Leasing the city’s water system to a private company would provide a quick infusion of cash, but Chicagoans would pay for it for decades – not only with higher rates but with reduced service, as the company cuts staffing levels in order to bolster its bottom line, according to a new analysis  from Food and Water Watch.
Over a 20-year period, consumers would pay two to three dollars for every dollar the city receives in an up-front payment, FWW estimates. The city could save 20 to 50 percent of capital costs by using municipal bond financing instead of private financing with a lease deal, according to the analysis.
It was released in conjunction with a public forum Monday night which attracted a standing-room-only crowd at the Chopin Theater (see previous post  re. nonprofits’ views — and suburban experiences — on the issue).
Ald. Scott Waguespack  (32nd Ward) warned that although the city isn’t talking publicly about a water deal, “these things happen fast” so “we’ve got to be on our game.”
He recalled asking if he could see the city’s economic analysis before the December 2008 parking meter lease vote in the City Council. “They said no, you can’t. That made it an easy ‘no’ vote.”
He urged audience members to contact their aldermen about an ordinance  he’s proposed to add transparency and taxpayer protections to asset leases by the city.
Waguespack said he first became aware of water issues while serving with the Peace Corps in Kenya. “I saw what happened when private interests control water,” he said. “Here in the U.S., rates go up, but in African they can just shut the water off.”
Rachel Weber , an urban planning professor at UIC, said private infrastructure investment funds grew dramatically with the end of the last decade’s economic boom, as investors became skittish about other markets and long-term, stable revenue-producing assets became more attractive. At the same time, fiscally strained cities and states grew desperate for cash infusions.
“The process for privatizing assets is often not transparent,” she said, and “investment firms often serve as both advisers and financiers.” The potential for undervaluing assets is great, she said.
Often investment banks advising cities on such deals are paid success fees, giving them an incentive to push a deal, so they “aren’t always a fair arbiter,” said Jon Keesecker of Food and Water Watch.
In many cases revenue streams from asset leases are securitized and sold off in bond markets, said Phineas Baxandall of U.S. PIRG .
Asset lease deals often involve “clear conflicts of interest,” while the efficiencies that privatization is supposed to bring “often turn out to be illusory,” he said.
Keesecker said a lease of the water system would involve a loss of local control, including the ability to decide where to build water lines and whether to sell water to other communities – or to water bottlers. Such activities could be restricted, but that would make the asset less valuable and reduce the city’s concession fee, he said.
Speaking from the audience, Kathy Cummings urged concerned residents to get in touch with a new group, Citizens Act to Protect Our Water .