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Under Water: The Grand Rapids City Budget and the Privatization of Water

October 6, 2010

For anyone following the news—what little of it there is to be had in the local mainstream media—it should come as no surprise that Grand Rapids is in a serious budget crisis. The City has so many problems in meeting its obligations, particularly where employee salaries, benefits, and pensions are concerned, that it is looking for any possible way to cut costs. Last week, Mayor George Heartwell announced that one of the options that the City was exploring was the privatization of the water/sewer system. GRIID covered this story and wrote about the disastrous effects that this type of decision has had on other cities that have tried it.

This week, GRIID was in touch with Commissioner Rosalynn Bliss for additional information. We wanted to know how extensive discussions have been about removing the water/sewage service from City management with its Commission oversight, and putting it in the hands of private contractors. Bliss described the water/sewer system discussion as “incredibly preliminary.” She stated that no decision “would be made without ample research, information, cost-benefit analysis, and community input.”

That being said, Bliss reported that at the last Commission meeting, Mayor Heartwell “asked the commission to share their ideas on what services could potentially be contracted out and one of the services is some of the operations of the sanitary sewer and water system (not selling the assets, but contracting out for some of the services).”

Bliss went on to say that the Commission had originally had a discussion about this in 2009 “when the water department requested another increase in water and sewer rates and the commission started asking about the details to the rate increase request.” At that time, Bliss said, the question arose about the possibility of keeping rates down if some services were contracted out of City hands.

What’s the problem with the current City system and why are the rates increasing? According to Manager Joellen Thompson of the City Water/Sewer Department, a large part of the problem is usage. She states that Grand Rapids has lost several major water users from the commercial/industrial sector. Fewer people using less water means that everyone pays more. This, by the way, is not good news for people who are attempting to act responsibly by conserving water use.

Another problem is increased costs. This, according to Thompson, includes higher electricity and chemical treatment costs. But Grand Rapids’ water system is also aging, and infrastructure costs are rising faster than they were in the past as a result.

The Water Department laid off 13 percent of its workforce in 2009. There were other City employee layoffs as well. But none of this could offset the tidal wave of costs that the City faces, with its largest financial obligation being its salaries, benefits, and pensions. Health care benefits for employees continue through retirement with the same plans intact, and the average retired City worker gets a pension of $1,900 a month. Police officers receive an average pension amount of $2,415 a month.

Most of the City of Grand Rapids employees are represented by unions, but not all. The “non-rep” employees—which, according to one report by WMMT are mainly “appointed officials, non-represented executive class and district court management employees,” have already received a 10 percent cut in compensation, primarily from increasing health care premiums and reducing pension contributions and the so-called “life allowance.” For details about these cuts, click here.

But if City services are to be preserved and the water system remain safely out of the hands of privateers, it’s crucial that all human resources costs be reduced this year. Bliss acknowledged that to GRIID, saying, “We are currently in negotiations with all of the City’s 13 unions and are seeking concessions.”

Whether or not the unions will make any concessions is another matter. As an example, the Grand Rapids Police Officers Association seems aggrieved about “dramatic concessions” it has already accepted and feels the public is not giving them credit for what they do. The union states the Police Department has already conceded to a $119.56 per month employee contribution payment for health insurance, and a “100 percent increase” in co-pays for office visits. The police union also notes that no one on the police force received a pay increase from 2006 through 2008.

It’s possible that the public doesn’t give the police credit for its sacrifices in this area because they don’t seem like sacrifices to most working people in Grand Rapids. Many folks in Grand Rapids have not had a pay raise for five years or longer. Those who are lucky enough to still have health care insurance pay an average of 21 percent of their salary for employee contributions, according to a recent Kaiser Foundation report. The Grand Rapids police officers pay less than half that—10 percent. In addition, the police department’s out-of-pocket deductible is an unheard-of $50. By comparison, a current policy from one area furniture manufacturer has set its out-of-pocket deductible at $1,500 per employee.

As for co-pays, the police’s previous co-pays for doctors’ visits were $10, and are now $20. This would still seem like a bargain to most people with insurance who pay between $30 to $50 for a doctor’s visit, depending on the type of doctor (primary care or specialist) seen.

In addition, under their current contract, the Police Department personnel receive a minimum of two weeks’ paid vacation, an additional minimum of 12 sick days per year, 12 paid holidays a year, and “longevity pay” bonuses starting at their 5th year of employment. Plainclothes police officers receive almost $1,000 a year as a clothing allowance to pay for new wardrobe items. It would be difficult to find Grand Rapids citizens, a quarter of whom are now living below the poverty line, who would see minor changes to these benefits as “dramatic concessions.” Most citizens of Grand Rapids can only dream of such extensive benefits and health insurance this affordable.

If the police union is any benchmark, meaningful cuts to the City’s largest financial obligation seem to be tentative at best. While it’s crucial to have strong union representation and to safeguard employee pay and hours, in the case of City employees this has to be balanced against the need to allocate taxes for services to the community at large.

According to Rosalynn Bliss, currently everything is on the table, to be explored and researched, while the City waits to conclude its 13 different union negotiations. She told GRIID, “I can assure you that I would never support any recommendation that would negatively impact our water service or add additional cost/further increase residents’ water and sewer rates.”

While Bliss has a solid record of supporting citizens’ concerns and interests, the question remains if the Mayor, City Manager, and other Commissioners might still be tempted by the idea of making the water/sewer system a profit center. Certainly budget cutting at the City is more complex than this writer ever anticipated. But it’s frightening to think that an easy way out of the budget shortfall might end up putting Grand Rapids citizens at risk of higher and higher payments to a utility being run as a profit center by a private company.

3 Comments leave one →
  1. November 5, 2010 2:37 pm

    WMEAC is watching the water/sewer services privatization discussion very closely. Little is known about how the city plans to move forward as a process has not yet been put in place. WMEAC has already begun to advocate for stakeholder involvement in such a process for accountability.

    Food and Water Watch is also engaged in watching this process. Their resources outlining practices in other cities where water/sewer service privatization/lease are very helpful and extensively researched. Go to http://www.foodandwaterwatch.org/water/private-vs-public/ for more information.

  2. Kate Wheeler permalink
    November 5, 2010 5:25 pm

    Rachel, thank you for your additional information. As the GRIID article stated, the City appears to be delaying any water service decisions until it finishes its union negotiations, which are not yet complete. After that, I’m assuming from my discussions with Ms. Bliss that the water discussion will start up again. However, on October 29, City Manager Greg Sundstrom delievered a speech to the Downtown Alliance in which he specifically listed the idea of privatizing City services and/or “consider divestiture of services” as steps in the process of achieving financial stability for Grand Rapids.

    Food and Water Watch has a great synopsis of city water privatization on its site, including this summary that discusses city water service takeovers as part of the global seizure of water control by capitalists:

    Around the world, multinational corporations are parlaying the misery of our water-starved regions into profits for their stockholders and executives.
    In the United States, water privatizers are targeting local governments that have daunting fiscal challenges or lack the wherewithal to make the improvements necessary to meet increasingly stringent federal water quality standards.

    Private companies try to persuade these cash-strapped cities and towns to relinquish control over their valuable public water and sewer systems. But consumers should be wary of these proposals. Many communities that experimented with privatization have found that it does not solve their water woes. In fact, private water companies often provide worse service at a higher cost than many municipal utilities.

  3. November 5, 2010 5:32 pm

    Yes. I’m particularly concerned with a company, EarthTech, that has long served the city in a contractual relationship. They’ve recently by bought out by Suez. I suspect this is the most natural relationship for the city to pursue. Suez has a growing reputation in US cities.

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