Food and Water Watch – Chicago Newstips by Community Media Workshop http://www.newstips.org Chicago Community Stories Mon, 14 Jul 2014 17:31:05 +0000 en-US hourly 1 https://wordpress.org/?v=4.4.12 Illinois considers GMO labelling http://www.newstips.org/2013/09/illinois-considers-gmo-labelling/ Mon, 16 Sep 2013 20:31:47 +0000 http://www.newstips.org/?p=7696 Supporters and opponents of state legislation to require labelling of genetically-engineered food will testify Tuesday at a State Senate subcommittee hearing in Chicago.

The subcommittee on food labelling will consider SB 1666, sponsored by subcommittee chair David Koehler (D-Springfield), on Tuesday, September 17 at 10:30 a.m. in Room C 600 of the Bilandic Building, 160 N. LaSalle.

Testifying in support of Koehler’s bill will be Michael Hansen, senior staff scientist of Consumers Union; Patty Lovera, assistant director of Food and Water Watch; and UIC professors Ann Reisner and William Kling.

Opinion polls show popular support for labelling of genetically-engineered foods in the range of 90 percent.  Fifty developed nations require labelling, including every European Union member.  Connecticut and Maine also require it, and 26 other states are currently considering similar measures.

Two previous hearing showed strong support for the measure downstate, said Emily Carroll of Food and Water Watch.  She said farmers in Central Illinois complain of sharply increased herbicide usage, necessary to address “superweeds” which have developed resistance to herbicides which GE crops are bred to withstand.

“We’re seeing a huge ‘superweed’ problem” as biotech companies respond to “pesticides that are no longer working” by “wratcheting up the toxicity level” — including the recent promotion of 2,4-D, an Agent Orange component — said Emily Carroll, a local organizer for FWW.   Some of these herbicides have demonstrated human health risks, she said.

Opponents of the bill argue that it would raise food costs and give them impression that genetically-engineered foods are unsafe.

According to FWW, many steps that would be required are already being taken, including segregating seeds and labelling products for ingredients and nutritional value, as well as steps required for exporting food to nations requiring labeling.  While the food industry projects major costs for consumers, FWW points to research showing that labeling in Europe has actually had negligible cost effects.

And while the food industry points to numerous studies finding genetically-engineered foods to be safe, critics say the research is incomplete, in part because biotech companies bar cultivation for research purposes.  Some research has turned up evidence of health impacts in laboratory animals, they say.

The federal FDA ruled in 1996 that genetically-engineered foods are no different than conventional foods.  State-level mandating of labelling wouldn’t be the first time that states instituted such regulations before the federal government was willing to do so, Carroll said.

The vast majority of Illinois’s corn crop and the nation’s soybeans and cotton are grown from genetically engineered seeds.  Biotech companies are now experimenting with genetically-engineered salmon and hogs.

]]>
Chicago infrastructure trust – and water privatization? http://www.newstips.org/2012/08/chicago-infrastructure-trust-and-water-privatization/ http://www.newstips.org/2012/08/chicago-infrastructure-trust-and-water-privatization/#comments Mon, 27 Aug 2012 20:59:56 +0000 http://www.newstips.org/?p=6578 A new report on private equity takeovers of public infrastructure focused on privatization of water services highlights Chicago’s infrastructure trust and warns of higher costs, degraded service, and diminished accountability.

“The infrastructure trust makes us more vulnerable to a public-private partnership” either to finance water system repairs and upgrades or for an operation-and-maintenance contract, said Emily Carroll of Food and Water Watch, which released the report.  “Taxpayers should be wary of getting a raw deal,” she said.

Mayor Emanuel has said he opposes the sale of Chicago’s water system, but the infrastructure trust is set up specifically to foster public-private partnerships, which Food and Water Watch considers a form of privatization, Carroll said.  In so-called P3s, public control over infrastructure is lost and ratepayers are on the hook for private financing costs, she said.

