New Orleans Private Partnership Dead

April, 20, 2004
Martha Carr

After seven months of silence, Mayor Ray Nagin said he's finally ready to call an end to the contentious privatization drive that has consumed the Sewerage & Water Board for the past five years, as two administrations and scores of residents debated -- often hotly -- whether to turn over the city's sewer and water systems to a private company's control.

Nagin last week said he will officially declare the $5 million effort dead at one of the board's next several monthly meetings, primarily because a new draft bid has failed to attract three private firms interested in operating both the sewer and water systems. The water board meets Wednesday and again on May 19.

"In the next couple of meetings, it will be done," Nagin said last week. "We've got three companies that are interested, but one wants the whole piece and the other two just want part of it. And you know that's not going through. I just don't see it, unless some miracle happens."

Drive began in 1999

The effort to privatize the city's sewer and water systems was initiated in 1999 by City Councilman Eddie Sapir, who presented the idea as a way to stave off future rate increases by holding down costs at the troubled agency.

At the time, the water board had inked a deal with the U.S. Environmental Protection Agency to spend more than $200 million repairing leaky underground sewer pipes that had been polluting Lake Pontchartrain, or suffer massive fines. Board members knew the expense of the 14-year job -- whose price tag has since grown to $650 million -- would mean huge rate increases, a politically dicey prospect. So they began investigating private management as a way to save money.

Former Mayor Marc Morial became the effort's key proponent and went on to shepherd the 20-year, $1 billion prospective contract through its first incarnation. Observers found plenty to criticize: Millions of taxpayer dollars went to consultants who drafted the bid proposals, while the three major companies interested in the job -- United Water, US Filter and OMI/Thames -- each put politically connected consultants on the payroll. Critics also said the process was often disorganized, confusing and not in the public's best interest.

The effort ended abruptly in October 2002 with a 6-5 vote, when opponents on the board orchestrated a coup to reject all bids.

Not enough bidders

Despite the controversy, Nagin chose to revive the beleaguered drive, promising to fast-track the process and solicit new bids by February 2003. More than a year later, the water board has yet to issue a second bid document.

Nagin says that's because there aren't enough private companies showing interest in the job to ensure the water board will get a competitive price. At least one company, United Water, has said it pulled back in part because of a move by privatization opponent and former City Councilman Jim Singleton to change the City Charter to require voter approval for any large water and sewer privatization contract.

Last year legislators wrote the same provision into state statutes, further solidifying what proponents called a major roadblock to attracting multiple companies. United Water withdrew from the process last June, leaving only Veolia Water North America, formerly known as US Filter, and a S&WB employee group publicly saying they would bid on the job. A Veolia spokesman declined to comment Monday.

Nagin said he's talked to companies about the possibility of splitting the job into smaller parts, such as water only or sewer only, but still hasn't gotten the response he thinks he needs.

"So we are probably going to exit out," he said.

Martha Carr may be reached at mcarr@timespicayune.com or (504) 826-3306.