What went wrong in New Orleans, according to Times Picayune writer Stephanie Grace

April 22, 2004
Stephanie Grace

In the five years since the board decided to explore privatization -- and spent $5 million in the process, mostly on consultants -- there's never been anything close to consensus that hiring an outside contractor to manage New Orleans' water and sewer systems was a good idea, that it would really save ratepayers money, protect the city's vital resources and still leave room for profit.

That wasn't really the fault of the companies that wanted the job. They were more or less reputable and seemed reasonably efficient and technically adept.

The fact is that the public was just never comfortable with the idea. Part of the reason may be our deep-seated resistance to change, something that has often held the city back. But a much bigger factor surely was old-fashioned voter cynicism, the feeling that somebody was trying to pull a fast one.

It's doubtful the board could have come up with a process that undermined public confidence as much as this one did from the outset, when City Councilman Eddie Sapir first proposed privatization as a way to avert looming rate increases. Securing accurate information and opportunities for public input were constant battles. Some highlights:

-- Watchdog groups identified a number of contract provisions that didn't seem to be in the public's interest, including one that gave the board, not the contractor, approval over who could be hired for major subcontracts -- a provision that then-Mayor Marc Morial staunchly defended before abruptly dropping it on his way out of office.

-- A couple of Morial's friends announced they were setting up a local group to become a "universal partner" with whichever company won the contract, an idea that seemed to die a merciful death as soon as it became public.

-- A blue ribbon committee met to evaluate the proposals, only to discover they didn't have critical information, that the public hadn't been notified of some of their meetings, that the Morial administration would not give them the chance to rate the bids numerically and that they were being asked to vote on a highly technical document that they hadn't even had time to digest.

-- Perhaps most damning of all, the board couldn't say with any authority how much the 20-year, $1 billion deal might save, which was, of course, the stated point of privatization. The water board's staff, which submitted its own bid, said the board was spending $52.4 million a year on items that would be covered by the contract. But the consultants said the correct figure was $74.9 million. Bids ranged from $42.8 million a year to $50.2 million.

In the midst of all this came the mayoral election, and every candidate, including Nagin, saw privatization as a potent campaign issue. Nagin said there was no way the deal would go through, as structured, on his watch. But his mayoral rival, former Councilman Jim Singleton, one-upped him.

Singleton engineered a public referendum that would require any privatization contract to be approved by the voters. On the same day the voters chose Nagin as mayor, they endorsed Singleton's idea by an overwhelming margin.

So by the time Nagin came into office in 2002 and decided to try to rework the contract to make it more acceptable to the public, in reality the deal was all but dead. One of two remaining bidders, United Water, said as much when it dropped out of contention, citing the referendum requirement.

United Water was by then in a weakened position anyway, since its landmark privatization deal with Atlanta had collapsed in a frenzy of finger pointing.

Still, Nagin persisted. He may have been right that a cleaned-up contract could have attracted at least three bidders, his bare minimum. But the mayor's team never produced a new proposal, and in the end, only one bidder, USFilter, stayed in the hunt.

Now, Nagin says he's ready to focus on other ways to reform the board.

Let's hope it doesn't take another five years.

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