In Baltimore, water issues have become the norm. People have been dealing with unaffordable water and incorrect water bills for years, and now the Mayor might be looking to privatize the water system.
Water privatization is something we’ve been fighting against since our founding. It’s when private corporations take control over public water utilities.
Water corporations often advertise themselves as a “solution” to municipal budget problems and aging water systems, but in reality, post-privatization, most communities face HIGHER water rates, WORSE service, and FEWER jobs.
When private companies come in to operate a water or sewer system, there is one main motivation: profit. There are plenty of ways to address water-woes and keep systems public.
Baltimore’s Latest Privatization Threat
Water privatization companies have been circling around Baltimore like sharks for decades. It’s nothing new.
But this time, one company is getting more heavy-handed.
Since last fall, Suez has been pitching Baltimore officials on a plan to take over the city’s water system.
It’s pitching a scheme, in partnership with a Wall Street firm KKR (which should immediately set off your alarm bells), that is an especially harmful form of water privatization called a long-term concession lease.
What is a Long-Term Lease Concession Lease?
In these privatization schemes, a local government nominally retains ownership of a water system, while a corporation comes in and controls everything from the management to the financing of the system for decades. The water corporations usually work with Wall Street firms to create special purpose vehicles to provide the cash to finance projects for the water system as well as to offer an upfront payment to the city in exchange for long-term control of the system.
These agreements are rare in the United States, but a few municipalities have pursued them as a short-sighted way to try to dig themselves out of budget shortfalls.
Meanwhile, the company can pad their profits by cutting costs by using cheaper materials, delaying maintenance, and downsizing the workforce.
And the very technical legalese in these contracts pretty much guarantees corporate profits by allowing the companies to hike up water rates in a variety of circumstances without approval from the city. So for Baltimore families, this would mean higher water bills.
This would only mean bad things for Baltimore, as many residents already can’t afford their water bills as is, let alone when corporate profits are part of the equation.
Suez’s Tactics Are Shady
Suez is trying to entice Baltimore city officials by offering a large upfront payment in exchange for long-term control of the water system, but there’s no such thing as free money, and we’d have to pay it back at a double-digit interest rate. These deals are like using a credit card to pay off your mortgage. They don’t make financial sense.
The City would keep ownership, but Suez would manage and operate the system. And most importantly, Suez would set the water rates.
Suez recently discussed their process for trying to convince a municipality to sign a lease with them. It’s scary - and highlights Baltimore.
Suez has hired lobbyists to essentially go into communities and spread pro-privatization propaganda. In Baltimore, Suez hired a distinctly named lobbyist, American Joe Miedusiewski, to help make its pitch. (Yes, we know you’re curious: he legally changed his first name to “American Joe” when he first ran for a seat in the state legislature back in the 1970s.) The corporate lobbyists have meet with everyone from city council members to environmental organizations to the business community to low-income advocates.
Because cities don’t seek to privatize on their own, the corporations have become aggressive door-to-door sellers. The Global Water Intelligence, an industry magazine, reported:
“In similar fashion, with few new opportunities coming to market, proactively engaging with prospective clients for new business has also become more prevalent. Suez, for instance, hired a team of lobbyists last summer to make the case for a concession contract in Baltimore (MD).”
And apparently the companies are in it for the long haul. Corporations should know that convincing a city wrought with water affordability issues to privatize is not going to be easy. So their plan seems long-term, deep-rooted, and specialized.
“You want your business development people out there talking to cities where they think there could be the potential for a project,” one observer told Global Water Intelligence. “It might not be for another 18 months or two years, but you’re finding out what their problems are, letting them know how you would approach it, and ideally you’re helping shape their expectations of what they want out of an operator so that when an RFP comes out it is quite nicely tailored towards you.”’
This news that Suez is working behind-the-scenes to privatize Baltimore’s water system is especially alarming given what happened this month in the state legislature.
In the final hours of the 2018 legislative session, the Baltimore City Mayor’s office worked to weaken legislation to remove water bills from tax sale in Baltimore. (Read more about that saga here.)
One of the amendments that the city tried to include was a mandatory study completed by an “outside professional entity” to examine Baltimore’s water billing and customer service. This is exactly the type of door into Baltimore’s water system management that an outside contractor like Suez would want. If given to Suez, the “solutions” proposed could certainly include the long-term lease of the entire system.
Why This Would Be So Bad
A good example of this form of privatization gone wrong for the consumer is Bayonne, New Jersey.
Bayonne signed a 40-year concession lease with Suez in 2012. Suez promised a four-year rate freeze, and instead rates went up 28% in those first four years.
In the first year of this contract, the number of homes sent to tax sale for their water bills tripled.
In 2014, a very similar 50-year deal was signed with Middletown, Pennsylvania. And even though the company promised not to raise rates until 2019, right now the town faces an 11.5% surcharge on water and sewer bills because people cut back on their water usage. Sales have fallen below the threshold specified in the lease, and the company wants to charge more in order to “make up for it.”
Middletown has said that the proposed price increases will lead to the average consumer paying $240 more per year for their water service, pushing cost of living above what many residents can afford.
Baltimore certainly has its fair share of issues when it comes to water billing. But privatization will only exacerbate the problems at hand.
When water corporations come in, they come in to profit.
The Department of Public Works is not perfect, but Baltimore must work to ensure everyone has access to safe and affordable drinking water while keeping the system public. Creating a comprehensive affordability program and robust bill-dispute process, as Council President Jack Young has committed to do, are important first steps.