Privatization debate still in the pipeline

 Thursday May 01, 2003

 Stephanie Grace

New Orleans Mayor Ray Nagin ends his first year in office as a popular mayor with an undeniably popular agenda: cleaning up corruption and patronage, making government more user-friendly and attracting business to his impoverished city.

Hard to dispute the merits of any of that.

On Nagin's radar for Year Two is something that is sure to be a much tougher sell: privatizing huge portions of the Sewerage & Water Board's operations.  

Nagin knows perfectly well how much of a fight he faces. He recently commissioned a poll, which found that just 20 percent of voters like the idea, while 60 percent oppose it. Pollster Verne Kennedy said privatization was unpopular when he first started asking about it in 2000 and has become even more so over time.

 Although Nagin says privatization is just one of three options he's exploring (finding internal efficiencies and restructuring the board's debt are the others), he seems focused on the outside-management alternative and confident that he can change people's minds.

"Here's an agency that everybody agrees is not the most efficient agency in the world. Here's an agency that is under federal mandates to do improvements," he said in a recent interview. "If we proceed with no outside management to help us to find savings in operations, we're faced with 100 percent rate increases over the next five years. End of discussion."

 Actually, it's not, and the Kennedy poll presents a roadmap of where Nagin will likely try to steer the conversation. In an unusually long and strikingly loaded question, voters were asked:

 "The Sewerage & Water Board announced it is anticipating as much as a 100 percent increase in rates over the next five years. Mayor Ray Nagin has proposed options to reduce those rate increases which would continue city ownership but turn over day-to-day management to a private firm as well as re-engineering the city's entire sewerage and water system.

Do you favor or oppose Mayor Ray Nagin's plans?"

Phrasing the dilemma that way won 58 percent approval for the mayor's approach, and that's the number he likes to throw around when discussing the issue.

Still, it's hard to overestimate just how deep suspicion of privatization runs.

Since the privatization drive was launched in 1999, it's been subject to constant criticism by community groups who felt that the proposal was not structured to protect the city's interests and that the process of seeking an outside contractor was fatally flawed.

Another question is just how much money the board would really save, particularly once a profit is built into the equation. The potential bidders cite huge savings, but the results from the first round of bidding show that the board could have netted only about $8 million a year at best. With about $600 million in federally mandated sewer system repairs and many millions needed to fix the water system, rates have been steadily climbing and are likely to continue rising under any circumstances.

Some also have questioned the wisdom of trusting a private company with the city's most basic resources, and it doesn't help that both hopefuls have parent companies in France. The industry had some public relations difficulties while the contract was under consideration last year, notably Atlanta's decision to sever a similar deal with one of the companies.  

Compounding this is the frequent mischaracterization -- either out of desire to drum up opposition or simple misunderstanding -- of the management contract as a "sale."

In fact, nobody has proposed that the board forfeit ownership of the utility.

Even Nagin panned the proposal during his mayoral campaign last year, so much so that he left some with the impression he opposed privatization, although he was careful not to say so directly.

The saga seemed to have ended in October, when the board abruptly voted to reject the bids. Nagin was on the losing end of the 6-5 vote, which came at the start of a meeting he had called to evaluate the proposals.

But Nagin was soon back at it, replacing the two opponents whose nine-year terms had expired and ordering that the contract he had harshly criticized during his campaign be reworked. The board is expected to seek bids on the revised proposal in the next few months.

It's a dangerous cause for Nagin to take on, since voters will get a chance to reject whatever contract he works out. If he triumphs, it will be his biggest political victory since the long shot election that made him mayor.

Can New Orleans Sewer and Water Board keep voters from having a referendum on privatization?

Union oraniziers claim voters would smash privatization like a "tomato on the street." The heat is on in the Big Easy!

Stephanie Grace is a staff writer. She may be reached at (504) 826-3383 or at