"You want to privatize my water? This isn’t Bolivia, Pal. We’re not going to let you thieve from us so you can get a seat on the board of directors of the winning firm. Take a leap Sanders.” Identified only as “guest,” this commenter on a Channel 8 webpage was boiling mad after reading about Mayor Jerry Sanders’s plans to privatize certain City services.
In 2006, San Diegans passed Proposition C, opening the door to privatizing services that had previously been the domain of the public sector. On January 13, 2011, Sanders announced that the City of San Diego will solicit bids later this year for private-sector operation of its street sweeping, road and sidewalk maintenance, and public utilities. Of all these City-run endeavors, it’s the Public Utilities Department — the waterworks — that has caught the attention of naysayers, who have already voiced opposition to the still-nascent steps toward privatization.
At the center of the antiprivatization forces are folks who call themselves “water activists,” represented most visibly by a not-for-profit organization, Food and Water Watch. As it turns out, the “Watchers” are a recent spin-off of Public Citizen, a band of “consumer advocates” led by cranky populist (and perpetual third-party presidential candidate) Ralph Nader. The group has 300,000 or so members in the United States, including 30,000 to 35,000 in California. When I spoke with Elanor Starmer, Western regional director, she maintained that her group has no particular ideological bent. “In my experience, they’re just concerned citizens.”
By way of explaining the organization’s stance, Starmer sent me a report, released in November 2010, called “Trends in Water Privatization,” in which the Watchers contend that budget shortfalls have created pressure on municipalities to augment their coffers by privatizing water systems. Exigent circumstances, according to the group, have led cities to make bad deals by accepting deeply discounted, up-front cash payments in exchange for relinquishing control of long-term assets. Moreover, contends Food and Water Watch, consumers’ water rates have surged upward in the wake of privatization — an average of 20 percent. They say that if Mayor Jerry has his way, San Diego will be no exception.
However, as Starmer acknowledges, the study doesn’t focus on the type of privatization deal that the City is contemplating. Among the 144 completed deals scrutinized, 138 entailed sale of the system itself to a private entity. The other 6 were concession agreements, which the report defines as leases in which “a private company assumes responsibility for all aspects of utility operation, including financial planning, and has a vested financial stake in the profitability of the utility [collecting] its earnings directly from consumers.” By contrast, Sanders is said to be contemplating a long-term management contract under which the City would retain ownership of the assets and control of the finances.
Regardless of how a city chooses to structure things, Food and Water Watch maintains that all privatization is bad. The group points to a portion of its study that looked at 18 municipalities that had entered into long-term management contracts but subsequently terminated the agreements in favor of public-sector management, saving, according to the study, an average of 21 percent. Food and Water Watch states that its mission is (in pertinent part) “to ensure the food, water and fish we consume is safe, accessible and sustainable.… We help people…force government to do its job protecting citizens, and educate about the importance of keeping shared resources under public control.” Even if, according to Starmer, privatizing a water system doesn’t result in higher rates for consumers, Food and Water Watch is still vehemently opposed to the private sector running the water show. “We believe that access to water is a fundamental human right and that it is dangerous to have it under private control.”
When I asked Starmer who she believed might be behind the impending push to bid out management of San Diego’s water-delivery services to a private concern, she suggested that it arises out of the San Diego Institute for Policy Research (now the National University System Institute for Policy Research) and the Reason Foundation, which jointly published a report in 2007 hyping privatization. She stated that Reason (which she initially characterized as a “right-wing think tank”) has ties to Councilmember Carl DeMaio. (Starmer later said, “The Reason Foundation self-identifies as Libertarian, so to be fair that is the language I should have used in describing them. We don’t like it when people call us left wing, and we certainly do not identify that way, so I shouldn’t be putting labels on others!”)
The report, “Streamlining San Diego” — subtitled “Achieving Taxpayer Savings and Government Reforms Through Managed Competition” — projects 10 to 25 percent savings for San Diego ratepayers. However, Food and Water Watch alleges that the study’s optimism is unfounded. Starmer says that the estimate is suspect because of a small sample size, noting that the figures are based on only two case studies — neither of which involved the type of management contract that San Diego is considering. She also claims that the findings were “debunked” by an economics professor at George Mason University in Virginia.
When I spoke with Carl DeMaio, he claimed that he knows little about Sanders’s plans other than what could be gleaned from the mayor’s announcement. As for the Reason Foundation, “I’ve collaborated with them on projects in the past, and they do good work, but I’m not a member.” DeMaio went on to state, “My interest is finding the most efficient ways to serve the public’s needs.” Sounding a note from somewhere in the middle of the political spectrum, he said, “This process shouldn’t be governed by extremes — ‘all public’ or ‘all private.’ We need to differentiate between the core things that the public sector does well and other things, such as support functions, that the private sector can do better. Bill collecting and meter reading would be two obvious examples — the low-hanging fruit. But that’s far different than [complete] privatization.” When asked about opposition to proposed changes in the city services arena, he said that, due to his advocacy of pension reform, unions are among the groups fighting hardest to keep things public. And what about Food and Water Watch? “They have very little credibility. Their attitude is, ‘Don’t you know that the private sector is evil?’”