She points to the experience of Atlanta, which canceled a contract with a private corporation for water system operation in 2002 after huge problems with repairs, including emergency responses, and inflated charges for work done.  When only half the promised savings were realized and revenues fell short, the city requested the company’s billing records and was refused, according to FWW.

Water rates

And while Emanuel recently raised water rates to pay for repairs and upgrades, he could later come back and say more money is needed – and the higher rates would make the system more attractive to private investors, Carroll said.

In investment industry surveys, water systems are rated among the most desirable kinds of infrastructure, according to the report.  One of the Chicago trust’s participants, Macquairie Infrastructure and Real Assets, spent $578 million to purchase a private water company in 2007 – the largest private equity water service deal listed by FWW.

The report cites a trade publication describing Chicago’s $1 billion infrastructure trust as “an industry-backed deal to establish PPPs as a politically and financially viable business.”

Currently “private equity vehicles are armed with over $100 billion” seeking highly profitable investments in public infrastructure around the world, in an attempt “to exploit the lagging recovery of the public sector,” according to the report.

About Chicago it says:  “The city’s primary motivation appeared to be the desire to take debt off city books to give the illusion of reducing its liabilities.  ‘We have a tool here that takes some of the pressure off taxpayers,’ Emanuel claimed.  ‘Use somebody else’s money for a change, rather than theirs.’

“In the real world, however, banks do not provide free lunches.  Chicago will have to repay the private capital investment with interest through user fees.

“The city’s chief financial officer admitted that private investment could be more expensive than traditional government borrowing.  Nevertheless, the City Council signed off on Emanuel’s plan.”

Higher costs

In fact, private equity financing is “much more expensive than government borrowing,” according to FWW.  “Private equity players have targeted annual returns of at least 12-15 percent.”

While the financial industry encourages governments “to use privatization as a ‘mega-credit card’ to finance infrastructure projects,” FWW cites a report by the Association of Chartered Certified Accountants: “Just as with a credit card, the interest rates have been relatively high, and at some point the debts have to be paid off.”

In the UK, a parliamentary commission found that private investors in infrastructure projects were making “excessively high returns” and concluded the private finance model was “inappropriate” for public works projects, according to the report.

While surveying water privatization issues around the country, the report raises more general concerns about private equity financing that could be relevant to Chicago’s experiment:

— Private equity investments in public infrastructure tend to be highly leveraged, adding risk and long-term borrowing costs, and private equity players “usually flip assets within a decade” to cash in on deals.

— Financial consultants for cities come from investment firms and have potential conflicts of interest.  The general use of “success-based” fees based on a percentage of the transaction deal gives consultants “a strong financial incentive to recommend the biggest deal possible,” even if it is “a terrible deal for the community.”

— Often public-private deals allow investors to renegotiate terms after a bid is chosen, so they will initially low-ball estimates.  Costs and profits can later be boosted with pessimistic financial projections and other devices.

— Private investors tend to overbuild or “gold plate” infrastructure projects in order to increase profits.

FWW was particularly concerned with the fact that Chicago’s infrastructure trust is set up as a nonprofit rather than a public entity, legally exempting it from open meetings and freedom of information requirements, Carroll said.

 

Related:

Chicago water for sale?

]]>
http://www.newstips.org/2012/08/chicago-infrastructure-trust-and-water-privatization/feed/ 5
Water privatization called a bad deal http://www.newstips.org/2011/02/water-privatization-called-a-bad-deal/ http://www.newstips.org/2011/02/water-privatization-called-a-bad-deal/#comments Thu, 17 Feb 2011 21:48:05 +0000 http://www.newstips.org/?p=3318 “For years, there has been talk of privatizing all or parts of Chicago’s water system, including the Jardine and South filtration plants, city pumping stations, water billing functions or just the sewer system,” according to Fran Spielman in Monday’s Sun Times.

She’s reporting on a Civic Federation report to the next mayor on the city’s finances.  It reiterates the group’s call to “pursue alternative service delivery to reduce costs” and institute protections for revenues from asset leases.

A new report from Food and Water Watch lists Chicago among cities where water privatization is under active consideration.

