The Corporate Control of Water Takes an Unexpected Twist

By Jon Keesecker, AlterNet. Posted September 9, 2008.

During an otherwise unexceptional State of the City address in February 2008, Mayor Donald Plusquellic put before the residents of Akron, Ohio, a proposal to sell the city's sewer system. The still-nascent plan, news even to some in the mayor's administration, involved handing over the city's system to a private company in return to for a roughly $200 million fee.

In the United States, about 85 percent of people on community water systems get their water from a publicly owned utility. But in recent years, as federal funding for water infrastructure has fallen, corporations have tried to buy up or privately manage more and more municipal water systems. And the result for communities has been higher rates and lower services.

However, in the case of Akron, things are shaping up a little differently. The purpose of the transfer, the mayor explained, is not so much to improve system operations -- the finances of the utility are in relatively good standing -- but rather to finance a scholarship program for Akron youth, modeled after a program in Kalamazoo, Mich. The Kalamazoo program, unveiled in 2005, was funded not by the sale of a city asset but by anonymous, private donors.

In the weeks following the speech, Plusquellic defended his proposal in radio, television and newspaper interviews. Despite blanket enthusiasm around the goal of funding higher education, the response of Akron residents to privatizing the water system ranged from apprehension to outright skepticism.

On radio show phone calls and in comments on the Web site of the Akron Beacon Journal, doubts about the plan multiplied. While few doubted the value of subsidizing higher education, many wondered: Would the jobs of more than 100 sewer utility employees be secure under a private operator? Could privatization lead to enormous rate increases like those sought by privately owned Water & Sewer LLC in nearby Richfield? Most importantly, what oversight would the public retain, and might the plan open the door to privatization of other public services? Some even worried that the scholarship funds might be siphoned off for other purposes.

By early March, community activists and the Northeast Ohio American Friends Service Committee were drawing 80 to 200 participants to public forums to discuss the mayor's plan. Their concerns focused on the prospect of rate increases, staff cuts, neglected capitol improvements and poorer service, all of which had been suffered in other privately operated water systems, as well as the ability of Plusquellic -- a skilled politician and 20-year incumbent -- to push through projects without bona fide public input. Many also worried that the mayor's will could become law before being subjected to a thorough public vetting process.

Why Akron Residents Have Reason for Concern

It is uncertain whether the citizens of Akron, even Plusquellic, knew the debate the city would soon enter when privatizing the city's water system was first proposed in early February.

A historically minor -- though not entirely absent -- participant in U.S. water service, private water companies have attempted major inroads into the U.S. water market in the past 10 years.

Decades of cuts in federal assistance to public water utilities, coupled with a 1997 tax code change encouraging privatization, laid the groundwork for the entry of multinationals into the U.S. market in the late 1990s. Major water companies like Paris-based Veolia Environment and Suez Environment quickly seized the opportunity to purchase domestic water companies and expand into new markets.

The result: a slew of large privatization proposals in major U.S. cities like Milwaukee (1998), Atlanta (1999) and New Orleans (2000). The same companies initiated a concurrent public relations campaign involving fiscal sponsorship of bodies like the U.S. Conference of Mayors (to which Plusquellic was elected president in 2004). Credit it to a certain discomfort about handing a private company the keys to life's most precious resource; it is no wonder that the privatization push quickly inspired a backlash among U.S. consumers.

In 2003, just four years into a 20-year contract, Suez was booted from Atlanta for poor maintenance and failure to achieve expected cost savings. Two years later, efforts to privatize New Orleans' water system collapsed and nearly a dozen communities were engaged in fierce public buybacks of water utilities acquired by Germany-based RWE after its purchase of American Water in 2001.

Growing awareness of the risks of water privatization continues to blacken the eye of major water multinationals in the United States and abroad. In April, RWE ended its brief stint in the U.S. water market with a less-than-spectacular American Water IPO geared toward divesting the company. In June, the world's two largest water companies -- Veolia Environment and Suez Environment -- were ousted from their own backyards (both are Paris-based) when the city decided not to renew those contracts. The decision was a stinging rebuke to the private water giants.

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Jon Keesecker is a senior organizer with the Take Back the Tap campaign at Food & Water Watch. He works with grassroots community groups across the U.S. to prevent the privatization of public water resources. Previously, Jon worked as a community organizer on water issues with Sweetwater Alliance in Michigan and Massachusetts Community Water Watch.

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