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Stockton City Council Ignores Public on Water Privatization, Opts to Negotiate Contract With Multinational Entity

Oct. 16, 2002

Stockton City Council Ignores Public on Water Privatization, Opts to Negotiate Contract With Multinational Entity

STOCKTON, Calif. – In a slap in the face to voters, Stockton’s City Council has decided to begin negotiating a water services contract with a private partnership before citizens can vote on whether to privatize the city’s water systems at all.

The council on Tuesday night scheduled a special election on privatization in March but decided in the meantime to begin negotiating with OMI-Thames, a partnership of two companies that operate globally and together are vying to manage the city’s drinking water, wastewater and storm water systems. The contract would span 20 years and cost $400-500 million. The mayor has reportedly said the council would vote as early as Oct. 22 to negotiate a contract with a private utility firm.

In forging ahead with negotiations, the council is ignoring the will of citizens, 18,000 of whom have signed a ballot initiative calling for voter approval of any contract over $5 million to privatize public utilities. The council rejected a plan to allow the initiative’s language to become law within 15 days and another plan for a January vote. Even if the voters approve the ballot initiative in March, it may not retroactively cover an existing contract.

“This is a real Catch-22 and a complete derailing of the democratic process,” said Jane Kelly, director of the California office of Public Citizen, a national consumer rights organization. “The council and mayor are arrogantly ignoring what at least 18,000 voters want. What’s more is that there could be legal ramifications if the city signs a contract and voters come out against it on a spring ballot initiative. Stockton could end up with a contract dispute that would cost the city millions.”

Consumer advocates fear that privatization could lead to rate hikes, deterioration of service and lack of oversight.

“Multinational water companies want to get a foot in the door and take control of California’s lucrative water services,” Kelly said. “Yet they have a track record of breaking promises, raising rates and letting service and infrastructure deteriorate in cities like Atlanta and Peoria.”

Thames Water, in particular, has a troubled history. In 1995 in Great Britain, Thames Water cut its investment in infrastructure by $490 million. Instead of taking the savings and reducing customers’ rates, the company used the money to boost its already high profits and dividends. This transfer of additional public money to the private sector took place after a 50 percent rate increase over the previous six years.

In 1999 alone, the British Environment Agency documented Thames Water’s involvement in 233 pollution incidents, resulting in eight prosecutions. Between 1989 and 1997, the company was prosecuted for environmental violations 31 times.

Following the buyout of American Water Works by the German conglomerate RWE (the parent company of Thames Water) in September 2001, a number of communities from Lexington, Ky., to Santa Cruz, Calif., began trying to regain control of their water systems.

The City of Thousand Oaks and Montara Sanitation District, both in California, recently protested RWE/Thames Water’s acquisition of American Water Works. Many consumers there fear that RWE will increase rates to recover the $6.7 billion cost of purchasing American Water Works and its subsidiaries. Santa Cruz County is currently urging the California Public Utilities Commission to deny RWE’s request to increase rates in Felton, Calif., by 57 percent on the same grounds.