Protecting Cape Coral's Water: A Crisis In The Making

Background

Cape Coral is a national leader in providing high quality drinking water and monitoring water quality.

Since 2006, the Cape Coral Public Works Utilities Division has invested over $170 million in its treatment, reclamation and distribution systems to ensure this quality is maintained.

In addition the Utilities Division has invested another $140 million in the new Kismet North RO plant which is 85% complete.

The Cape Coral Water Works treats water with a multiple-step process to protect public health. The U.S. Environmental Protection Agency has endorsed Cape Coral’s drinking water as among the highest quality in the nation.

The Cape Coral Water Works collection & distribution systems, treatment & reclamation plants are owned by the City of Cape Coral and provides drinking water to residents and businesses in Cape Coral and neighboring communities.

Problem

There is an effort underway to privatize the Cape Coral Works, an effort which is moving quickly and quietly.

The idea was first broached publicly by several councilmen in late 2008, after discussions with several business executives.

Water privatization is being undertaken in response to $35 million in budget shortfalls in Cape Coral.

The idea is to arrange a very-long-term lease of all the water operations, with the city retaining ownership; a 99-year lease has been suggested.

A one-time payment of $500 to $600 million for the lease would be set aside in an endowment to generate about $30 million annually to help fund city operations.

It is assumed that water rates will go up after privatization; the rate is currently at market rate. $30 million annually in lease revenue would substitute for additional property taxes, fees, or state or federal revenue.

If the City was to move forward, the city Council would authorize an RFP to find an “Advisor Team” to oversee and guide the bidding and contracting process.

Multiple firms would submit proposals by a deadline. The Advisor would then move as quickly as possible to prepare an RFP for the actual privatization.

In other cities where this process has occurred, advisors are paid with a combination of fee for service and “success” fees upon completion of a final contract which is an incentive for advisors to push for privatization.

Impact Analysis

This proposal does not bode well for the Cape Coral area. There are a number of serious issues at stake—costs, water quality, economic development and accountability.

There are several major companies in the world with the capacity to bid for the Cape Coral contract; three of which are Suez Environment, Veolia Environnement and RWE.

The first two are French multinational corporations with global operations related to water and waste management.

The third is a German firm which in April 2009 announced its intent to sell its water operations, including American Water which operates in the U.S.

Suez Environment owns United Water, which obtained a contract to manage the Milwaukee Metropolitan Sewerage District (MMSD) in 1998.

MMSD became the largest publicly owned wastewater system under private operating contract in the US. In 2008, at the expiration of the contract, United Water was replaced by Veolia on a 10-year contract.

Among other things, United Water was issued 20 notices of contract non-compliance during its tenure running MMSD.

Both United Water and Veolia have had serious problems in other cities across the United States. Veolia has managed water systems in New Orleans and Indianapolis as well as smaller communities in Massachusetts and Texas.

The drinking water in Indianapolis is rated second worst in the nation and received a failing grade from Men’s Health magazine. Residents took Veolia to court claiming the company overcharged 250,000 customers.

This privatization proposal emerged in the midst of enthusiastic discussions about the extraordinary importance of maintaining lake & river water as a resource for generations to come.

Handing control over a completely renovated water system to a multinational corporation whose only obligation is to stockholder profits would remove this valuable resource from public control.

Accountability and transparency are especially important priorities for governmental operations at all levels. Water is a fundamental necessity for families and businesses.

Unlike petroleum or electricity, there are absolutely no alternatives to water as an essential element for life and commerce.

Decisions about the operations and management of this basic resource should be made deliberately and with substantial public oversight.

The Cape Coral area—the entire state of Florida—has a huge stake in water as a pivot point for economic recovery and growth. We cannot let this slip through our fingers into the hands of companies with no stake in local growth.


Steps to take

There are four main goals:

1. Bring this issue into the public view—this should not be a secret process decided quickly behind closed doors. It is crucial to develop a coalition that can spread the word.

2. Slow down the process. There are some local leaders who want the Advisor hired in late summer, then brought in to move as fast as possible toward final privatization.

3. Develop and distribute information to community members and leaders about the water privatization issue, the corporations involved and alternate ways to address the budget shortfall at the city level.

4. Maintain public control and oversight of Cape Coral’s water works.