A page from the 1914 book “The Star-Spangled Centennial” celebrating “the Great drains Baltimore is now Building,” suggesting “The system will be the finest in the world.” A hundred years later, these waterworks are in major need of repair. (August 19, 2014)
After Baltimore City wrested its water and sewage system away from the private Baltimore Water Company in 1854, the municipal system expanded and made improvements, so much so that by 1914 the city crowed about its “finest in the world” new sewer system in a brag book aimed at tourists and business owners.
A hundred years later, a nonprofit corporate privatization watchdog that thinks the city is about to sell its waterworks to a private company is focusing attention on a tiny Baltimore contract to promote efficiency in the city’s troubled waterworks. Some city workers protested the contract—which has not yet been awarded—on August 13 at City Hall.
“Project 1224, Procurement of Consultant Services: Water and Wastewater Plants Efficiency Study,” was advertised in early summer, drawing two “letters of interest,” the first step in determining who gets the contract. A French company, Veolia, and PA Consulting of the United Kingdom were the companies that submitted letters.
Corporate Accountability International, a Boston-based nonprofit that has been bird-dogging water-privatization schemes around the world for 10 years, asked to see the letters and emailed local media to pitch the story. The group believes the city contract is the first step in a water-privatization scheme, and means to stop it.
City Paper (and the Sun, which covered the protest last week) made a public-records request for the letters as well. The Department of Public Works rejected the requests, citing a provision that exempts disclosure of trade secrets.
The contract itself appears innocuous. Among its provisions are to “Evaluate Montebello Water Filtration Plants 1 and 2, Ashburton Water Filtration Plant, Back River Wastewater Treatment Plant, and Patapsco Wastewater Treatment Plant operating and maintenance processes, with a particular focus on the areas of energy usage, chemical usage and pricing, residuals management, and labor efficiencies.” The whole contract is “not to exceed $500,000.”
Corporate Accountability sees a more sinister aim.
“Veolia has a track record of using these Trojan horse consulting contracts to get its foot in the door, opening opportunities to further privatize cities’ water systems,” says Katherine Sawyer, a National Water Campaign Organizer for Corporate Accountability International. She says the next step is outsourcing and layoffs and then, often, a big private debt-funded plan that locks in the contractor. “This type of contract led to Veolia’s management of Pittsburgh’s water system, for example,” she says.
In 2012 Pittsburgh hired Veolia “to provide interim executive management services” to its waterworks, two years after the previous executive director resigned amid a scandal involving water and sewer line insurance that customers were billed $5 per month for unless they opted out. (A similar program Baltimore announced earlier this year is strictly opt-in and costs $8.49 per month.) After the first year of the Pittsburgh contract, Veolia announced that it had earned bonuses for its executives, though union workers had rejected a contract offer.
Veolia did not return City Paper’s phone calls seeking comment. A spokesperson for the company referred The Sun to city officials. According to the newspaper, the mayor’s office spokesperson called the protest “wild and irresponsible speculation that is not rooted in any fact.”
Veolia Transportation runs Baltimore’s best bus system—the free downtown circulator. But that’s like a hobby to the huge company. It claims its water and wastewater services serve more than 500 communities in North America. In 2013, water accounted for about 45 percent of Veolia’s 22 billion euros ($30 billion) of revenue, according to Reuters.
A spokeswoman for the other potential bidder, PA Consulting, sent an email declining to comment.
Sawyer says the Baltimore contract also looks similar to one that St. Louis abandoned last year amid pressure from anti-privatization advocates (including the Corporate Accountability International). These things follow a pattern, she claims.
“Stage one is look at the system and say you’re going to make improvements in efficiency,” Sawyer says. “In stage two they bring in their proprietary ‘Peer Performance Solutions,’ so to implement the ideas you have to pay them again.”
In most consulting deals, you pay the consultant once and get to use his ideas forever, she says. With Veolia and the other big water companies, “the contracts are huge, dense, filled with legal issues that cities don’t usually understand or have the methods to understand them.”
Veolia has apparently been so stung by critics of its water work that it has a whole FAQ page devoted to dispelling “myths.” The contracts are here called PPPs—“Public-Private Partnerships”—and Veolia stresses that it’s not like a huge multinational suddenly owns your waterworks. Why, they don’t even set rates to make a profit! “Rate-setting authority remains the responsibility of the municipal government,” Veolia reports. “Thousands of North American communities served by public-private partnerships have experienced cost reductions of 10 to 30 percent. For instance, Oklahoma City has saved more than $150 million through a partnership.”
Federal law changed in the mid-1990s to allow long-term PPPs. Cranston, Rhode Island was the first city to jump, according to an effusive 1997 story in the Sun. Then-Baltimore Mayor Kurt Schmoke was talking to the private water companies then: “We are open,” he told the Sun. “We invite people to come in.”
The trend has been toward privatization ever since. The journal Global Water Intelligence published a report last year saying that for the first time, more than 1 billion people “receive water or wastewater services from the private sector.”
There has been something of a roll-back in waterworks privatizations in recent years, though, with “remunicipalizations” of some private takeovers that began in the 1980s. In a white paper released in June, Corporate Accountability counts more than 20 municipalities in the U.S. that took back control of their water works from private companies in the past decade or so. In Veolia’s home country, Paris did the same in 2010, saving its ratepayers money while financing city services. Turns out running water utilities is harder than it looks, and making a profit on them even harder than that—even with the efficiencies private companies supposedly enjoy.
Founded in 1977 as Infact, the Corporate Accountability International led the boycott against Nestlé for its infant-formula marketing in poor countries. It fought the nuclear weapons industry in the 1980s and tobacco companies in the 1990s. The anti-private-water campaign started in 2004 as a project on bottled water which sells for a premium, promotes plastic pollution, and, usually, is sourced from municipal taps. Its beef with the private companies is philosophical. “No matter how the private sector frames its intentions, its legally bound priority is market development over community development, profit maximization over welfare maximization,” the group says in its white paper.
The Corporate Accountability Campaign is allied with AFSCME, the huge state-and-local government employee union. Glenard Middleton heads up the Baltimore local, but he did not return City Paper’s calls asking about Veolia and the water contract.
Baltimore’s water and wastewater systems have been plagued with problems for many years—from diabolically inaccurate billing, which may have cost some people their homes and businesses, to leaking and disintegrating pipes which waste huge amounts of water, damage other property and pollute the bay. At 4 p.m. on Friday, Aug. 15, the Department of Public Works quietly dropped a press release acknowledging that a storm-related sewage leak it had previously said it “believed to exceed 10,000 gallons” was actually a 3 million-gallon leak.
As part of a consent decree with federal pollution regulators, the city is spending $1 billion to fix the problems, and passing the cost on to rate payers, as it must. At an Aug. 7 hearing for the City Council’s Taxation, Finance and Economic Development Committee, Council President Bernard C. “Jack” Young asked for a delay in the next scheduled rate increase. “A lot of people are falling through the cracks and may be in danger of losing their homes due to unpaid bills,” he said.
Young sponsored the bill calling for the hearing in June, just about the time Public Works published its RFP seeking efficiency consultants.
Young’s spokesperson, Lester Davis, says Young is not a fan of privatization. “If something like this were to come up in the future the council president would obviously be a leading skeptic.”