By Tara Lohan
It was 1985 and privatization, deregulation and free trade were in the air. Canadian Prime Minister Brian Mulroney and President Ronald Reagan were negotiating a free trade deal — a precursor to NAFTA. Among the goods it would cover: "Water, including … mineral waters … ice and snow."
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A major piece of legislation funding the development and improvement of water-related infrastructure passed Congress last week for the first time in nearly a decade, and President Barack Obama is expected to sign the bill soon.
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Yet public interest groups warn that a key provision in the law would complicate public investment in drinking water and wastewater systems in big cities and small towns alike. The end result, they say, would be to strengthen privately-managed or -owned water systems while leaving the federal government to take on the risk of these investments—essentially subsidizing water privatization.
“This law will facilitate the privatization of water systems and prioritize funding for privatized systems,” Mary Grant, a researcher for the water program at Food & Water Watch, a watchdog group here, told MintPress News.
“The basic problem is that it will only fund up to 45 percent of project costs, but also stipulates that the rest cannot be made up through the use of tax-exempt bonds,” Grant continued. “Yet such bonds are the primary way in which local governments fund infrastructure projects, so why would they try to make use of this funding?”
The broader law, agreed upon by large majorities in both the House and Senate over the past week following a year of negotiation, is known as the Water Resources Reform and Development Act. The full bill authorizes funding for a spectrum of new water infrastructure projects—particularly around ports and waterways, including flood protection and restoration—worth some $12.3 billion, though this money will still have to go through an appropriations process.
Assuming that President Obama signs it, the Water Resources Reform and Development Act will be the first such water-related funding package to become law since 2007. Even then, the 2007 bill passed over the threat of veto from President George W. Bush, primarily due to budgetary concerns. As with any large funding bill, the act has received criticism from conservatives worried that Congress will not be able to provide adequate oversight for what they expect to be a frenzy of project requests.
The bill also includes provisions aimed at dealing with what experts say is a multi-billion-dollar funding gap for drinking water and wastewater systems across the country. Last year, the U.S. Environmental Protection Agency (EPA) estimated that some $384 billion in improvements would be needed in U.S. drinking water infrastructure over the next two decades. The EPA also found that many of the country’s 73,400 water systems are between 50 to 100 years old.
“[T]he nation’s water systems have entered a rehabilitation and replacement era in which much of the existing infrastructure has reached or is approaching the end of its useful life,” EPA Acting Administrator Bob Perciasepe said at the time. “This is a major issue that must be addressed so that American families continue to have the access they need to clean and healthy water sources.”
While Congress is receiving widespread plaudits for finally acting on this shortfall, critics are worried that the final law will be detrimental to communities across the country.
Dwindling Public Funding
According to data provided by Food & Water Watch, federal spending on improvements to drinking water and wastewater systems since the late 1970s have dwindled by some 80 percent. Since the late 1990s, the group says, federal grants have offered just $15 billion for this purpose.
In 2012, dozens of federal lawmakers wrote to the congressional leadership to highlight this situation, citing rising concerns among mayors, public water systems directors and others. The lawmakers noted that federal funding for water systems made up just three percent of total costs, down from 78 percent 35 years earlier. This shortfall, they warned, leaves “cities and towns across the country bearing the difficult challenge of pulling together funds for public water systems.”
The new Water Resources Reform and Development Act does attempt to ameliorate this problem, making available $175 million in funding over five years. But the part of the law that focuses on this issue, known as the Water Infrastructure Finance and Innovation Act, does so primarily by steering communities toward public-private partnerships.
It is unclear whether this is by design. As Food & Water Watch’s Grant notes, a central issue is the fact that the Water Infrastructure Finance and Innovation Act does not allow communities to raise funding for infrastructure through the issuance of tax-exempt bonds, a process that the watchdog group says has raised more than $1.6 trillion for local and state infrastructure projects over the past decade.
