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Detroit tried something similar (albeit for different reasons). Didn't work out so well for them: http://www.npr.org/blogs/money/2014/08/08/338068996/episode-...

Detroit should have immediately cut off non-paying customers for... non-payment -- instead of waiting for $90m in overdrafts to accrue.

Access to clean water and sanitation is a fundamental human right so cutting off people who don't pay is problematic.

Cutting off farmers is politically scary.