The number of communities considering water privatization is up dramatically due to widespread budget crises, particularly among larger cities concentrated in the Rust Belt, according to the report.

Privatization is “not a smart way to balance budgets,” the group says.  While the public pays higher rates, cities often get less than full value for their assets, and the long-term costs of the lump-sum lease payments are significantly higher than the cost of municipal revenue bond financing.

In addition, it can undermine public pensions by transferring employees to the private sector, leaving fewer workers paying into public plans.

In fact, a number of communities are buying back privately-owned water systems in order to save money, according to the report.  Evansville, Indiana, is one; the city expects to save $14.5 million over the next five years after bringing water services in-house.

Food and Water Watch opposes all forms of privatization, including sale or lease of water systems as well as operation and management contracts with private companies, said organizer Emily Carroll.  “They have many of the same problems,” she said.  “Staffing is cut drastically in order to cut costs and boost profits” and “there simply isn’t enough staff to maintain water systems.”

Water main ruptures increase and water quality is jeopardized, she said.

Carroll points to Indianapolis, hailed by the water industry as a success story for privatization.  Under private operation since 2002 there have been boil warnings, lawsuits charging overbilling, and state and federal investigations of environmental violations.

In community meetings in Chicago, she said, “almost everyone we talk to is completely outraged at the idea.  If there’s one thing they don’t think should be privatized, it’s water.”

According to the group’s report, public opposition has derailed many attempts at water privatization.

Another coalition, spearheaded by Illinois PIRG, continues to push for a taxpayer protection ordinance that would require independent evaluation and public hearings on major long-term leases.  Last year 19 aldermen signed the coalition’s pledge for transparency and accountability in asset-lease deals.

“What we got from the parking meter deal was malfunctioning meters, rates that quadrupled overnight (and continue to climb), and the possibility that we are out about a billion dollars in lost revenue,” said Celeste Meiffren of Illinois PIRG. “Can you imagine if this happened with our municipal water system?”

Related:

Chicago water for sale? (October 20, 2009)

Water and privatization (April 18, 2010)

]]>
http://www.newstips.org/2011/02/water-privatization-called-a-bad-deal/feed/ 2
Forum on water privatization http://www.newstips.org/2010/04/forum-on-water-privatization/ Tue, 20 Apr 2010 20:06:55 +0000 http://communitymediaworkshop.org/newstips/?p=1676 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.

The panel was moderated by Abigail Singer, a new organizer focused on water privatization with Little Village Environmental Justice Organization.  It was co-sponsored by Illinois PIRG.

Speaking from the audience, Kathy Cummings urged concerned residents to get in touch with a new group, Citizens Act to Protect Our Water.

 

Related:

Chicago water for sale?

]]>
Water and privatization http://www.newstips.org/2010/04/water-and-privatization/ http://www.newstips.org/2010/04/water-and-privatization/#comments Sun, 18 Apr 2010 17:54:00 +0000 http://communitymediaworkshop.org/newstips/?p=1663 While Chicago suburbs served by a private water company face steep rate hikes – and several communities band together to buy out the company’s pipeline – organizing around water privatization steps up in Chicago, and legislation promotion transparency in privatization deals is proposed in the City Council and state legislature.

A community forum on water privatization (Monday, April 19, 7 p.m., at Chopin Theater, 1543 W. Division) features Ald. Scott Waguespack along with two national experts on the subject, Jon Keesecker of Food and Water Watch and Phineas Baxandall of U.S. PIRG, who co-authored a report on privatization in Chicago issued last October by Illinois PIRG.  The event is free.

Food and Water Watch will be releasing an economic analysis of water privatization in Chicago.  The group, which assists local groups battling for public control of water around the world, recently opened a Chicago office.

FWW maintains water privatization leads to constant rate hikes and declining water quality.  It’s also a bad economic deal for cities, said Emily Carroll, FWW’s new Chicago organizer.

“Governments get a big lump sump up front – that’s the appeal of these deals,” she said.  “But in the long term, private companies do not give taxpayers what the asset is worth – that’s how they make money.  And these are really long-term leases.”

