Water Heist: Corporations Are Targeting Cash-Strapped Cities for Control of Their Public Water

Corporate interests are eyeing our water. From wastewater to drinking water, big business is looking to cash in on public water systems and they've got a new tactic: They're using desperate economic times to convince city officials that they should place a corporation between families and their ability to eat, drink, and clean.

Take Akron, Ohio, for example. In September 2008 I wrote an article for Alternet about a ballot measure in Akron where voters were asked whether to lease the city's wastewater system to a corporation in return for an immediate, one-time payment. The plan was roundly defeated. But more importantly, as the article suggested, the lease signaled a new direction for water privatization in the U.S. This involved a collaboration between water companies and Wall Street to snatch up control of water infrastructure for the better part of a century.

Since that vote, similar lease plans have been floated in Milwaukee and Chicago, presenting a dangerous possibility: In the near future, a major U.S. city could sign over unprecedented control of its water system to a corporation for a generation or longer. The silver lining in this narrative is that the same communities being targeted by water corporations for these deals are now charting out new ways to ensure their water remains in public hands. And for the moment, advocates of public control are winning.

The Lease Model of Water Privatization

Recent decades have been an active period for water corporations. In the 1990s the corporate push to privatize was buffeted by a tax law change under the Clinton administration that encouraged multinationals to enter the U.S. market. However, when privatization of water systems in large cities proved to be a nonstarter-due in no small part of public education and opposition-the largest players like Veolia, Suez, American Water, and Aqua America opted instead for a strategy of gobbling up smaller systems. This has been the basic narrative of municipal water privatization in the U.S., until recently.

As we enter the second decade of the 21st century, water companies are pushing a new model of privatization and targeting some of America's largest cities, starting in the water-rich Midwest. This new business model involves the acquisition of systems for periods much longer than previously considered, and with much greater control of the asset. These companies now want to lease your water, so they can sell it back to you.

The concept is relatively simple. The company pays the municipality an upfront sum of money in return for control of the water system. The company regains its investment through water bills over the life of the lease. The lease model stands in contrast to the more common "operation and maintenance" (O&M) contracts of the past decade in three main respects. For starters, cash flows in the opposite direction: an O&M contract generally involves a city making payments to the water company. The lease also differs significantly in the degree of the control that the public hands over, which may include capital improvements, system reach, and collection of excess revenue. Finally, these proposals span a much greater length of time-often 75 to 99 years-theoretically so the company has adequate time to regain its investment.

The incentive for cities is clear, if shortsighted. In the rustbelt Midwest, where the recession has hit state budgets hard, the one-time cash influx-a lifeline of sorts-is hard to refuse. And while water systems are not the only asset companies are willing to acquire, many cities in the water-rich Midwest see their access to freshwater as one of their most valuable assets. Cities like Milwaukee and Chicago have excess capacity to deliver freshwater, a resource described with growing frequency as "blue gold" and "the new oil."

But the intrinsic costs to the community are numerous and in part account for the fact that no such deal has yet been concluded in a large U.S. city. For starters, rate increases are guaranteed, seeing as this is the company's primary means of recouping its investment. In Chicago, where parking meters were leased in 2008, a schedule of rate increases was written into the lease to ensure a return for the company. And loss of control can extend beyond rate-setting to encompass decisions over bulk water sales and regional development too. After all, no company would spend a pretty penny on an asset that it can not leverage or use to its advantage. These are costs to the community that endure over the life of the lease, whether it be 75 or 99 years.

Despite the drawbacks to these deals, water companies are using tough economic times as leverage.

Mobilization in the Midwest: Communities Fight Back

The upshot of this assault on large public water systems is that the same cash-strapped communities targeted by water corporations for these deals are meanwhile growing smart water activists and developing new tools to prevent the sale of their water. The three primary instances are Akron, Milwaukee, and Chicago.