Stockton’s Water “Not for Auction”

Residents of Stockton, California, have demanded the right to vote on a multimillion-dollar proposal to contract out operation of the city’s water system in what would be the largest water privatization on the West Coast.
“We would be turning over the operation of our most vital resource in this community to a huge conglomerate,” said Stockton City Councilwoman Ann Johnston, a supporter of an 18,000-signature petition to put the plan to a public vote. “No matter what, that company [would not be] as responsive as the local government.”
Privatization proponents say the deal, which has attracted bids from three of the world’s largest water companies and is set for a city council vote as early as November 12, would cut costs and fund improvements to help meet federal standards for wastewater.
Stockton Mayor Gary Podesto, and the council majority that supported him, tout a “public-private partnership” — the city gets low-interest financing available to public entities, and the private company provides management and engineering expertise. For 20 years, the city would contract out operation of Stockton’s water supply and waste- and stormwater systems. But it would not transfer ownership of any infrastructure. “We’re not selling one thimble of water, or one bolt at the plant to anyone,” said Podesto. “The city and city council would maintain control over rates. We would merely be contracting for an operator to turn on the pumps.”
But those were the terms in Atlanta, Georgia, which signed the largest-ever water privatization contract in 1999: a 20-year, $21-million-a-year operation and maintenance agreement with United Water, a subsidiary of French-owned Suez. Instead of cost savings and new infrastructure, the city has been flooded with complaints of dirty water and poor service, according to the Atlanta Journal Constitution. Now, the city is trying to get out of the contract.
“If, as in Atlanta, you are dissatisfied, you have no fallback position because you have dismantled what was a functioning organization,” said Dale Stocking of the grassroots coalition Concerned Citizens of Stockton. “Especially if you let this go for 20 years, once you disband a functioning system, there’s no way to put Humpty Dumpty back together again.”
Stockton, a city of 250,000 on the San Joaquin Delta, has a blend of public and private water supply systems and an all-public waste- and stormwater treatment system. Since 1934, the Cal Water company has supplied water to the older city center without incident, though at higher rates than those of the public system. The city began supplying water to more residents as Stockton’s population grew. The public now owns over 2,600 miles of pipe, 35 wells, three reservoirs, 105 pumping stations, and two waste treatment plants.
But this is not simply a question of pipes and pumps; local democracy is at stake, said Dr. Richard Nickerson, a Stockton city councilman. Stockton’s planning efforts would be at the whim of a corporate-controlled water system, which could influence the water supply necessary for any city planning effort. “It’s setting up a hard situation for people who don’t control their water,” Nickerson told Terrain. “You can’t control your future unless you control your water. Water is the future.”
In the wake of water privatization in Bolivia, control has become an issue. In Spring 2000, residents of Cochabamba took to the streets to drive out the private water company, Aguas del Tunari, controlled by the San Francisco–based engineering giant Bechtel. The water company had raised rates by up to 300%, leaving poor residents unable to afford water. Now, using 1950s-era bilateral investment treaties that anticipated the provisions of global trade agreements like the World Trade Organization (WTO)’s and the still-pending Free Trade Agreement of the Americas (FTAA), Bechtel is suing Bolivia for $25 million in lost future profits. The case remains before a World Bank court, which meets in secret.
“The way situations are going with the WTO, I don’t believe that the city of Stockton needs to expose itself to [any] part of a foreign company,” said Stocking, who is also a member of a city ad hoc advisory committee to review the privatization proposals. “We have to ask what potential exposure we would be opening ourselves up to.”
Though proposals from three multinational companies were submitted in July to a city consultant, they were not made public until September 9, after both the Concerned Citizens and Stockton’s daily newspaper, The Record, filed public records requests. Mayor Podesto insists that the confidentiality was necessary to make clarifications and refine the proposals in an efficient manner. But the original plans called for a final contract to be signed without any public input. The entire process was to be handled by Massachusetts-based Alternative Resources Incorporated (ARI), which is part of the National Council for Public Private Partnerships. All three of the private water company bidders are members of that council.
On October 2, 2002, ARI submitted a report — approved by a council majority a week later — favoring the approximately $600 million bid of the multinational OMI/Thames. That’s a partnership between engineering firm Operations Management International, Inc. and Thames Water, a subsidiary of the German RWE Group. The other bidders in Stockton are US Filter, a subsidiary of the financially troubled media and water giant Vivendi; and Stockton Water Service, a partnership between multinational French water giant Suez and the local company, Cal Water.
DeltaKeeper Bill Jennings says the mayor and other backers of privatization “have gone out of their way to keep all pertinent information out of the hands of the citizenry.” Similar charges have surfaced in New Orleans, where voters passed a measure requiring a popular vote on water privatization.
To Gary Wolff of the Pacific Institute, a non-profit research and policy think tank based in Oakland, Stockton’s central problem is secrecy. “It is our opinion that privatization can work, with care and proper safeguards, but without those, it shouldn’t be done at all,” Wolff said.
But to Dale Stocking, the issue is not just secrecy but privatization itself: “Water is a human necessity and not a commodity for for-profit trading,” he said. “I’m not so sure that basic resources needed for human life are things that you put up on the auction block.”
The Stockton privatization is part of a national trend, said Jane Kelly, director of the California chapter of the advocacy group Public Citizen. The US Senate bill SB 1961, she said, would require privatization studies by any city seeking federal funding for water infrastructure.
In mid-October, Stockton officials certified the Concerned Citizens’ voter initiative, which seeks a new law to require a yes-or-no vote on any major privatization scheme. It would likely go before Stockton voters in a special election, probably in January at the earliest. But the city council could decide whether to proceed with contract negotiations in November — and could approve a water privatization deal before the city-wide vote. If that happens, Stocking told Terrain, the Concerned Citizens would consider suing to block the decision.
Elsewhere in California, entrepreneurs are pushing various projects to supply wholesale or bulk water to water agencies or to the state — either for human use or to maintain ecosystems. These new private efforts range from Cadiz Inc.’s ill-fated proposal to store and mine water under the Mojave desert [see Terrain, Summer 2002], to Delta Wetland’s project to flood low islands in the Delta [see Terrain, Summer 2001], to entrepreneur Ric Davidge and World Water SA’s scheme to bag water from the Gualala and Albion rivers on the North Coast for shipment to San Diego [see Terrain, Fall 2002].
Kelly predicts that the water giants pushing into cities like Stockton might try to buy up these scattered wholesale storage and supply projects, resulting in start-to-finish private control of water. “[If] the retail and the wholesale delivery of water gets outside the democratic accountability of public control, we [would] expect to see them converge,” she told Terrain.
And corporations like Cadiz and Delta Wetlands, after drawn-out legal and regulatory wrangling, have won critical regulatory approvals from state and federal officials, though both also face threats of either more litigation or legislation to block the projects. On October 9, citing citizen pressure and financial risks, the board of the Metropolitan Water District rejected the Cadiz deal.
“[Those projects] would be as disastrous for the consumer as the deregulation of electricity,” Public Citizen’s Kelly said. “We know that when you allow a private corporation to control the public’s water, quality deteriorates and prices skyrocket.”

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