Groups weigh in

Since the parking meter controversy last year – and a Newstips report in October, which revealed the city’s consideration of water privatization – other local groups have weighed in on the general issue of privatization.

In February, Dennis Gannon of the Chicago Federation of Labor and Jerry Roper of the Chicagoland Chamber of Commerce wrote an op-ed calling parking meter privatization “a great success for Chicago’s businesses and the public” and urging renewed efforts to privatize Midway Airport.

The CFL’s major concern in protections for incumbent workers, said spokesperson Nick Kaleba.

Though it has criticized the excessive use of proceeds to cover operating budget deficits, the Civic Federation continues to advocate consideration of privatization as a means of reducing the city’s operating expenses and increasing efficiency, said Lawrence Msall.  He reiterated the guidelines proposed in a 2006 issue brief – deals should require competitive bidding and involve non-core services, and proceeds should be used to reduce long-term obligations, not operating costs.

Is water a core service for the city?  Msall thinks not, pointing out that many municipalities are served by private utilities.  “I don’t know that the citizens of Chicago care very much who is providing their water as long as it’s of high quality and safe,” he said.

The Better Government Association has urged greater transparency in privatization deals.  The problem with parking meter privatization was not the concept but the process, said Andy Shaw.  “The problem is when things are done in the dark of night,” he said.  “Give us transparency and information — and time for public input.”

Legislative protections

Two groups are backing legislative efforts to increase transparency in privatization deals —  though one hopes to restrain the process and the other to spur it.

Illinois PIRG is organizing support for an ordinance introduced last fall by Waguespack which would require the city to inform aldermen when a consultant is hired to consider a privatization deal; mandate a public hearing 30 days before a City Council vote on a deal; and limit leases of assets over $1 million to 30 years.

While some privatization deals may be appropriate, much more transparency and taxpayer protection is needed – and the city’s water system should be kept public, said Brian Imus of Illinois PIRG.

The Metropolitan Planning Council is backing SB 3482, sponsored by State Senator Heather Steans (D-7th), which would provide authority to the state’s transportation department, tollway authority, and municipal airports to enter public-private agreements to finance new transportation projects and lease existing infrastructure.

The bill would require prior authorization of deals by the General Assembly and independent review by the state’s government accountability commission, and it would require that proceeds go to a transportation fund.

“As a tool privatization can be good, though our experience in this region raises a lot of concerns,” said MPC vice president Peter Skosey.  With the state hard-pressed for cash, public-private partnerships could raise funds for high-speed rail, bus rapid transit in Chicago, or a new road providing western access to O’Hare, he said.

Privatization of water systems should be considered, he said, though any money generated should be reinvested in the water system.  Long-term sustainability of the region’s water supply is a major concern for MPC (the group issued a report on the subject last year, and is sponsoring a forum next month), and Chicago’s aging water infrastructure – over 4,000 miles of pipes, much of it dating to 1890 – is a significant source of water loss.

In addition, private utilities are required to include the full cost of providing water in their rates, while public utilities can tap other public funds.  Higher rates reflecting the true cost of water would discourage waste by consumers, Skosey said.

“There are towns in the region that lack the resources to upgrade and repair their water infrastructure,” he said.  And “some towns are very happy” with private water service, he said.

Another rate hike

That wouldn’t seem to include towns served by Illinois American Water Company, the largest private water utility in the state and a subsidiary of American Water Company, the largest private water utility in the nation.

On April 13, the Illinois Commerce Commission approved a $40 million rate hike for IAW’s 317,000 customers; about 37,000 customers in Chicago’s suburbs will see rates go up by 26.4 percent.  IAW had requested $61 million.

An IAW request for a 5 percent statewide increase to fund infrastructure improvements is still pending.  IAW’s last rate hike was August 2008.

The ICC expressed “serious disappointment” with IAW’s refusal to comply with the commission’s request for more support documentation.  “IAW can’t view Illinois ratepayers as an open checkbook,” warned ICC chair Manuel Flores.

