Global Water Cartel Comes to Hometown America
Soaked in St. Paul?
by Dave Riehle
The following article is reprinted from the September 1 issue of the Union Advocate, semimonthly newspaper of the St. Paul Labor & Trades Assembly. The Advocate’s subhead reads: “Residents would lose a valuable public resource if St. Paul auctions off its Water Utility.” About the author the newspaper says: “Dave Riehle is local chairman of United Transportation Union Local 650, sergeant-at-arms of the St. Paul Trades & Labor Assembly, and a resident of St. Paul.”
“We lose a little on every gallon but we make it up in volume.” That, essentially, is the sales pitch delivered by private, for-profit businesses seeking to take over publicly owned and operated water utilities throughout the nation. These companies typically promise significant new capital investment and technology upgrades while keeping water rates low, besides delivering hefty dividends to the municipal budget. At the same time they brag to Wall Street about high returns on investment. Does this sound too good to be true? Read on.
St. Paul got what Mayor Norm Coleman called a “very, very preliminary” sales pitch after Coleman invited the world’s largest private water systems operator, United Water Services, to make a presentation in late July. The invitation was probably prompted by the distribution of a pro-privatization report by the National Association of Water Companies, a well-funded association of private water operators, at the annual U.S. Conference of Mayors meeting held in New Orleans in June.
Preliminary or not, workers at the St. Paul Water Utility are extremely concerned about the prospect of this valuable and indispensable city asset being auctioned off by Coleman as part of his “Compete St. Paul” campaign to privatize city services and whipsaw city unions. Representatives of several Water Utility unions are active participants in the labor-led St. Paul Works! Alliance. As members of this community-labor coalition, they are seeking to alert the labor movement and the public at large to the danger of turning the Utility over to a profit-taking outside operator, or even worse, selling the assets of the Utility outright.
Could St. Paul Become Another Sydney, Australia?
Some 300 employees, including members of 10 unions and two professional associations, operate the Water Utility. The Utility treats and distributes water to some 400,000 consumers, including a number of suburban communities such as Maplewood and West St. Paul. It also sells water wholesale to other municipalities like Roseville and Little Canada. The potential impact of a sell-off of the Utility is huge, and the prospect raises a high degree of uncertainty about jobs, wages, and benefits, as well as concern over the future quality, availability, and price of water to the public.
A Valuable Resource
The St. Paul Water Utility is in exceptionally good shape as it exists today and in terms of what it has inherited from the past. St. Paul water rates are among the lowest in the nation, and well below those of comparable utilities operated by United Water. The Utility has just completed a $36 million dollar upgrade of facilities, which will bring improved treatment capabilities and increased efficiency on line in the next few years. One of the fears at the Utility is that a takeover by a private entity such as United Water, based on a “snapshot” assessment of present conditions and assets, could allow the new operator to buy in at an unrealistically low price and then take credit for improvements which were initiated and put in place by the current staff, and cash out the assets of the Utility over time, insulated from public scrutiny.
St. Paul’s water delivery system, substantially put together in the late 19th and early 20th centuries, was designed with an unusual degree of foresight and systematic planning. While many St. Paul residents are aware that Lake Vadnais and the reforested land and parks surrounding it are part of the city’s water system, they may not know that the lake is only the final stage of an extensive system of lakes, canals, streams, and watersheds held or administered by the Utility. As a result, the Water Utility’s real estate holdings, ranging from the McCarron Treatment Plant on Rice Street almost to Forest Lake, mostly along the Rice Creek watershed, constitute one of the largest portions of undeveloped land within the burgeoning metropolitan area.
It is inevitable that a for-profit management of the Utility would move as rapidly as possible to turn these assets into cash flow by finding one pretext or another for selling off the choicest parcels to developers.
Sell-off of prime public resources has, in fact, been one way that United Water has made a profit since taking over several water systems in the United States. Just last year, the company aroused furious community opposition when it proposed to develop reservoir land in New Milford, Connecticut, for use as a high-priced golf course and housing development brokered by the company’s subsidiary, United Properties Group. The company had purchased the property and physical plant of the town’s water system in the 1980s.
The New York Times reported that in spite of an appeal by the town based on documented fears of water table pollution, United Water had nevertheless switched to a deep-well aquifer system, thus freeing up the reservoir property for sale by the company. In reports filed with the Securities Exchange Commission, United Water identifies United Properties as “a non-regulated business engaged in real estate investment and development” including housing and golf course development in New Jersey, New York, Delaware, Idaho, and Florida, all areas where the company has taken over municipal water operations.
