S and WB sell-off is sunk

Times-Picayune (New Orleans, LA)

April 20, 2004 Tuesday

Sand WB sell-off is sunk, Nagin says;
New draft bid hasn't drawn firms' interest

BYLINE: By Martha Carr; Staff writer

SECTION: NATIONAL; Pg. 1

LENGTH: 1092 words



After seven months of silence, Mayor Ray Nagin said he's finally ready to call an end to the contentious privatization drive that has consumed the Sewerage and Water Board for the past five years, as two administrations and scores of residents debated -- often hotly -- whether to turn over the city's sewer and water systems to a private company's control.

Nagin last week said he will officially declare the $5 million effort dead at one of the board's next several monthly meetings, primarily because a new draft bid has failed to attract three private firms interested in operating both the sewer and water systems. The water board meets Wednesday and again on May 19.

"In the next couple of meetings, it will be done," Nagin said last week. "We've got three companies that are interested, but one wants the whole piece and the other two just want part of it. And you know that's not going through. I just don't see it, unless some miracle happens."


Drive began in 1999

The effort to privatize the city's sewer and water systems was initiated in 1999 by City Councilman Eddie Sapir, who presented the idea as a way to stave off future rate increases by holding down costs at the troubled agency.

At the time, the water board had inked a deal with the U.S. Environmental Protection Agency to spend more than $200 million repairing leaky underground sewer pipes that had been polluting Lake Pontchartrain, or suffer massive fines. Board members knew the expense of the 14-year job -- whose price tag has since grown to $650 million -- would mean huge rate increases, a politically dicey prospect. So they began investigating private management as a way to save money.

Former Mayor Marc Morial became the effort's key proponent and went on to shepherd the 20-year, $1 billion prospective contract through its first incarnation. Observers found plenty to criticize: Millions of taxpayer dollars went to consultants who drafted the bid proposals, while the three major companies interested in the job -- United Water, US Filter and OMI/Thames -- each put politically connected consultants on the payroll. Critics also said the process was often disorganized, confusing and not in the public's best interest.

The effort ended abruptly in October 2002 with a 6-5 vote, when opponents on the board orchestrated a coup to reject all bids.

Not enough bidders

Despite the controversy, Nagin chose to revive the beleaguered drive, promising to fast-track the process and solicit new bids by February 2003. More than a year later, the water board has yet to issue a second bid document.

Nagin says that's because there aren't enough private companies showing interest in the job to ensure the water board will get a competitive price. At least one company, United Water, has said it pulled back in part because of a move by privatization opponent and former City Councilman Jim Singleton to change the City Charter to require voter approval for any large water and sewer privatization contract.

Last year legislators wrote the same provision into state statutes, further solidifying what proponents called a major roadblock to attracting multiple companies. United Water withdrew from the process last June, leaving only Veolia Water North America, formerly known as US Filter, and a S and WB employee group publicly saying they would bid on the job. A Veolia spokesman declined to comment Monday.

Nagin said he's talked to companies about the possibility of splitting the job into smaller parts, such as water only or sewer only, but still hasn't gotten the response he thinks he needs.

"So we are probably going to exit out," he said.

'Organism' repels change

It won't be the first time.

Nagin, at his own admission, has run into numerous political roadblocks in his other attempts to reform the quasi-state agency. Most recently he found himself unable to garner the support he needed among New Orleans lawmakers to pass two proposed bills in the current legislative session. One bill would have removed the mayor and three City Council members from the 13-member board, and a second would have brought the agency under city control.

Nagin has since agreed to ask the Legislature for permission to convene a committee to study the idea.

"I think it's an organism that has its own white blood cells and it attacks anything that looks like it's different and is invading the body," Nagin said of the water board. "Think about it. It is an organism that repels change. It's unbelievable."

So now Nagin is setting his sights on finding a permanent replacement for former Executive Director Harold Gorman, who was fired last June. City Councilman Marlin Gusman, who is chairing the board's search committee, said a list of finalists for the job should be presented to Nagin in the next several months.

Once a new executive director is in place, Nagin said he wants to work with that person to re-engineer the agency. That task, he hopes, will be made easier after more changes are made to the board.

Support for shifting focus

The terms of board members Henry Dillon and Bill Grace expire this year, according to a board spokesman. A third board member, Ben Edwards, is serving at the mayor's pleasure after his nine-year term expired last November.

"By that time the board's makeup should change a little more, and we should be able to get it done," Nagin said.

That's music to the ears of John Wilson, who led the employee group that bid on the first privatization proposal. Employees have long advocated keeping the agency under public control and restructuring it to provide better, cheaper services to customers.

"That would completely make sense," Wilson said. "The leadership of the organization is an issue that has to be settled, and we could definitely go along with that."

Gusman and board member Tommie Vassel said they also would support shifting focus from privatization to the executive search and re-engineering, after months of the issue lying dormant.

"I do think it is right for us to move forward," Gusman said. "When you have issues of that magnitude hanging over your head, it is difficult to move at the speed you ought to."

Vassel said: "We've explored the options, looked at what other cities and agencies have done, and we're probably at that point where the board feels comfortable voting one way or another. The mayor has apparently reached that conclusion as well."

Note: For some reason, blogger wouldn't publish ampersands, hence the "S and WB's"