Opponents of the rate hike included State Representative Renee Kosel (R-81st), the assistant minority leader.  She’s teamed up with Attorney General Lisa Madigan to sponsor an expert review of IAW’s operations which found the company was overcharging for management fees (paid to another American Water subsidiary) and cited problems with billing, metering, customer service, and fire protection. Kosel and Madigan argued IAW should decrease, not increase, their rates.

Citing “serious and pervasive” errors in the company’s record keeping, making it impossible to track water purchases and sales, in 2006 Madigan called for a comprehensive audit of the company.  “If the company can’t keep accurate records, we need to question everything about the fairness of their rates,” Madigan said.

Municipalities have also opposed IAW’s rate hikes over the years – one official said the relationship with the utility has been “adversarial most of the time” —  and the village of Homer Glen filed several complaints with the ICC.  In 2007 the ICC upheld complaints regarding inadequate inspections – including no records concerning fire hydrants – and billing irregularities.

In recent weeks village boards in Homer Glen, Bolingbrook, Woodridge, Romeoville, and Lemont have approved a Northern Will County Intergovermental Agreement to pursue acquisition of the 18-mile pipeline owned by another American Water subsidiary that brings water from Lake Michigan to the communities.  Individual communities are studying acquisition of distribution systems.

“The only solution to these outrageous rate increases is to buy the system,” Homer Glen Mayor Jim Daley told the Homer Horizon.

Broken hydrants

In addition to high rates there are issues of service and water quality, said Bolingbrook village attorney James Boan.  “The biggest thing is that a private company’s drive is for one thing – profit for its shareholders,” he said.  “A municipality’s drive is to provide a public service.”

He said a feasibility study recently completed by the communities found they could take over and operate the water at current rates – “and that was before this rate hike.”

A bill by Kosel to make municipal takeovers easier has attracted bipartisan support (and backing by the Illinois Municipal League).  HB 5485 would remove water infrastructure built by developers (and paid for by homebuyers) from the value of a water system in eminent domain appraisals.

IAW called the bill “an alarming attack on the value of private property,” the Horizon reported.

The notion that conservation is promoted by laws that let private utilities charge for all water costs – including water lost in leaks and unmetered construction sites – doesn’t make sense to IAW customers.  The company “has no incentive to conserve water because whatever it loses due to leaks in its pipelines, it makes up for in its charges to customers,” Kosel told Phil Kadner of the Southtown Star.

Boan recalls a water main which burst on a Saturday in Bolingbrook.  “They let it go all weekend, because we paid for the lost water and it was cheaper to bring in a crew on a Monday and avoid paying overtime,” he said.

In another example of the profit motive undermining the public interest, he cites a 2007 investigation by CBS2 which found that numerous fire hydrants operated by IAW were out of order, including hydrants outside schools in Lisle and Mount Prospect and a nursing home in Bolingbrook.  A subsequent inspection in Mount Prospect found that 50 percent of hydrants had problems.

Fire departments reported finding inadequate and conflicting records regarding hydrant repairs.  Lisle Fire Chief Tom Freeman said that because a private company owns the hydrants, the fire department has no authority to order them fixed.

American Water Company was bought by RWE, a huge European utility corporation, in 2001.  Four years later RWE announced it was selling off the company; by late last year RWE had reduced its holdings in AWC to 2 percent.

Minutes of an RWE board meeting leaked to US News and World Report by FWW showed the Europeans’ hopes of high growth were dashed “due to political resistance to water privatization in the U.S.,” in the words of CEO Harry Roels.  In addition, regulators were creating problems by demanding reductions in contamination by arsenic and lead in AWC pipes.

Roels estimated the company was losing 19 percent of its water value through leaking pipes – and that at the current rates of investment, it would take 200 years to replace all the distribution lines that need it.

In California, the Public Utility Commission’s ratepayers advocate opposed RWE’s sale of American Water, fearing the financial burden would be shifted to customers (pdf).

