Fix In for Stockton's Water?

Conflict of interest charged in bid process

Consumer advocacy group Public Citizen has charged that a company hired to recommend whether Stockton should privatize its water systems is biased toward privatization. The consultant, Massachusetts-based
Alternative Resources Inc. (ARI), has ties to the private water industry and has a history of recommending private alternatives over public.

Stockton's city council decided in 1999 to explore hiring a private
company to operate the city's water systems, in hopes that the private sector could operate and repair the systems more efficiently and less expensively. OMI/Thames Water, California Water Service Company/ United Water Resources and US Filter have expressed their interest in running the systems, which include 405 miles of water mains, 1,151 miles of sewer pipes, 187 miles of connection lines, 20 pumping stations and a treatment plant.

Public Citizen claims that the vying firms have a record of breaking environmental and other laws. In 2000, the City Council of Biddeford, Maine withheld payment from OMI until the company fixed a chronic odor problem at the city’s sewage treatment plant.

In 1996, a top executive of United Water Resources’s parent company, Suez Lyonnaise des Eaux of France, was imprisoned for bribery in connection with a contract award. In Atlanta, where United Water has a municipal contract, officials and residents have since complained about
broken fire hydrants, slow service and brown water with flecks of debris.

In 1997, executives of US Filter’s parent company, Vivendi Environnement of France, were convicted of bribing the mayor of St-Denis to obtain a water concession. Last year, an electrical fire at a sewage treatment plant that US Filter operates in New Orleans caused raw sewage to be dumped into the Mississippi River.

The idea of privatizing Stockton's water systems has been criticized by Public Citizen and the Concerned Citizens Coalition, a group of Stockton residents who want to keep the systems public. City water is less expensive than water offered by California Water Service Co., a private firm bidding on the city contract that now serves about half the city's
population. And Stockton's Municipal Utilities District has been able to cut costs in the past two years, resulting in savings that the agency estimates would be sufficient to perform necessary repairs without raising rates over
the next 10 years.

ARI is a member of the National Council for Public-Private Partnerships (NCPPP), whose mission is to "to advocate and facilitate the formation of
public-private partnerships at the federal, state and local levels," according to its mission statement. ("Public-private partnership" is
generally understood to mean privatization.) ARI's fellow members include OMI, Thames Water, United Water and US Filter - the companies competing for Stockton's contract. This creates a potential conflict of interest, Public Citizen said. Representatives of these and other major water companies serve on the council's board of directors.

The NCPPP is an active member of the H2O coalition, an industry group that also includes the National Association of Water Companies and the Water and Wastewater Equipment Manufacturers Association. The
coalition opposes adequate federal assistance in rebuilding the nation's crumbling water and wastewater infrastructure, hoping that a lack of funding will force communities to privatize their water systems, thus expanding the revenue base of the coalition members.

When the bids to privatize Stockton's water systems are submitted, ARI will compare them to an estimated cost of public operation prepared by HDR Engineering and decide which alternative benefits Stockton the
most — public or private operations. Public Citizen maintains they have been informed by an ARI representative that ARI always recommends public-private partnerships. ARI's list of clients is not readily available, but information on ARI's Web site appears to corroborate the statement. Two cases in which ARI have recommended privatization of water systems include Taunton, Mass. and the borough of Chester in New Jersey.

"It's absurd to expect a company that's in bed with the private water industry to recommend the public alternative," said Jane Kelly, director of the California office of Public Citizen. "By relying on ARI, the City Council is effectively signing away maintenance of the city's water and sewer systems."

Stockton's Mayor Gary Podesto has said that the city is merely exploring its options and could decide to keep the operations public. The city hired HDR Engineering to prepare an estimate of what it would cost for the city to continue running the water systems if it became more efficient and made certain capital improvements. But it will be ARI, and not HDR, that will make the final recommendation to the city.

"Hiring HDR to prepare a benchmark report is little more than a smoke screen," said Diego Valencia of Public Citizen. "The city officials have decided to privatize from the get-go, or they would not have contracted ARI."

"Hiring a water industry insider to decide whether Stockton should keep its water public is like asking a Coke executive if Pepsi is better," said Jane Kelly. "The mayor and the city council should be wiser than that."