Certainly from a libertarian perspective, water and sewage are not. For philosophers like Rothbard, humans have a natural right to not being aggressed against--but not a right to, say, health. Similarly so for authors like Hoppe and Nozick.
All of them believing in libertarianism for consequentialist reasons as well, they would probably view this story as testament to the failures of government, and what happens when it is coopted by businesses.
Edit: I also want to disagree with the other commenters that issues of 'rights' don't matter. Sure, if you're only judging things by their consequences, then that discussion is moot. But having a moral position against the coercion of government (I'm going to take your money to build sewers, roads, engage in multiple wars, etc) is a legitimate stance--even if you disagree with it.
Well, you can draw further distinctions between Rothbard and Nozick (don't know too much about Hoppe). Nozick would support a minimal state whose sole job was to protect property and was financed by government coercion.
Rothbard would go further, though, and say even that minimal state is too much, as it is still coercing people to fund government activity (police protection of property). Even as that end of property enforcement is just, it's still using an immoral means to achieve it.
Which just goes to show that one man's right that deserves government protection is another's coercion. I respect Rothbard's consistency, because it's quite problematic for the run-of-the-mill libertarian to argue for some forms of positive liberty (the right to government provision of property enforcement) while saying that other forms of positive liberty are categorically unjust (such as, say, the right to government provision of running water).
Rothbard is like Plato. Interesting thinker from a historical perspective, but it's not like we still take the Earth, Wind, Fire, Water thing seriously.
That particular strain of libertarianism is indefensible on anything other than religious grounds ("Property is a god-given right while water isn't") or something equally metaphysical.
I doubt Rothboard would describe his viewpoint as being simply that "property is a god-given right while water isn't," even if you exclude the god-given part. It's more that property is an institution that develops from organic human action and self-organization. And in his vision people end up self-organizing into groups that will defend some version of property rights using threat of violence if necessary, and he goes further and thinks that, due to the nature of the market of violence, most will converge onto roughly similar versions of property that are best suited for human living.
My take on that is that this has already happened, but as it turns out the market of violence lends itself to aggregation and monopoly. We call this monopoly supplier of violence the State, which has found it utility maximizing to form a set of contracts, implicit and explicit, with most of the different parts of society, including price discrimination, loss leaders, etc.
In other words, Rothbard left out public choice and the economics of the firm, and when you add those into anarcho-capitalism you get... social democracy.
I deeply admire, though, his capability to imagine a different, more decentralized, and free-er world. Like most visionaries, his greatest flaw and strength is his utopianism.
Rothbard is an interesting one in this case, though. He didn't think things like water were a right, but he also didn't think that most current corporations legitimately owned their property, since its acquisition was tainted (in most cases) by deep entanglement with government. He wasn't entirely consistent on the remedy, but at times he agreed with leftists that it was legitimate for workers to expropriate their employers' property and reconstitute factories/etc. under new ownership, though he disagreed on the reasons why. This entanglement between JP Morgan and the Birmingham government is an illustration of why he came to those kinds of conclusions (viz., that JP Morgan's "property" is illegitimate, accrued in part via aggression as an ally of the state).
I would imagine that there are restrictions preventing the residents from installing septic tanks so their only option was the sewer system run by the city. The libertarian perspective would allow them to install their own sewage handling system as long as it didn't adversely affect others.
All of them believing in libertarianism for consequentialist reasons as well, they would probably view this story as testament to the failures of government, and what happens when it is coopted by businesses.
Edit: I also want to disagree with the other commenters that issues of 'rights' don't matter. Sure, if you're only judging things by their consequences, then that discussion is moot. But having a moral position against the coercion of government (I'm going to take your money to build sewers, roads, engage in multiple wars, etc) is a legitimate stance--even if you disagree with it.