]]>
http://www.newstips.org/2010/04/water-and-privatization/feed/ 3
Chicago water for sale? http://www.newstips.org/2009/10/chicago-water-for-sale/ Tue, 20 Oct 2009 21:47:11 +0000 http://communitymediaworkshop.org/newstips/?p=803 With Chicago facing a half-billion-dollar shortfall – and Mayor Daley ruling out increases in taxes, fees, and fines – could the city which has pioneered the leasing of major public assets be looking into a long-term lease of its water system?

“The City of Chicago Department of Water Management is said to be considering a lease of its water and wastewater system,” reported the Public Works Financing newsletter in April.

A water department spokesman didn’t confirm or deny the report, but was dismissive. “I hear these rumors periodically, but so far there hasn’t been anything to it,” said Tom LaPorte.

Such a move wouldn’t come without opposition – first of all from the union representing rank-and-file workers in the water department.

“In general privatization is a bad idea,” said Anders Lindall of AFSCME Council 31. “It places a middleman between taxpayers and the government that serves them, a private-sector middleman whose concern isn’t good quality public services but profit.”

Using upfront payments from the sale or lease of assets to pay for operational costs “is the road to fiscal ruin,” he said. “It’s like burning your furniture to heat your house.”

Akron, Milwaukee say ‘no’

Other cities in the region, contending with their own fiscal crises, have recently struggled with the issue. In Akron last November, voters defeated a ballot initiative to approve the long-term lease of the city’s water system by a two-to-one margin. By a similar margin they passed another initiative requiring voter approval for any future sale, lease or transfer of a public asset.

In a city hard-hit by the foreclosure crisis, “people are already so stretched, and the prospect of having to pay higher rates for water and sewer services hit home pretty strongly,” said Greg Coleridge of Northeast Ohio AFSC. He worked with labor and community groups to organize the Citizens to Save Our Sewers and Water, which educated residents about the costs of water privatization and passed petitions to get the issue on the ballot.

Coleridge said early education was crucial — including community screenings of a number of documentaries on water privatization — “so when the big p.r. machine comes along, people already have a deeper understanding, and they won’t be so easily fooled.”

In Milwaukee, the Common Council voted in June to put on hold the hiring of consultants to solicit bids for a 99-year lease of the city’s water system, after a coalition of labor, community, and environmental groups came together to oppose the proposal.

Keep Public Our Water “came together really fast,” said organizer Corinne Rosen. People were concerned about water rates going up and water quality going down, as well as fiscal responsibility and the secrecy of the decision-making process, she said. And while the idea is down it may not be out; KPOW is keeping an eye on things — and pushing for a council resolution against privatizing the city’s water works.

Private operation of municipal water systems often means frequent rate hikes, with private utilities charging as much as 80 more than municipalities for water, as well as lower quality service, with deferred maintenance and backlogged service requests, according to a recent report from Food and Water Watch. The group opposes corporate control of food and water resources, and assists local organizing efforts around the world (including those in Akron and Milwaukee) to keep water in public hands.

The report deals with two types of privatization, explains FWW organizer Jon Keesecker, management and operation contracts, where cities hire private companies, and leases or sales, where companies pay municipalities so they can collect user fees themselves.

People’s first concern about such deals is often rate hikes, he said, along with water and service quality. Beyond that, though, “with something as essential as water, people really want the accountability of public control,” he said.

Indianapolis considers sale, Fort Wayne buys back

In Indianapolis, a private company has operated the water system since 2002; the deal included a five-year rate freeze. Five years later, rates went up 29 percent, and this April they went up an additional 12 percent (after the water company requested a 17 percent hike). In September another rate hike request was submitted – this time for 35 percent. Also in September, Mayor Greg Ballard proposed selling off the water and sewer utilities to outside operators; part of his argument is that it could bring rates down.

Meanwhile, state and federal authorities are investigating environmental violations by the Indianapolis water company, and residents sued last year charging the company systematically overbilled 250,000 customers. (A judge ruled they lacked standing; the city is the company’s only customer.)

This month the Illinois Commerce Commission is holding hearings on a request for rate hikes ranging from 28 to 50 percent by Illinois American Water Company, which serves 317,000 customers from Chicago’s southwest and western suburbs to southern Illinois. It’s the latest of a steady string of rate hikes. (American Water bought up local private water utilities in the area starting in the 1980s.)