Corruption and Abuse
When billions of dollars in public assets are at stake, the climate is ripe for corruption and abuse. Earlier this year in Kansas City, water privatization became an explosive political issue when it was reported that Mayor Kay Barnes’s top campaign consultant was working at the same time for a company seeking to take over the city’s water services department. A confidential document obtained by the Kansas City Star outlined a plan to buy or manage the money-making city water system, including “a strategy to elect a mayor and city council that favored privatization and a plan to discredit the department’s reputation so the public would support a private takeover,” the paper reported on May 29.
City workers twice marched on city hall in protests which the newspaper characterized as “public and ugly,” chanting “Our jobs are not for sale.” AFSCME Local 500 President Nate Byas, a protest leader, said, “We believe we have been betrayed.” The mayor quickly backpedaled, at least publicly, and invited the union to participate in a “Citizens Committee” to study “public/private partnerships.”
Privatization was at the root of a spectacular water crisis affecting some 3 million people last year in Sydney, Australia (see story page 22). For several weeks, residents were forced to boil water and purchase bottled water.
Australia’s prime minister called the crisis an “international embarrassment” for the city, already decorated with bunting for the Olympic Games 2000, which it will host next year, and on the heels of an advertising campaign in which Australian Olympians praised the city’s water for its purity.
Behind the crisis was an escalating process of privatization of Sydney’s water operations, which began in the early 1990s with the conversion of Sydney’s water board to a for-profit corporation, and with the commissioning of privately owned, for-profit water treatment plants at a cost of some $3 billion over 25 years. The main contractor, Australian Water Systems, is a joint venture of the giant, French-based corporation “Suez Lyonnaise des Eaux,” which also owns United Water Services.
Worldwide Water Cartel
Suez Lyonnaise, present in 120 countries and with vast interests in water, energy, and waste services, is at the heart of the emerging world water cartel. The company was originally formed to operate the Suez Canal. Today it has contracts in Manila, Budapest, Bucharest, Casablanca, Jakarta, Buenos Aires, Amman, Ho Chi Minh City, and Sydney, among others.
The company’s web site says that “public/private partnerships to supply drinking water and wastewater services are a fast-growing trend in the United States, where Lyonnaise des Eaux operates under the United Water trade name.”
While spreading geographically, the company also is growing vertically, taking over suppliers of critical services and the chemicals needed to provide those services. In June, Suez Lyonnaise agreed to purchase U.S.-based Nalco Chemical Co., the world’s largest provider of water treatment services, for $4.1 billion in cash. That same month, Suez Lyonnaise also agreed to buy Pittsburgh-based Calgon, another major supplier of water treatment chemicals, for $300 million, thus establishing themselves as owners of 50 percent of the world capacity for these services and products.
The immense Suez Lyonnaise global water cartel that is rapidly emerging is interested in making big returns on investment, with a current target of 10 percent. It is clear what their basic strategy is: Get a foot in the door with public promises of new capital investment while maintaining low rates, sign long-term contracts, and even agree to maintain union contracts in some cases. Once they are established, with public control and access to information blocked by all sorts of assertions of proprietary privileges, as happened in Sydney, they can pretty much do what they want. With a stranglehold on the supply of the chemicals and other elements necessary for treatment, they can extract profits from the front end. They can also move, as they have internationally, to escalate residential rates, cut jobs, and encourage higher industrial consumption through lower rates to big business. In addition, they funnel treatment through increasingly expensive chemical processes and pursue profitable development in existing watershed areas.
St. Paul Water System — a Unique Legacy
Which brings us back to St. Paul. United Water operates water and wastewater utilities in some 23 U.S. cities, including Atlanta, Milwaukee, Indianapolis, and Houston. Now it’s knocking at our door. (Actually, it didn’t even have to knock, as we know.) St. Paul’s Water Utility is a special and almost unique legacy that should continue to belong to the city as a whole. It’s a system that works well, is self-sustaining, and provides services with great economy and care. It has been fenced off to an exceptional degree from political corruption and tampering.
The old Empire Builders who put it together, whether they intended it or not, left us with an outstanding example of the superiority of a disinterested and democratically controlled operation run for the public good over a profit-seeking operation which is driven to take, and not to give. That is worth defending, not only for the immediate goal of protecting good jobs, as important as that is, but in the interests of the community as a whole. Historically it is the labor movement that has been best qualified to lead and organize that battle.
As the South African Municipal Workers’ Union, which is fighting the privatization of water by a British multinational, explains: “Water is a life-giving, scarce resource, which must remain therefore in the hands of the community through public sector delivery. Water must not be provided for profit, but to meet needs.”