A local lawyer representing SUEZ’s North American operations pitched an idea to city government that the company would buy Shreveport’s water and sewerage operations for $508 million. SUEZ, a French corporation that also deals in environmental and energy matters, contracts for operation in or outright owns and runs about 100 municipal systems in America, making it the second largest firm doing that.
A deal like this would create a windfall for the city. Recent years have seen dramatic rate hikes endured by Shreveport consumers to pay for hundreds of millions of dollars in improvements mandated by the federal government. Not only would this relieve the city of this burden, it also could save money by Shreveport not having to run water and sewerage operations and this puts a lot of money into its coffers for other capital improvement needs.
The notion has attracted some critics. A report by the organization Food and Water Watch in 2010, parroted unthinkingly and uncritically by local news outlets, singled out SUEZ for deals gone bad with cities, some for raising rates beyond what politicians wanted, others for regulatory violations along the lines Shreveport faces. A couple of other cities also have ended contracts early with it since then.
However, Food and Water Watch’s biases discredit its recommendations. The group virulently opposes privatization, despite the fact increasingly municipalities have turned to this solution so that now over 2,000 contract out their facilities or buy from a supplier. Recently, often cities like Shreveport that, because politicians ran the show, held rates artificially low while infrastructure crumbled, find few other options than instituting crushingly-high rate increases or privatization.
And, contrary to the group’s misleading party line, data show privatization usually, but not always, turns out better for municipalities. Over the past decade, over 90 percent of contracting cities have renewed with their water and sewerage providers, such satisfaction they have enjoyed with services rendered. More specifically, while SUEZ lost some business, it also gained some, recently picking up highly-populated Nassau County, NY; Bayonne, NJ; and Middletown, PA.
Plus, the group’s general argument that privatization “caused” costs to go higher and cites specific examples regarding SUEZ ignores the reality that in many instances rates would have increased anyway without privatization in order to finance necessary huge infrastructure improvements. In fact, privatization of easily measurable and monitorable services such as water and sewerage provision typically save money, meaning had many of these cities not privatized rate increases almost certainly would have been higher otherwise.
SUEZ could not commit to having lower rates as a result of taking over Shreveport’s sewer and water provision. But likely whatever rates hikes would have to come would be lower than those inevitably on the way if the city continues to run things.
Of course, past compliance record matters and should receive thorough vetting by Shreveport. But let’s say after that the city isn’t satisfied; that SUEZ would offer to buy the system for over a half billion dollars shows other potential suitors that could have more palatable histories might pay nearly that much, perhaps even more for Shreveport’s system. Or, an operational contract of many years length could bring in the hundreds of millions necessary to pay for the mandatory upgrades in totality.
If nothing else, the SUEZ offer should demonstrate to Shreveport elected officials that the market provides these options. Now they have little excuse not to privatize in some form to serve citizens best.