St. Louis City is a model for what cities should do when large water corporations come knocking on their doors offering “public-private partnerships,” according to a report released today by the Corporate Accountability International organization.
The report, “Troubled Waters: Misleading industry PR and the case for public water,” gives a nod to St. Louis’ grassroots organizers, who fought to prevent city officials from entering into a contract with Veolia Water North America, a French multinational company. The report’s author Emanuele Lobina predicts that St. Louis organizers’ struggle is one of many to come.
Over the next 20 years, U.S. water systems will likely require a staggering $2.8 to $4.8 trillion investment, according to the report.
“In response, private water corporations are waging a national campaign to present privatization, in its many forms, as a cure-all that will reduce costs and increase efficiency,” Lobina states.
With privatization becoming more taboo, Lobina found that water corporations are having to come up with more creative ways to get their feet in the door by “repackaging” private water contracts – such as Veolia’s “Peer Performance Solutions” consulting package. Lobina used St. Louis as an example.
He writes that in 2007, St. Louis City Mayor Francis G. Slay accepted the first place award and a check for $15,000 from Veolia, for a “Best Tasting City Water in America” award. Three years later, in September 2010, representatives from Veolia toured the St. Louis Water Division facility. And they followed up three months letter with a proposed $250,000 consulting contract “in a supposed effort to cut costs,” he writes.
“The proposal reportedly lacked the necessary support of the Water Division and failed to gain traction,” he writes, “but Veolia had identified critical political allies through which to pursue a contract with the city.”
Two years later in 2012, the city of St. Louis issued a request for proposals for a consultant to conduct an efficiency study of the city’s water utility. The city’s selection committee chose to award the contract to Veolia and its Peer Performance Solutions contract model, but the contract first needed to be approved by the Board of Estimate and Apportionment (E&A Board). Community members and local organizations learned of the proposed contract and formed the Dump Veolia Coalition in opposition.
The report quotes Lewis Reed, president of the Board of Aldermen, as saying, “In St. Louis, public opinion on the proposed Veolia contract was loud and clear. I stood against it because I believed the contract would have given Veolia a foothold to push through future contracts, deepening its power over and ability to profit from our water system. Veolia’s tactic is to work out sweetheart deals with influential players in cities like ours, but Veolia doesn’t have the whole city in its back pocket.”
Great Rivers Environmental Law Center, an environmental law firm, analyzed Veolia’s proposed contract and concluded that the “contract will have the effect of privatizing the city’s Water Division, and will make city residents captive to Veolia.”
Though the initial contract was for a consulting agreement between Veolia and the city, Lobina writes that its language would have helped set the stage for privatization in the future.
“The contract language ceded intellectual property created through the consulting contract ‘by Veolia alone, with the city or jointly with others’ solely to Veolia,” Lobina writes. “The Law Center found this contractual provision troubling because it turned Veolia into the private owner of all ideas for improving the St. Louis City Water Division, and meant that the city may have found it impossible to implement any proposed changes identified in the consulting phase of the contract without hiring Veolia and could even lose control of its water service.”
“This would have meant the city would pay Veolia as a consultant to identify cost-saving measures to which Veolia would have the sole right—the reversal of a typical consulting arrangement.”
For a year, Slay failed to secure the votes he needed on the E&A Board to push the contract through. Many remember when the city attorney sent a letter to Comptroller Darlene Green, stating that the Board of Aldermen had already approved Veolia’s contract as a budget line item in its budget approval process, and that the comptroller had a “ministerial duty” to approve the contract. This outraged several aldermen, who were already skeptical about Veolia’s track record and Slay’s persistence in spite of public opposition to the contract.
Alderwoman Christine Ingrassia is quoted in the report.
“The public must have power in decisions regarding our public water system,” she said. “I would be wary of contracting with any corporation that relies on circumventing the public voice with backroom dealings to expand its business, especially when it comes to our most vital public service.”
In the end, the aldermen fought back by presenting a bill to remove the budget line item in question from the city’s budget. In the process, Veolia withdrew its contract bid, “rather than face legislative action from the full Board of Aldermen that could have further damaged its reputation.”
According to the report, 33 U.S. municipalities have “remunicipalized” their water systems since 2003, bringing them back under public control. Five have done so in 2014 alone. And an additional 10 have set the wheels in motion to do so this year through legal and/or administrative action.
Lobina argues that public-private partnerships and privatization “are one and the same thing, and are equally problematic.” The companies have poor track records of keeping promises of improved efficiency and management, he said.
“The reason behind the private water industry’s failure to deliver on its promises is the fact that it prioritizes profits over the democratic governance and sustainable development of public water systems,” Lobina writes. “Private water corporations behave like typical monopolists to extract rent from their long-term contracts at the expense of local communities.”