It appears, however, that this option was only removed after negotiations with an eye toward the federal deficit, following a budgetary “scoring” by the Congressional Budget Office. Groups representing the municipal water sector say the Water Infrastructure Finance and Innovation Act won’t work for their members.
“We have huge wastewater infrastructure needs, so we’ve been supportive of having more tools in the toolbox to help communities pay for upgrades and new projects,” Hannah Mellman, legislative manager at the National Association of Clean Water Agencies, a lobby group that represents the municipal wastewater sector, told MintPress.
“Yet the tax-exempt bond exemption will make [the Water Infrastructure Finance and Innovation Act] pretty unworkable for our members. That’s not to say that they wouldn’t use [the Water Infrastructure Finance and Innovation Act], but if they can’t finance their side of projects with tax-exempt bonds we don’t see how it will be usable. So we’re disappointed to see that in the final bill.”
Funding criteria under the bill will also be different than under traditional federal water assistance. For instance, the latter has always been in part based on issues related to public health, but the Water Infrastructure Finance and Innovation Act requires no such consideration. Instead, criteria for funding under the act will include issues that strike some observers as odd — for instance, how much of the money would go to areas with significant energy development, or whether the projects already have private financing partners.
Access and Equity
On the one hand, then, the Water Infrastructure Finance and Innovation Act likely will not offer communities large or small the funding required to address the water infrastructure needs that the federal government admits are necessary and widespread. On the other hand, watchdog groups say the bill’s impact could be more far-ranging still, touching on issues of access and equity.
“We are alarmed by the implications of this bill, which would open the doors to an increase in water public-private partnerships in the U.S. and effectively subsidize water privatization,” Erin Diaz, the director of Public Water Works!, a campaign at Corporate Accountability International, told MintPress in a statement.
“The privatization of water systems around the globe has often resulted in devastating results for the economy and people—rate hikes, layoffs, labor abuses, environmental damage and public safety risks—all while failing to invest in essential infrastructure.”
In 2012, Diaz’s office published an exhaustive report on the international experience of water privatization over the past two decades. With a focus on the World Bank’s role in this issue and a call for the multilateral lender to divest from private water companies worldwide (it has yet to do so), the report undermines the central rationale in favor of privatization: that corporate efficiency leads to lower operating costs.
Such findings have come up repeatedly in the U.S., as well, with surveys finding that investor-owned utilities in dozens of U.S. states charge around one-third more than those owned by the public.
Profit-driven systems also experience problems in deciding where to extend service. Driven by profit rather than public access, companies have at times proved reluctant, for instance, to provide services in low-income areas or very small communities.
Indeed, Grant says this was one of the original reasons that U.S. water infrastructure—much of which was originally privately owned—was taken over by the public sector during the early twentieth century. As this trend has reversed in some places over recent decades, similar concerns have again cropped up.
“Though water privatization remains fairly rare, there has been a lot of work on the part of private utilities trying to expand their operations,” Grant said.
“In West Virginia, for instance, a private water utility has been buying up other utilities, and the result has been smaller households have struggled in attempts to force the company to serve their areas. The company was also trying to cut back on its investments after the state government wouldn’t allow the rate increases it wanted to impose.”
Meanwhile, even as lawmakers are undercutting municipalities’ ability to raise money for water infrastructure from tax-exempt bonds, lobby attempts have made some headway in pushing Congress to remove legal caps on the levels to which bonds to fund private activity would be allowed in the water sector. In mid-May, senators formally proposed removing limits on what are known as private activity bonds for water-related projects, prompting applause from the National Association of Water Companies, a group that lobbies on behalf of water companies.
Lifting these caps would “open the floodgates to financing water privatization projects, effectively subsidized by taxpayers,” Corporate Accountability International’s Diaz told MintPress.
“This interference, present at every level of government, is just one small part of the private water industry’s strategy to expand its market across the U.S.,” said Diaz. “The provisions in [the Water Infrastructure Finance and Innovation Act] that could provide public financing to private water are just one example of the many policy avenues the private water industry pursues to privatize water and weaken its greatest competitor—publicly-controlled and democratically-governed water systems.”
