By Stephanie Geller, Research Specialist, Community Wealth Building, Democracy Collaborative, January 15, 2019
One of the earliest municipal enterprises were public power companies. As early as the 1880s, local governments began forming them to provide electricity in areas that investor-owned utilities considered unprofitable. Today in the US, more than 2,000 community-owned electric utilities serve more than 49 million people, provide 93,000 local jobs, and invest more than $2 billion a year back into local communities. Many local governments, under pressure to improve services amid declining tax revenues and public resistance to tax increases, have launched enterprises in sectors traditionally dominated by private firms, including hotels, golf courses, composting, real estate, and—notably—cable and broadband service. Frustrated with slow broadband speeds and high prices, about 750 communities now operate publicly owned networks.
Municipal enterprises offer a way for municipalities to provide quality, affordable goods and services while creating jobs and boosting incomes for local residents without additional expenditures on social programs. City-owned ventures can also improve the stability of local economies by decreasing their dependence on corporations prone to relocate in order to lower expenses and maximize profits. Municipal enterprises hold considerable potential to provide important services to communities that for-profit providers are unwilling to serve, such as what the Federal Communications Commission says are the 14 million rural residents—nearly 30 percent of all rural households—who lack broadband access. Similarly, as local employment translates into increased tax revenues and reduced expenditures on social programs, municipal enterprises have a strong incentive to hire area residents and give back to the community. Public power utilities, which on average return 33 percent more to their communities than private companies, provide powerful evidence of this.
Municipal enterprises are motivated to provide quality, affordable services because they are publicly owned entities run by local officials accountable to area residents. Municipal enterprises are able to prioritize vital public goals and set guidelines around local sourcing, local hiring, sustainability, and related practices to maximize their positive impact on the community. They do this while maintaining a track record of more reliable service: households powered by public electric utilities, for example, experience outages on average less than half as often as customers of private utilities—59 minutes a year compared to 133 minutes—while paying nearly 15 percent less. Moreover, municipal ownership not only makes a venture unlikely to leave a community in search of higher profits but also offers governments a way to ensure enterprises meet critical local needs.
PIKE PLACE MARKET, SEATTLE, WASHINGTON
To achieve scale, municipal enterprises must overcome public perceptions that public ownership is inherently inefficient and bureaucratic. While data and real-world experience sharply contradict these stereotypes and demonstrate the model’s capacity to generate a range of positive community benefits, significant education is needed to reverse such long-standing beliefs. Furthermore, like for-profit businesses, municipal enterprises can lose money: Baltimore’s city-owned 757-room Hilton hotel, which opened in 2008, lost more than $84 million before it turned a profit in 2017. Despite the years of losses, officials say the hotel has helped draw additional convention business to the city and has supported spin-off businesses.