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New Report confirms fears about the possibility of Grand Rapids privatizing its water system

November 30, 2010

In late September we reported that Grand Rapids Mayor George Heartwell was considering the idea of privatizing the City’s water and sewage system because of the budget deficit that Grand Rapids is faced with.

We noted in a report by the group Food and Water Watch entitled “Money Down the Drain,” the key findings state that:

  • Private utilities charge higher rates than municipalities
  • Privatization does not increase the efficiency of water and sewage systems
  • Privatization has many hidden expenses
  • Water corporations drive up costs and shoot down service quality
  • The public can do it better and cheaper, and
  • Public funding for water must go to only public utilities

Food and Water Watch has just published a new report that is particularly relevant to the budget deficit issue that faces the City of Grand Rapids. Their new report, Trends in Water Privatization, released yesterday takes a close look at the dramatic increase in municipal water privatization.

The major findings of a report “reviewed 200 prospective and completed sales and concessions over the last two decades and uncovered five aspects of this new trend in water privatization:

  • Many cities and towns explored sales and long-term concessions of their water and sewer systems since 2008. There were five times as many prospective deals in 2010 as there were completed transactions in a typical year over the previous two decades.
  • Prospective privatizations, if actualized, would affect an unprecedented number of people. The typical water system put forward for privatization in 2010 served around 45 times more people than the average system sold over the last two decades.
  • Budget constraints drove the surge in potential privatization deals. Previously, the need for expensive improvements to water infrastructure was the main factor in a municipality’s decision to sell or lease its water system. Since 2008, several cities have considered privatizing well-maintained water systems to shore up weak budgets.
  • Possible sales and concessions were clustered around the Rust Belt. Although the surge in interest was a nationwide phenomenon, prospective deals were concentrated in the Rust Belt, where cities were hit particularly hard by the recession.
  • Strong public opposition hindered privatization. Public resistance thwarted at least 17 possible sales and concessions from 2008 to 2010 and seemed likely to block many more prospective deals. In fact, despite new attention on the idea, the number of sales and concessions completed each year remained small.

The report notes that the budget crisis that many municipalities across the country face will likely continue for a few more years and that means that for profit water companies will be seeking to cash in on this economic reality.

Food and Water Watch states in Trends in Water Privatization that, In May 2010, Don Correll, then-CEO of American Water, the nation’s largest water company, told investors that the fiscal crisis coupled with the need for expensive water system improvements created golden opportunities for privatization. “So the idea of monetizing some assets,” he said, “something that was almost heresy some time ago is something that we’re seeing far more receptivity to today and we are busy with that as well.”

Another company, Aqua America, has stated that they were talking with at least 40 municipalities about water privatization in 2010 alone and are expected to close the deal on 20 of those communities by the end of the year. Clearly, these private corporations are aggressively seeking opportunities to buy water systems from municipalities that are struggling financially.

The report does not mention Grand Rapids, but that doesn’t mean that private entities haven’t already approached the city. However, one of the few encouraging facts presented in the Food and Water Watch report is that when citizens are alerted to the possibility of municipal water being privatized they were able to block the sale of these city services in at least 17 communities in the past 2 years.

Grand Rapids needs to not just be aware of this possibility, we need to be organized and demand that the water and sewage system we currently have stays within the democratic control of the city and not fall into the hands of private profiteers.

 

 

4 Comments leave one →
  1. Kate Wheeler permalink
    December 1, 2010 4:55 am

    Judging from comments made by Greg Sundstrom, I’d say this is more like a probability, at least in his mind. With the new council members in place, I’m not sure there’s enough opposition to block him. So it truly is up to GR citizens, who might–given the economy here–be motivated more by the expense-to-residents story than anything else.

    What did you think of the recent announcement of the cost decrease in water this coming year? How does that tie into the city manager’s long-term plans?

  2. December 1, 2010 2:36 pm

    Kate, I haven’t seen Sundstrom’s recent comments. Do you have a link to those?

  3. Kate Wheeler permalink
    December 1, 2010 5:24 pm

    Jeff, the most recent speech that Sundstrom gave about this was at the end of October, to the Downtown Alliance. The synopsis of the speech can be found at http://www.grand-rapids.mi.us/download_upload/binary_object_cache/frontpage_Transforming%20the%20City%20of%20Grand%20Rapids%20Address%20-%20Oct%202010.pdf

    Sundstrom doesn’t, in this text, come right out and say he’s going to privatize the water system. But he talks about how he’s going to “transform” the city spending. He talks about a list of things to make that happen, including “privatizing delivery systems” “consider divestiture of services” and “consider new service models to lower the cost of providing services to our citizens.” Very general notes, but I was told he’s talking pretty specifically about the privatization of water here. I did not actually hear the speech to see how he filled in this corporate-speak, though.

    The rate “decrease” was announced mid-November via the GR Press: http://www.mlive.com/news/grand-rapids/index.ssf/2010/11/water_sewer_rates_to_drop_5_pe.html

    It says that it’s going to be a 5-percent decrease for 2011, and then there’s a warning that things don’t always go according to plan. There are two public hearings scheduled for this.

    I am unable to decode this. I can’t tell if it’s the Water Department people working against Sundstrom, since Sundstrom does not appear in this article in his regular photo-op role. I wondered whether this promised decrease is being announced to lull the citizenry or whether it’s a power struggle inside the city government. That’s why I asked for your read on it, since you’re much more familiar with the background and the players than I am.

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  1. New Report confirms fears about the possibility of Grand Rapids privatizing its water system (via Grand Rapids Institute for Information Democracy) « The Wobbly Goblin

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