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Critics of the triennial World Water Forum are encouraged by the failure on the part of forum organizers to attract large numbers to this year’s event taking place March 12-17 in Marseille.
Forum organizers announced at a press conference last week that only 2,000 people had fully registered, while another 2,000 were yet to be confirmed. This falls dismally short of the 20,000 participants that had been anticipated.
The small number of registrations also comes despite the fact that various national, regional and municipal authorities have poured millions of euros of public funds into sponsorship of the event.
“It isn’t just the World Water Forum that is failing,” says Maude Barlow, senior advisor to the 63rd President of the UN General Assembly. “Water privatization has failed communities around the world and a growing number are now reclaiming control of their water. In this context, it is no surprise that this illegitimate Forum is no longer able to attract attention.”
Notably, the Norwegian Ministry of Foreign Affairs has already stated that it will not be attending this year.
At the 2009 World Water Forum in Istanbul, 24 governments signed a counter-declaration recognizing water as a human right in opposition to the forum’s official ministerial declaration. And in a scathing criticism of the World Water Forum, then-president of the United Nations General Assembly, Father Miguel d’Escoto Brockmann, called for the UN to hold its own event to address the global water crisis.
“It is significant for the World Water Forum to show signs of crisis in Marseille, which is where the World Water Council was founded,” says French MEP Michèle Rivasi. “Re-municipalization is gaining speed in France, regardless of the strong support for privatization from the French government.”
Groups from around the world—who view the forum as a corporate tradeshow disguised as a multi-stakeholder conference—are organizing the Alternative World Water Forum (in French, Forum Alternatif Mondial de l’Eau, or FAME). They have invited governments to a consultation with civil society outside the forum on the implementation of the human right to water.
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Just 50 days before the World Water Forum and the Alternative World Water Forum take place in Marseille, France, the European Commission has announced formal anti-trust proceedings against French water companies Veolia, Suez and subsidiaries Lyonnaise des Eaux and SAUR.
The commission will examine whether companies have coordinated their behaviour in markets for water and wastewater services in France, in particular, with respect to elements of the price invoiced to final consumers. This follows several unannounced inspections at the companies in April 2010, where Suez was then fined €8 million for breaking a seal placed by the commission during the inspection.
“Food & Water Europe applauds the European Commission for its actions,” said Food & Water Europe Executive Director Wenonah Hauter. “This investigation shows why our water services should be publicly owned. The first priority of private water companies is shareholders, not communities. Private operators are known for trimming costs in operation, as well as cutting jobs and raising rates in communities they enter with no consideration for transparency.
“Even though there is strong public resistance to privatization, the public sector is helping the private water companies by providing finance, developing strategies, and even investing in these companies. At the same time, the ownership of private water companies in Europe has become all the more concentrated, overwhelmingly dominated by Veolia and Suez.
“In times of austerity measures and financial crisis, it is all the more important that there is transparency on the pricing of water services, especially when the business of these companies deal with a common good such as water.
“This comes at a bad time for the French water companies who are preparing the World Water Forum in the name of the World Water Council and have already seen their shares drop by around 5 percent following the commission’s announcement,” concluded Hauter.
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Food & Water Europe is a program of Food & Water Watch, Inc., a non-profit consumer NGO based in Washington, D.C., working to ensure clean water and safe food in Europe and around the world. We challenge the corporate control and abuse of our food and water resources by empowering people to take action and transforming the public consciousness about what we eat and drink.
Food & Water Watch works to ensure the food, water and fish we consume is safe, accessible and sustainable. So we can all enjoy and trust in what we eat and drink, we help people take charge of where their food comes from, keep clean, affordable, public tap water flowing freely to our homes, protect the environmental quality of oceans, force government to do its job protecting citizens, and educate about the importance of keeping shared resources under public control.