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187 Chapter 11 When Contracting Really Doesn’t Work Atlanta’s Water Contract WE ALL need between twenty and fifty liters of water free of contaminants every day to live a healthy and productive life (UNESCO 2006). Water’s importance is rising as population densities and climate change interact to create more regions with acute water shortages (Sachs 2005, 283). Indeed, water has been called “the oil of the 21st Century” (CBC News 2004). According to the U.S. Environmental Protection Agency (EPA), the United States has one of the safest water supplies in the world (U.S. Environmental Protection Agency 2006). However, water quality varies from state to state. In Georgia, where Atlanta is located, there were no water systems violating maximum containment levels or treatment levels according to a recent report of the U.S. EPA (2003, 4). Atlanta decided to privatize its water services in an attempt to solve a fiscal crisis rather than to deal with a water supply or quality problem (although there was a potential environmental crisis looming in the background). Atlanta was not alone in dealing with water- and sewer-system-related fiscal challenges. In 2005, the U.S. EPA reported to the Congress that the U.S. public water system infrastructure investment needs would total $276.8 billion over the next twenty years (U.S. Environmental Protection Agency 2005, 1). What makes Atlanta notable is that it sought to solve its water infrastructure challenges through a large and comprehensive agreement with a multinational, for-profit corporation. Private operation of public water and sewer systems was not prevalent in the United States during the late 1990s, but it was hardly unusual. In 1990 there were private operations in twelve countries serving fifty million people; a little more than a decade later, there were private systems in fiftysix countries serving 300 million people (Carty 2003; Marsden 2003). Among the largest companies are France’s Suez Lyonnaise des Eaux Group 188 Chapter 11 and Vivendi Environment, and British-based Thames Water (owned by Germany’s RWE AG). These firms operate in every region of the world (Marsden 2003). Saur of France and United Utilities of England (working with the U.S. Bechtel) have also secured major contracts (Marsden 2003). On January 9, 1998, the Suez Lyonnaise des Eaux Group proudly announced that its United Water Services subsidiary was selected to take over management and operation of the drinking water system for the 1.5 million residents of Atlanta, Georgia (Suez Lyonnaise 1998). At the time, the contract was estimated to be worth more than $400 million, the largest of its kind ever awarded in the United States (New York Times 1998). In the press release announcing the contract signing, then Atlanta mayor Bill Campbell said that “this day really marks the beginning of a partnership which will result in tremendous savings that will reduce the amount our water customers will have to pay in the future. Our citizens and ratepayers will benefit by improved technology and more efficient and innovative approaches to management. This will be a win-win situation for all involved” (United Water 1998). Mayor Campbell was not a privatization advocate. At the time of the water contract he was “philosophically opposed to privatization.” He also maintained that “privatization is a government’s admission of failure. Government ought to be able to accomplish projects as efficiently as business” (Ramage 1998). In fact, early in his tenure as mayor, Campbell signed an agreement with municipal workers that he would not contract out city jobs unless faced with a fiscal emergency (Savas 2005, 87). Campbell turned to privatization in the case of water because he faced a budget deficit, a water system in need of major overhaul, and the opportunity to save the city about $30 million a year in operation and maintenance costs by contracting with a private entity (Ramage 1998). He also faced mandates to upgrade the city’s three wastewater treatment plants totaling $1 billion in capital expenditures, which would translate into a near doubling of water and sewer rates for consumers (Savas 2005, 88). After careful analysis and a two-year battle with opponents, the city entered into a twenty-year partnership with United Water Services. Mayor Campbell was not alone in supporting the move to privatization. The public water agency did not have a great reputation. According to then City Council member Lee Morris, “I personally agreed with the concept of turning it over to a private operator because the...

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