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USFilter, water board close to settlement
Company still in line for outsource contract

October 14, 2003

By Martha Carr
Staff writer

USFilter and the Sewerage & Water Board appear to be nearing a settlement in a three-year dispute over the company's operation of the city's two wastewater-treatment plants.

The company is poised to bid on a massive contract -- worth more than $1 billion -- that would privatize the board's entire water and sewer operations for up to 20 years.

The water board Wednesday will consider paying USFilter $2.6 million it had been withholding in exchange for the company's commitment to repair
and maintain the two plants according to contract specifications.

The settlement comes amid findings that the board and the company each failed to fully comply with the contract in recent years, as the cost of the deal ballooned from $5.2 million in 1992 to an estimated $13.8 million this year.

"This contract hasn't worked well for either party, so we have developed a settlement to try to bring both parties up to a level playing field," said the water board's president pro tem, Sidney Evans. "The next thing we need to do is decide how should we operate these facilities. If we still believe
privatization is the best way to go, we should put it out for bid and let the best company win. If we feel it should be brought in-house, we should do that."

The company's violations, if viewed in their entirety, could have been grounds to terminate the contract, according to an analysis prepared by water board deputy general superintendent Charles McKinney, who mediated the settlement negotiations.

But the water board's action also contributed to problems at the plants, according to McKinney's analysis, which determined that it failed to adequately oversee the contract and never demanded that the company fix its deficiencies. The board also failed to codify changes in the contract,
distorting what was expected of USFilter, the analysis found.

The dispute came to a boil in June, when letters between the company and the board's acting executive director became public. That prompted Mayor Ray Nagin, who serves as president of the board, to order staffers to resolve the skirmish.

Evans says the board's desire to resolve the sewer-plant contract dispute has nothing to do with USFilter's interest in the ongoing privatization process.

"This isn't a move to pacify USFilter or to get them in a better position to bid on privatization," Evans said. "This is an operational matter that was not working well."

At issue have been repeated problems at the city' s East Bank Sewage Treatment Plant in the Lower 9th Ward, which has discharged sewage into the Mississippi River 64 times since 2001, according to McKinney's analysis. The West Bank plant in Algiers, which has seen fewer problems, has had 31 illegal discharges since 2001, the analysis shows.

Most of the discharges violated a 1998 consent decree with the U.S. Environmental Protection Agency over lake pollution caused by the city's leaky sewer system, and have resulted in tens of thousands of dollars in fines.

USFilter has blamed the water board for the inefficiencies and the EPA violations at the plants, having needlessly postponed much-needed capital improvements.