In Homer Glen and Orland Hills, where water rates are dramatically higher than in neighboring towns that draw the same Lake Michigan water through municipally-owned systems, officials are considering using eminent domain to take back their water systems, according to the Southtown Star. Other municipalities, including Peoria and Pekin, have mounted similar efforts over the years, but American Water has beaten them back.

Sometimes cities win. After a six-year legal battle, Fort Wayne, Indiana, last year won control of water services that had belonged to a Aqua America. According to FWW, a typical household’s bill dropped by over a third, while water quality and service improved significantly. “It’s been quite successful,” said Keesecker.

Paris says ‘non’

If Chicago were to consider water privatization, one prime prospective buyer would be Veolia Water, part of the North American subsidiary of the French multinational Veolia Environnement, the largest private water company in the world. Veolia Environnement NA moved its headquarters to the Aon building in August 2008. At the time, chief executive Michele Gourvennec noted that “the city of Chicago’s many environmental initiatives mirror…our interest in providing leading-edge environmental programs for our municipal, industrial, and commercial customers.”

Veolia operates the Indianapolis water system (now called Veolia Water Indianapolis) under a 20-year, $1.5 billion contract. In 2008 Veolia took over a $400 million contract to operate the Metropolitan Milwaukee Sewerage District, and it was listed as one of three multinationals that would have the capacity to bid on a water system takeover there.

Veolia’s “vision” is of “a future where the entire planet’s increasingly scarce supply of water fit for human consumption is controlled as a commodity to be bought, sold, traded, marketed, managed and priced for the highest possible corporate profit,” according to a 2005 corporate profile by Public Citizen. (The group argues that as a “natural monopoly,” water resources are best kept in public hands.)

Public Citizen charges that “corruption appears to be part of their corporate culture,” noting bribery convictions of company executives in New Orleans as well as France and Italy, and the jailing of mayors in Bridgeport, Connecticut, and Angoulene, France, for taking bribes from company representatives. (In New Orleans in 2002, after faith, labor, community and environmental groups organized against privatization, bids were rejected by the water and sewer board — and a referendum was passed requiring voter approval of any privatization contract.)

Reviewing the corporation’s operations in Africa, Asia, Europe, and Latin America, Public Citizen charges that Veolia has “a global track record of corruption, broken promises, environmental degradation, price-gouging, obfuscation, misdirection, and secrecy.” Nonetheless, “the world’s largest water company continues to enjoy substantial support within powerful pockets of financial and political circles.”

Founded in 1853 as Compagnie Generale des Eaux (by decree of Napolean III), Veolia took over the water system of Paris in 1861. Last year Paris decided it will not renew Veolia’s contract for water services in the city, which expires on December 31, Inter Press Service reports.

“We want to offer better service, at a better price,” said Paris Mayor Bertrand Delanoe.

A new model for Chicago

Chicago has led the nation in putting major public assets up for long-term lease. Its 2005 Skyway lease to a European consortium was the first such deal for an existing tollroad in the U.S.; its attempt to privatize Midway Airport (which could be revived if economic conditions improve) would have been the first of its kind too.

A recent Illinois PIRG report looks at all of Chicago’s privatization deals, including downtown parking garages and the city’s parking meters, and finds that all include contract terms limiting concessionaire’s risk. In the parking meter deal, the city is barred from issuing permits for parking facilities that charge less than three times nearby meter rates, which would seem to remove any competitive pressure to keep rates down.

In no case has there been any independent financial analysis of asset value or public interest impacts, Illinois PIRG found; the deals are developed and cut in secret, with no opportunity for public input; huge fees for lawyers and financial consultants cut into the value of deals, and sometimes raise conflict-of-interest concerns; and multigenerational leases limit options for cancelling deals and saddle future generations with rising costs and limited options.

The longer the timeframe, the harder it is to accurately gauge an asset’s value, said Brian Imus of Illinois PIRG, and it’s virtually impossible to predict changes in technology and demographics in the long run.

