$96,696,000 in annual public revenue from private sale of a public resource sounds about right to me.

By Katherine Watt

[NOTE: The following views are my personal views only. I currently serve as Vice-President of Nittany Valley Environmental Coalition, but this post does not reflect any official position of the NVEC.]

The last couple days I’ve really been thinking a lot about the need to be more specific about the problem I’m concerned about, untangling the Spring Township Water Authority Cerro Well (PW-2) now under construction, which is a good idea as a backup well that won’t increase total system draws, from the proposed STWA sale of the Cerro Well water to the private Nestle bottling plant, which is a bad idea partly because it will increase total draws immediately but mostly because it’s the foot in the door increasing risks of increased future draws by Nestle and other water bottlers.

I also think it’s important to distinguish between the potential good Nestle could do – for Centre County jobs/economic development – if Nestle built a food processing plant instead of a water bottling plant.

I’d like to find an economic development person who could put together a sound counter-proposal for Nestle’s $50 million investment, showing what a food business would look like, including the local economic impact and profit margins for Nestle.

Food processing profit margins are obviously lower than the profits to be had from resale of municipal tap water.

But they should still be profitable enough, especially if the Centre County commissioners, Chamber of Business and Industry of Centre County executives, and Spring Township Water Authority board members reduce the appeal of water bottling by presenting a counterproposal contract on the water plan that includes serious profit-sharing between public and Nestle.

Some math.

The normal STWA customer pays $4.75 per thousand gallons of municipal tap water.

Based on a 2013 estimate by Business Insider, Nestle would resell the same water privately for $1,220 per thousand-gallons.

One of the estimates put forward by project proponents is that Nestle will purchase 300 gallons per minute, or 432,000 gallons per day, or 158 million gallons per year.

158 million gallons is 158,000 thousand-gallons.

If STWA charges Nestle $4.75 per thousand gallons, Nestle will pay $750,500 per year to Spring Township for water.

If Nestle turns around and sells that water for $1,220 per thousand-gallons, their private corporate sales revenue will be $192,760,000 per year, on an initial capital investment (to build the plant) of $50,000,000. If Nestle sells that water for $7,500 per thousand-gallons (*see below), their annual sales revenue on 158,000 thousand-gallons goes up to $1.185 billion.

Let’s suppose instead that STWA revises the non-binding Term Sheet adopted on February 28 [2.28.18 STWA-Nestle Terms.]

Let’s suppose STWA, with the full backing of the Centre County commissioners and the CBICC board, says to Nestle:

“Nestle, you can build your bottling plant and buy up to 158,000,000 gallons per year of our public water, and no more.

The sales price – for your consumptive use, which will remove that water from our watershed – is the average of our standard customer cost of $4.75 per thousand gallons and your proposed bottled sale price of $1,220 per thousand gallons: the price at which we will sell you our public water is $612 per thousand gallons.”

At 158 million gallons per year, which is 158,000 thousand-gallons-per-year, that’s $96,696,000 in annual revenue for Spring Township and Centre County.

In sum:

I think it’s great if Centre County Commissioners, CBICC executives and Spring Township Water Authority board members want to promote economic development and help create good jobs for the thousands of unemployed and under-employed Centre County citizens who need good jobs.

I think it’s stupid if those same “leaders” go along with a Nestle-written plan to sell an extremely valuable publicly-owned natural resource to a private corporation for 0.4%, or less*, of its market value.

If the Spring Township water authority board, Centre County commissioners and CBICC get serious about making sure the public benefits from the private sale of a public natural resource, Nestle will probably walk away and look to build in another, less sensible community.

But if Nestle doesn’t walk away, the Nestle project would generate at least $96,696,000 per year in public revenue for Centre County, creating an enormous pool of capital to be invested locally, in local small business development – farming, food processing, managed forestry, light manufacturing, and hundreds of other essential goods and services.

I think that would be pretty good.

*UPDATE:

The numbers get even bigger using the $7.50 per gallon cost based on single serving (16.9 oz) bottle sales, as reported in the Business Insider story.

Using $7.50 per gallon makes it $7,500 per thousand-gallons, and makes the average (of $4.75 and $7,500) equal $3,752 per thousand-gallons.

Sale of 158,000 thousand-gallons of public water to Nestle, or another private bottler at that price, would raise $592,820,000 per year for Centre County public budgets.

Direct-to-consumer sales if we built a Centre County public water bottling plant and didn’t share profits with Nestle or any other privately-held corporation, would generate $1.185 billion per year in public revenue.

 

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