Stockton Puts Water Services in Private Hands

A growing national movement to privatize water services scored a major victory Wednesday, as the city of Stockton agreed to contract its water delivery and sewer systems to a multinational company.

Stockton’s decision to have OMI-Thames Water operate the city’s water system for 20 years, the largest such deal in California, is seen as a key test of private water schemes. Companies are eyeing the water sector as a huge growth area, because fewer than 10% of U.S. water systems are now privately managed.

Gary Miller, the OMI-Thames executive overseeing the Stockton project, said he expects the deal “to be emulated by municipalities around the country.”

If Stockton is indeed a sign of things to come, privatization won’t happen without a fight. Consumer groups and many local residents protested the deal, raising the specter of California’s failed electric power deregulation. Among their fears were poor service, excessive rate hikes and the loss of city jobs.

Jane Kelly, California director of the consumer group Public Citizen, was among those who lobbied against the deal.

“If you like what they did to electricity, you’ll love what they’re going to do to our water,” she said of efforts to privatize public services.

Residents are mounting a petition drive to force a public vote in November that could nullify the contract, said Sylvia Kothe, a Stockton resident leading the effort.

The City Council approved the deal Tuesday by a 4-3 vote, and the contract was signed Wednesday.

The $600-million contract will put the company, a joint venture of American and English subsidiaries of the Colorado engineering firm CH2M HILL and the German utility conglomerate RWE, in charge of Stockton’s water, waste water and storm water utilities.

The agreement could be voided within the next three months, as the city, OMI-Thames and the union representing city utility employees negotiate the terms of the transfer of 115 city workers to the private firm, said Matt Robinson, a city spokesman.

In the last five years, hundreds of communities have gone private because of costs to repair outdated sewer pipes, treatment plants and other infrastructure.

Stockton is no exception. The city faced more than $100 million in capital improvement costs, according to a city-hired consultant.

The city hopes to save millions in capital and operating costs, and put the burden of possible future environmental fines and penalties on the contractor. Consultants estimated savings of $154 million to $175 million over the 20 years of the contract.

But a study by the Pacific Institute, an Oakland environmental research group, concluded the deal could end up costing Stockton $1.7 million more annually than if it maintained its city-run system.

The nation’s largest private water contract, in Atlanta, collapsed in January. The deal with United Water was to have lasted until 2019, but officials re-established public control after complaints of poor service and breakdowns. United Water, a subsidiary of the French firm Suez, acknowledged problems but said the system it took over was in worse disrepair than the company initially thought.

“Atlanta should be a wake-up call to a city like Stockton,” said Peter Gleick, director of the Pacific Institute. “These deals aren’t always as good as cities think they are.”