Water board hopes to learn from Atlanta
City's privatization venture went south

Thursday April 17, 2003

By Martha Carr

Taking the advice of government watchdog groups, several Sewerage & Water Board of New Orleans members said Wednesday they will visit Atlanta in coming weeks to examine the collapse of one of the largest water privatization contracts in the United States.

A handful of members also said they plan to take a hard look at the board's current contract with USFilter, which runs both the east and west bank wastewater-treatment plants.

The California company is one of three that have been deemed qualified to bid on a 20-year contract to run the board's water and sewer systems. A second qualified bidder, United Water, was forced out of Atlanta in January after an audit found the contract had saved only half of what the company promised.

"I think it's a positive development that they want to go to Atlanta and find out from the people directly involved what went wrong with the contract," said Janet Howard, president of the Bureau of Governmental Research. "I also think they need to find out whether privatization has worked here, and if not, why not."

Water board member Tommie Vassel, who was recently appointed by Mayor Ray Nagin, said it seemed only logical that members look into the Atlanta fiasco before issuing

another request for proposals to bidders. Presently, the board is incorporating changes into a draft of the request for proposals, which will likely be released to the public in mid-May. The board's first request for proposals was highly criticized by the public and ultimately rejected by the board in a 6-5 vote last October.

Vassel also suggested that the water board's staff prepare a report on USFilter's management of the agency's wastewater-treatment plants during the past decade.

Nagin, however, said that asking for a report from water board staffers, who as part of an employees' group could compete with the private companies for the management contract, would present a conflict.

"Are you sure you want to do this?" he asked Vassel, adding that such a presentation could turn into a "sideshow."

In the end, the board did not ask for a formal presentation, and some members said they would look into it on their own. 

In Atlanta, a city audit of the operations of United Water Resources concluded the company failed to do all of the maintenance and repair work it was supposed to. United Water agreed to back out of its contract in January.

The local contract, first issued to Professional Service Group in 1992 and now held by USFilter, also has been the source of controversy. USFilter was acquired by Vivendi, parent company to PSG and its holding company Aqua Alliance, in 1999, and started running the New Orleans plants as part of the contract. Last June, a jury in federal court convicted former PSG president Michael Stump and ex-water board member Katherine Maraldo on bribery-related charges stemming from the company's attempt to land a five-year contract extension. Both are scheduled to be sentenced July 7 in Houston.

USFilter also was criticized after an electrical fire at the east bank wastewater-treatment plant in July 2001 led to flooding of the plant's grounds and caused raw sewage to be pumped into the Mississippi River for several hours. The incident prompted complaints from former board member Jim Singleton, who said the company had been fined $30,000 by the Environmental Protection Agency for exceeding discharge limits and was in danger of violating the federal consent decree governing the sewer system. Singleton was an opponent of privatization.

While no timeline was set at Wednesday's meeting for the trip to Atlanta or delving into USFilter's contract, BGR's Howard said the investigations should be completed before the draft request for proposals is released to the public.

Assistant City Attorney Arlinda Westbrook said the board will likely call a special meeting early next month to incorporate changes to the draft request or will discuss them at its regularly scheduled meeting May 21. Once the board decides on a final draft, it will be issued to the public for comment and posted on the water board's Web site, Westbrook said. Five public hearings will follow the document's release, said Marcia St. Martin, the agency's deputy director.

So far, the board has said it will give the public 30 days for comment, despite pleas from several citizens to allow more time.