Monday, March 15, 2010

Water utility deal moves forward in Indy

Interesting news out of Indianapolis, where Mayor Greg Ballard has announced plans to move forward with a sale of the city's water and sewer utilities. The deal reportedly would net the city an upfront payment of $425 million, which it would use to address significant infrastructure needs. The new owner - a public charitable trust called the Citizens Energy Group - also would assume about $1.5 billion of debt from the two utilities.

Here in Milwaukee, the prospect of leasing the city's water utility was first raised by the city comptroller in 2008 as a potential strategy to help offset dwindling state aids and maintain existing services (see the Forum's August 2009 report for more information on the city's long-term fiscal predicament). A proposal to explore the idea was shot down by the common council, however, after significant opposition arose from environmentalists, city labor unions and others.

Indianapolis' proposed deal differs from the concept discussed in Milwaukee in several key aspects. Perhaps most important, the potential buyer is a non-profit entity that was created by civic leaders to provide gas, steam and chilled water to citizens without a profit motive. Citizens Energy Group's assets are owned by Marion County residents - suggesting important public oversight capability - though it is administered by a board of directors that is not accountable to voters.

The concept floated in Milwaukee, on the other hand, likely would have involved a private, for-profit entity. That entity would have entered into a long-term lease agreement to operate the water utility, as opposed to assuming ownership.

In addition, one of the key benefits cited by proponents of the deal in Indianapolis is the opportunity to consolidate water and sewer operations, which they say will reduce operating costs and save money on large-scale construction projects. Here in Milwaukee, sewer operations are governed by the Metropolitan Milwaukee Sewerage District, which privatized the bulk of its operations in the 1990's.

Whether the proposed deal in Indianapolis encourages Milwaukee officials to take another look at a potential lease of its water utility certainly is dubious given the strong reaction evoked by the comptroller's recent trial balloon.

Providing more food for thought, however, is the most recent The People Speak poll, conducted by the Forum in partnership with UWM's Center for Urban Initiatives and Research and The Business Journal Serving Greater Milwaukee. The poll found that 40% of respondents in the four-county metro area agreed with the notion of leasing the water utility as a means of helping address the city's budget problems, while 51% disagreed. In a much smaller sample size of City of Milwaukee residents, the margins were 39% for and 56% against.

Certainly, there's no groundswell of support for the concept at this time, but it's also not attracting the type of overwhelming opposition that might justify refusal even to explore the idea, particularly when other potential revenue enhancements or service cuts are put on the table for comparison.


Jon Keesecker said...

It is accurately stated in this post that last year's proposed lease of the Milwaukee Water Works elicited a strong opposition from the community. I would add further that organizations and individuals concerned about this possibility continue to watchdog the issue in the interest of broad opposition to water privatization that very much remains (as evidenced in the PPF poll).

It is also correct that the Indianapolis proposal is quite different from the Milwaukee proposal. For that reason, it would be a stretch to suggest that a completed deal in Indianapolis would strengthen the case for last year's lease proposal in Milwaukee. Rather, a stronger similarity between the two proposals is the concern--raised both in Milwaukee and by public officials in Indianapolis--about loss of transparency and accountability if the utility is handed over by the city through a lease or sale.

At this point, however, it is far from certain that Mayor Ballard will close a deal with Citizens Energy Group.

Jon Keesecker
Central Region Director
Food & Water Watch

Anonymous said...

giving up control of the daily operation, long term up keep and improvement of the city's water supply is shortsighted at best and an act of lunacy at worst. we've seen where the private sector has taken: the banks and brokerage houses, saved by the taxman that they try to avoid, and the health insurance industry that has made health coverage unaffordable when available.
water is our life line and we ought to keep it under public control and scrutiny...

SocratesChildren said...

The lack of overwhelming opposition to leasing our water-works might be explained by two thoughtful government decisions that will likely make leasing more difficult.

The Common Council voted to take it off the map. And Rep. Fred Kessler has introduced state legislation to prevent such a leasing.

The opposition to leasing may have relaxed and turned its energy to other pressing needs, but the chatter against leasing continues. There are small nimble political groups involved in housing, public transportation, and urban gardens that are scrutinizing water talk and looking for broad-based regional cooperation in those areas - not mere dollars.

The idea of using water to encourage economic development sounds good in a poll, but the devil-in-the-details may be the loss of control of water through a lease. If, having given up our control with a lease, how do we squeeze development that benefits the public interest out of a (possibly) disinterested private corporation? Or, more importantly, how do you convince water drinkers that they will benefit if they give up control?

Bill Sell

ultracon said...

The lack of opposition to privatizing our water might be due in part by the lack of media coverage on what could go wrong if we do it. Maybe if we had a media blitz that didn't focus just the business leaders that can benefit from it and what they are saying but focused on all the miserable failures of privatization around the world the polls would be showing something different.

Mary Grant said...

The People Speak poll is flawed and unreliable. It should not be interpreted to mean that 40 percent of respondents support a lease of the Milwaukee Water Works.

The poll led respondents to think that a lease of the Milwaukee Water Works could help the city address its budget problems. (And it seems to have presented the lease of the Water Works in a vacuum, as if there were no other policy options to resolve the budget shortfall.)

The poll, also, was not as clear as it should have been. People who opposed the lease had to indicate that they "agree" with the poll's statement.

Moreover, the Public Policy Forum misinterpreted the results of its study. The survey did not find that 40 percent of respondents favor a lease. That was not the question. It found 40 percent of respondents do not oppose a lease if it helps address the city's budget shortfall.

Yet, despite these problems, the poll still found that most people oppose leasing the Milwaukee Water Works.