Piping Mad

Citizens stand up to water privatization

BY Brian Cook

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The tidal rush to privatize water service in the United States appeared to subside on January 24, when Atlanta announced it was canceling its contract with a private company, United Water, after enduring four years of unclean water, shoddy service and unmet contract obligations. In October, a massive outcry from citizens put the brakes on New Orleans’ plans to privatize its own water system.

In the wake of such events, it would seem prudent for cities to rigorously analyze the costs and benefits of privatization before signing over control of their municipal water supply to so-called public-private partnerships. So why are city officials in Stockton, California, rushing into a 20-year, $600 million arrangement with OMI-Thames Water?

“The city is on an ideological bandwagon,” says Juliette Beck, senior organizer at Public Citizen’s Water for All campaign. “They’re railroading democracy for a project that’s not even going to save them any money.”

After Stockton Mayor Gary Podesto announced his plans to privatize the city’s water and wastewater infrastructure in 1999, the Concerned Citizens Coalition of Stockton, a group opposed to privatization, collected the 18,000 signatures needed for a public referendum on any contract worth more than $5 million proposing to privatize public utilities. On October 15, the coalition handed their petition to the Stockton City Council, asking that the vote take place in January. The council decided to delay the vote until March 4—then announced they would enter into immediate negotiations with OMI-Thames Water (a partnership between an American corporation, Operations Management International, and Thames Water, a British company looking to expand).

Residents were outraged, especially since it was not the first indication city officials may be determined to privatize at any cost. In January 2002, eyebrows were raised when Alternative Resources Inc. (ARI) was hired as a third-party consultant to make the final recommendation on whether to privatize. ARI is a member of the National Council for Public-Private Partnerships (NCPPP), a group whose membership includes entities like OMI-Thames. In turn, the NCPPP is a member of the H2O Coalition, a manufacturer and industry consortium that actively lobbies against directing federal aid toward long-neglected U.S. water and wastewater infrastructures.

In an effort to show the City Council was not wholly dismissive of public opinion, Podesto announced in December that the city would hold eight “public forums” from January 15 to January 29. “We get frustrated,” Podesto said at the time, “because we’re answering over and over and over again the same questions. I’ve just got to be more patient. We’ll answer them and we’ll answer them and we’ll answer them.”

But rather than providing the promised answers, the forums only provoked more questions. Angry citizens pointed out that when the Council makes its final decision on February 19, there will be a host of unresolved issues, including the contracts of more than 100 unionized workers that remain in dispute despite months of negotiations; an environmental impact review, required by California law, but which the city’s lawyers argue is unnecessary; and the contract itself, which OMI-Thames claims will save the city $175 million over the next 20 years.

Gary Wolff, principal economist at the Pacific Institute, a West Coast think tank, joins Stockton residents in doubting that estimate. Wolff’s own analysis found that the city would actually save $1.7 million per year by not privatizing. In using more realistic projected inflation rates, he says, “All these projected annual cost savings disappeared.”

But even worse than overpaying for basic services could be the consequences of the services themselves. Thames Water recently ran into trouble in England, where it provides water for 13 million residents. On December 19, England’s Environment Agency admonished the company for “unacceptably high levels of [pipe] leakage,” which it said left London customers at “greater risk of water shortages.”

In fact, Thames has been England’s most heavily penalized polluter in two of the past four years and has been accused of preferring to pay fines over maintaining its facilities. In 2000, the chief executive of the Environment Agency complained, “The scale of penalties levied by the courts makes pollution—and prosecution—an acceptable risk and an acceptable business expense for too many.” That same year, Thames was fined roughly $400,000 after “a series of errors” caused several homes to be flooded with raw sewage and industrial waste.

But if pollution is an integral part of Thames’ business strategy, so is expansion. Though Thames’ parent company, the German conglomerate RWE, is $27 billion in debt, it recently doled out $7.6 billion to acquire American Water Works, one of the largest water companies in the United States. The managing director of Thames Water North America justified the purchase by pointing out that, since only 15 percent of water in the United States is provided by private companies, “this transaction is predicated on Thames Water taking a share of the growing water privatization services in the United States.”

Back in Stockton, Sylvia Kothe of the Concerned Citizens Coalition expresses the main reason why her community, and others like it, are adamantly opposed to such expansion. “Water service shouldn’t be left to a private company. In the end, they’re only answerable to their shareholders. And this is our water.”

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Brian Cook was an editor at In These Times from 2003 to 2009. He now works on the editorial staff of Playboy magazine.

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