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Elise Zuidema
December 3rd, 2009

The Price of Privatization: Stockton CA

The public won a major victory against water privatization in Stockton, Calif. On March 1, 2008, after the community spent years fighting for public water, and after the city spent millions of dollars defending its privatization contract, public operators reclaimed control of Stockton’s water and sewer systems.

For four years, the Concerned Citizens Coalition of Stockton (CCCoS) waged a grassroots campaign that culminated in a legal victory to defeat the privatization of their municipal water utility. The company returned control of the utility to Stockton in March 2008, after the city council decided against appealing a court ruling that its contract with OMI/Thames Water violated California environmental law. OMI/Thames was an alliance of CH2M Hill’s OMI and Thames Water, which at the time was a subsidiary of German energy giant RWE and now is controlled by Australian bank Macquarie.

Stockton, CA water rally

Background

In 2002, then-Mayor Gary Podesto triggered widespread public protest when he proposed the $600 million contract with OMI/Thames to operate and manage the municipal water, wastewater and stormwater systems for 20 years.

Podesto claimed that the privatization deal would save the city millions of dollars and that it was time “to think of Stockton’s citizens as customers.” An independent analysis of the contract by the Pacific Institute, however, concluded that the mayor’s figures were grossly overstated.

In March 2003, Stockton residents passed an initiative that required voter approval of any privatization contract. Unfortunately, one month before the measure went to ballot, Podesto rushed the privatization contract through the city council dodging the need for voter approval.

The CCCoS responded by organizing a referendum campaign to cancel the contract. After weeks of walking their neighborhoods, they fell just shy of collecting the required number of signatures to nullify the contract. Their efforts were complicated by a ruthless and expensive campaign launched by OMI/Thames and Podesto aimed at defeating the citizens’ campaign.

Left with no other alternative, the CCCoS sued the city of Stockton for not conducting an environmental review of the contract as required by California law. In a case that garnered international attention because it was featured in the documentary film “Thirst,” the CCCoS emerged victorious.

The Privatization Experience

Stockton residents suffered for three years under privatization contract while the case was argued in court.

The CCCoS produced a series of detailed reports that documented various problems, including excessive rate increases, frequent sewer overflows and poor maintenance of the infrastructure. The city was apparently unable or unwilling to bring OMI/Thames into compliance with the contract. The CCCoS found that the city even revised the contract when the company could not meet a contractual requirement.For example, the third CCCoS report found that the city allowed the company to run equipment to failure rather than carry out preventative maintenance. 

For Sylvia Kothe of CCCoS, the issue takes her back to 1954 when a League of Women Voters study found that municipal water should remain under public control. That is why, more than 40 years later, she got involved in the fight. She said the process was flawed from the beginning and the public was not involved in the discussion about who would control the water and how. The big issue was the contract never being in compliance with the California Environmental Quality Act. Beyond this, the city leaders overlooked the record of bad management that OMI-Thames had piled up.

According to the San Francisco Chronicle: “Among critics of the deal, there were other disappointments that went beyond the legal fight—including a sewage spill into the San Joaquin River and the contamination of irrigation water with chlorinated water.” 

Perhaps now that the Stockton nightmare is nearly over, cities will reconsider putting their water and sewer utilities into private hands.

Alan Snitow, who co-authored the book Thirst with Deborah Kaufman profiling public opposition to water privatization, told the Chronicle: “Water is a public trust, and should be overseen by public representatives. Like fire, police and schools, water is a public responsibility.” 

 

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