The report was issued in conjunction with an ordinance sponsored by Alderman Scott Waguespack, who called the parking meter debacle “a wake-up call for the City Council to strengthen the tools they have to make sound fiscal and policy decisions.”

The ordinance would require notification of aldermen whenever a public asset lease was under consideration; a public hearing at least a month before a council vote on putting out a bid; independent third-party review of asset values, public-interest concerns (which are particularly relevant in core operations like parking meters), consideration of other options; and a 30-year limit on leases of assets worth over $1 million.

“There need to be policies in place to protect the interests of the public and taxpayers,” said Imus. “We don’t have that in Chicago.”

He expects a push for hearings on the ordinance next month. A previous council effort to impose a 30-day “waiting period” was whittled down to 15 days under administration pressure. It’s not the time period itself but the independent review it provides for that’s important, says Paul Sajovek, Waguespack’s chief of staff. (In Akron voters won a 90-day review period — and the requirement that voters approve any lease of public assets.)

Imus believes it’s possible that some privatization deals could benefit the public. And while some would agree with Lindall that privatization is a bad idea generally, it’s likely many would agree with Keesecker that water services should be kept public.

]]>
Leaks in Great Lakes Compact? http://www.newstips.org/2008/08/leaks-in-great-lakes-compact/ Fri, 22 Aug 2008 14:29:32 +0000 http://communitymediaworkshop.org/newstips/?p=248

While Great Lakes advocates are pressing for swift congressional approval of the Great Lakes Compact, groups concerned about water privatization are working to close what they call “loopholes” in the international agreement.

A coalition including Food and Water Watch, Michigan Citizens for Water Conservation, and the Council of Canadians is concerned that while the compact bans large-scale diversions of Great Lakes water, it provides exceptions for bottled water and for water labelled as “product.”

The compact, ratified by eight states with a parallel agreement backed by two Canadian provinces, would prohibit large diversions and set uniform standards for water use in the Great Lakes basin. It was approved by the U.S. Senate by unanimous consent on August 1, but House approval was postponed after U.S. Rep. Bart Stupak (D-Mich) issued requests for comments from federal trade agencies.

Stupak questioned whether allowing diversions of Great Lakes water as “product” would subject the agreement to international trade law. In recent years corporations have used trade agreements to overturn local environmental protections.

In a letter to the U.S. trade representative, Stupak cited his concern “that ratifying the compact could allow Great Lakes water to no longer be held within the public trust, but instead be defined as a product for commercial use.”

The coalition has met with members of Congress to press for an amendment to legislation approving the compact which would remove the bottled water exception and establish that the Great Lakes are held in public trust, said Sam Finkelstein, a Chicago organizer for Food and Water Watch.

While it may be too late for an amendment, he said, the coalition has found support for an effort to insert language of congressional intent affirming its goals into the bill’s conference report, perhaps followed by an amendment to the Water Resources Development Act.

The Alliance for the Great Lakes, which worked with Great Lakes governors in negotiations over the compact, argues for prompt ratification, said Joel Brammeier.

“The Great Lakes Compact is the product of many years of negotiation and reflects the consensus of the Great Lakes basin on how to product and conserve these resources,” he said. “This isn’t the time to be arguing finer points.”

He added: “States have every right and authority to regulate the use of their waters for bottling within their own boundary.”

Finkelstein said “the exception was added because of pressure from companies like Nestles and Coke.”

“The fact is the Great Lakes are a shared resource,” he said, and while “it’s true states have the power to enact legislation on bottled water, the purpose of the compact is to create standards across the board.”

Michigan Citizens for Water Conservation has battled a Nestles Ice Mountain bottling plant in Mecosta County originally projected to use over 200 million gallons of water a year. Efforts by MCWC and others including Clean Water Action and the Sierra Club to include more stringent rules on water exports in state legislation ratifying the compact were unsuccessful. Last month Michigan became the final state to ratify the compact.

The U.S. House is expected to consider approval of the compact in September.

]]>