Water Worries

Like the biblical David, wastewater workers challenge a giant and defeat privatization with help from the public.

By Clyde Weiss

NORTH ROYALTON, OHIO

Mayor Gary Barna met with the city’s wastewater treatment workers to tell them they would soon be employees of U.S. Filter Operating Services Inc., the nation’s largest privateer in the field. The date was April Fools’ Day, 1999, but this was no joke.

Mike Bode, an assistant supervisor at the plant, recalls that day clearly. At the time, he was a wastewater treatment operator and member of AFSCME Local 3410 (Council 8). He was stunned to hear Barna declare to the roughly 20 employees and managers: “I don’t need council approval to do this.”

But he did, and the union members knew it. “He was attempting to shove this down our throats,” explains Bode. The union members were not inclined to swallow.

Soon after, Barna called a second meeting, this time accompanied by U.S. Filter executives who vowed to keep the employees on the payroll and to recognize their contract, at least until it expired two years later. Bode wasn’t impressed: “These guys attempted to schmooze us with very slick talk about their training programs and all the job opportunities and their great benefits.”

As he listened to U.S. Filter try to sell its plan, Bode became incensed. Playing the greed card, the officials promised workers Christmas bonuses if they managed to cuts costs from a projected budget. The idea “infuriated me,” he says later. Savings are supposed to go to the ratepayers, not into the employer’s coffers, he explains. “We could be making all kinds of money, but the incentive is wrong. There’s something just plain, old unethical about this.”

While they were willing to discuss profit, the company’s officials were less forthcoming about how their plan to refinance the city’s $37 million debt to remodel the wastewater system would cost taxpayers more money in the long run. “They didn’t want to talk about it,” complains Bill Wagner, president of the local and a 10-year jack-of-all-trades at the plant. “They just wanted to be our friends.”

But the employees quickly realized that U.S. Filter — the American subsidiary of a Paris-based company called Vivendi — was far from a friend. Speaking to the mayor, Wagner was succinct: “Over my dead body.”

When the dust had settled, months later, Wagner was still standing. U.S. Filter’s plan was dead, however, and Mayor Barna was looking for a new job.

ACHILLES HEEL. Publicly owned and operated wastewater systems serve the great majority of the nation’s population. Most, like North Royalton’s — which handles 2.5 million gallons a day — are small operations. But in systems of various sizes, a growing trend toward privatization threatens union jobs and places profit ahead of public service.

Municipal wastewater systems are vulnerable to privateers because of the high price of running and improving them. The U.S. Conference of Mayors estimates that the cost of providing these services exceeds $43 billion a year — a figure destined to increase as facilities age and federal controls tighten. With the Clean Water Act in mind, the U.S. Environmental Protection Agency projects the cost over the next two decades to repair, replace or expand existing wastewater plants at more than $140 billion.

That’s the Achilles heel privateers hope to exploit. James Keene, U.S. Filter’s vice president of municipal development, said last September: “As municipalities continue to struggle with increased regulations, growing populations, aging infrastructure and pressures to keep rates down, the trend toward public-private partnerships intensifies.”

North Royalton, just outside Cleveland, is such a municipality. The city’s effort to modernize its wastewater plant to accommodate growth saddled residents with a sewer rate of $51.31 per 1,000 cubic feet, among the highest in the state. U.S. Filter’s pitch: It could save the city more than $21 million over the contract’s 20-year life and lower the rate.

But such estimates often don’t hold up to scrutiny. The company had not even submitted its plan through a competitive bidding process. “It became very clear to us that their numbers were shaky,” says then-councilwoman (now-mayor) Cathy Luks.

Seeking objective advice, the council hired Malcolm Pirnie Inc., a century-old New York-based firm of environmental engineers and scientists. In their first meeting with the council, the consultants didn’t even want to look at the U.S. Filter proposal because it was prepared before the city had issued a formal request-for-proposal. “It was not competitive,” says Luks, flatly.

Pirnie consultants — instead — proposed ways the city could streamline wastewater operations and cut costs without turning the plant over to privateers. For instance, they suggested reducing electricity costs through “load shifting and peak shaving,” and installing a system to monitor real-time power use. They also proposed streamlining the plant’s organizational structure, which has since been implemented through “cross-training” of employees to handle dual responsibilities. Potential cost savings: up to $469,000.

Improving operations can be a better solution than contracting-out in most instances, says Dr. Jeffrey Lauria, a vice president of the Pirnie firm. The U.S. wastewater industry, he explains, ought to operate under the principle that “the public is best served by an entity set up to serve its best interests — not one that’s run as a bottom-line business.”

KNOW THINE ENEMY. Meanwhile, the members of Local 3410 weren’t sitting on their hands. They researched U.S. Filter and Vivendi, attended city council meetings and raised the political pressure against privatization. “We went in force,” says Wagner. “I more-or-less told the city council that if they get rid of us, I’m going into every neighborhood, door to door, to get them out of office.”

The local also supported Luks for mayor. They took their case to the media. Wagner feared not only for the plant’s employees, but for public wastewater facilities throughout the country, tumbling like dominoes before the privateers. “I saw this big scheme of Vivendi eating up U.S. Filter and acquiring a lot of wastewater treatment plants,” he says. “The end result would be a French company that owns all the world’s wastewater plants.”

Wagner’s fear was not so far-fetched. Vivendi already is the world’s leading private provider of commercial, industrial, municipal and residential water and wastewater treatment systems, with nearly $13 billion in annual water-related revenue. The multinational company purchased U.S. Filter last year for $6.2 billion, making it the largest private player in the U.S. wastewater market — ahead of competitors such as United Water, OMI Inc. and U.S. Water.

U.S. Filter is huge in its own right. It has captured nearly 30 percent of the domestic water/wastewater projects operated by private contractors for municipal, regional, state and federal clients, and is aiming even higher. Richard Heckman, chairman of Vivendi Water (the company’s water/wastewater branch), made that clear last September. “Our first mission in the United States,” he declared, “will be to significantly increase our already significant position in North America’s municipal and industrial outsourcing markets.”

VOTERS DECIDE. Convinced that privatization is not in the city’s best interest, councilwoman Luks took her case to the North Royalton voters last November. It was the biggest issue during the five-way primary campaign for mayor. Her platform was straightforward: “My message was, ‘Yes, we can become more efficient. Let’s get rid of the rhetoric and promises and look at this realistically.’ If U.S. Filter can do it more efficiently, we should also be able to. At the same time, we don’t need to make a profit — they do.”

Luks, supported by AFSCME, proposed that the city follow the Pirnie improvement plan. Gary Barna, the incumbent, stuck to privatization. “Apparently, they agreed with me,” Luks says of the voters. “I won the election.”

Barna finished third and dropped his effort to push privatization a week later. Since then, the city has started to implement the Pirnie plan. The wastewater department has downsized from 20 to 16 people through attrition and streamlined operations. “We’re jumping through hoops trying to save money,” says Wagner.

“We already know that we’re going to be able to lower the sewer rates before the year is out,” adds Luks.

PROTECTING WORKERS. Not only has AFSCME prevented privatization of wastewater services in some locations, it has also been successful at preserving wages and working conditions when a private company does take over. Among the cities where AFSCME has worked out such preservation agreements: Indianapolis, Atlanta, Wilmington, Del.; New Bedford, Mass., and Bridgeport and New Haven, Conn.

The bottom line is that union leaders must remain wary of privateers, and be ready to act when events seem to be moving against the interests of their members and the public. “We’re going to keep going to council meetings,” vows Wagner. “We know the monster’s still lurking out there.”