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Water and privatization

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).

Avoiding water shortages

Even within the Lake Michigan region, many municipalities are reaching their limit on water withdrawals under the international Great Lakes Compact.

With growing development, Illinois faces growing demands on its water supply. Proper planning — and consideration of water management issues in land use and development decisions — is required to avoid water shortages in coming decades, said Mandy Burrell of the Metropolitan Planning Council.

MPC is sponsoring “Beyond Showerheads and Sprinklers,” a conference on water governance in Illinois, along with Openlands and the Paul Simon Public Policy Institute. It takes place this Friday, May 16, at the Union Club.

Read the rest of this entry »

Connecting communities, funding transit

As a new report spells out the benefits of rail and bus systems in northeast Illinois, three Chicago communities are meeting to discuss improving their pedestrian environment and access to mass transit in order to make their neighborhoods more convenient and vibrant.

The Near North task force of Reconnecting Neighborhoods meets Wednesday, March 26 at 6 p.m. at the Evergreen Towers Apartments, 1333 N. Cleveland.

The Metropolitan Planning Council is facilitating community input in the neighborhood planning program sponsored by the RTA and the city’s Department of Planning and Development in three areas where CHA projects are being replaced by mixed-income development.

The Near North task force has identified an overemphasis on auto-oriented development as a key problem, with a retail center at Division and Clyborn that fosters traffic congestion but doesn’t act as a neighborhood center.

“The feeling is that if you can make the community more pedestrian friendly, with public transit as the first option, you can entice retailers into the area with foot traffic from people looking to meet their needs closer to where they live,” said Brandon Johnson of MPC.  One goal is to find ways to restore the street grid in “superblocks” that once held giant housing developments, he said.

Community meetings have been held by a Reconnecting Neighborhoods task force in recent weeks for the Mid South, an area located near CTA and Metra lines but lacking easy access to them.  (One task force member, the Quad Communities Development Corp., won expanded hours on the 43rd Street bus this month.)  The task force has identified a Metra stop at Oakwood and a joint fare agreement between CTA and Metra as two goals.

A community meeting for a Reconnecting Neighborhoods task force on the Near West Side is planned for later this month, and two more rounds of public meetings are planned in each area as proposals are refined, Johnson said.

Johnson said it’s ironic that planning patterns that were set by white flight in the era of suburbanization are being reworked because of white flight back from the suburbs.  “You have planning based upon a preferred constituency,” and “when they wanted to live in the suburbs and have access to the city, we built a lot of roads, and now that they’re more environmentally conscious and less willing to drive, we see the political will reflecting those changes.”

Not quickly enough, according to a new report from Illinois PIRG which spells out possible benefits of increased investment in transit alternatives.

“We need to stop thinking about funding priorities in 20th century terms,” said Brian Imus of Illinois PIRG.  “We have a whole new set of 21st century problems — global warming pollution, sky high gasoline prices, and congestion that is only getting worse as we build new roads.”

The report compares the impact of transit agencies across the country — in northeastern Illinois, transit saved 276 million gallons of oil and $723 million that would have been spent on gas in 2006, second only to New York City. Statewide, transit reduced carbon emissions by nearly 2 million metric tons.

On the plus side, “we have a pretty extensive transit system,” Imus said — but on the minus side, “we have a transit infrastructure that’s falling apart.”

He hopes the report will add to the impetus for a state capital budget — but he notes that Governor Blagojevich’s capital budget proposal “doesn’t get us close to a program to get our transit infrastructure in good working order.”

Blagojevich’s proposal would spend five times as much on roads as on transit, a far heavier emphasis on roads than past state plans, Imus said.

Illinois could lose federal matching funds if it doesn’t move quickly on transportation funding, he said — and it could be at a disadvantage in negotiations over next year’s federal transportation bill, with states and localities that are currently expanding transit systems in a much better position.

Prospects for New Legislative Session

Major issues facing the Illinois General Assembly will be addressed – one day before the opening of the legislature’s 95th session – by senior staff of the Metropolitan Planning Council at a media briefing on January 9.

Prospects for sustainable development proposals and funding for education and transportation will be discussed by MPC president MarySue Barrett and other top staff.

In 2007 legislators will consider funding for the Chicago Metropolitan Agency for Planning, the new agency joining transportation and land use planning, and MPC supports including a dedicated funding stream for the agency in a new state capital plan, said Mandy Burrell. Such funding could provide incentives to encourage transit-oriented development, and should be tied to performance indicators measuring regional progress toward sustainable development, she said.

The group has backed the RTA’s Moving Beyond Congestion campaign to build support for expanding public transit and has studied proposals to use public-private partnerships to finance roadways and transportation projects. “Such partnerships are most appropriate for new infrastructure projects,” Burrell said.

Other topics at the media briefing include proposals to encourage development of affordable housing near jobs and transportation and to link expanded school funding to tax reform and educational improvement.

The briefing will be Tuesday, January 9 at 12 noon at MPC’s offices at 25 E. Washington, and is open to the media. Reporters are asked to register in advance.



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