New Jersey privatizes its water in the worst way possible

Last month, Chris Christie sold off New Jersey’s public water supply to a bunch of corporations.

The Water Infrastructure Protection Act (WIPA), approved on February 5th, allows municipalities to sell their water facilities to private companies without public referendum. As part of Christie’s privatization task force agenda, WIPA aims to balance Jersey’s current budget crisis, while also fixing the state’s water facilities that ail from “emergent conditions,” or what the bill calls “serious risks to the integrity of drinking water and the environment.” The Protection Act has alarmed New Jersey communities and watchdog groups, however, who claim, as activist Jim Walsh has said, the bill allows “multinational corporations to profit off increased water rates with virtually no recourse for New Jersey residents.’’

Though flatly ignored by the national media, WIPA is a painfully important piece of legislation that comes at a pivotal juncture in the national and global conversation about how exactly we should “define” water. It also opens up bigger questions about private institutions and their role in shaping the public sphere — the first of which being, can we really trust corporations to do something that government has been doing for a hundred years?

The people of New Jersey certainly seem to be suspect. Chief among the outraged over WIPA’s passage are public interest groups like Jersey’s Division of Rate Counsel (DRC), which has lambasted the bill. Stefanie Brand, the Counsel’s Director, expressed concerns in a statement to the NJ legislature, on Dec. 11th, saying she feared that:

  1. WIPA will raise the public’s rates. A lot: Because the bill strips authority from the Board of Public Utilities (BPU), the organization that has traditionally regulated rates in NJ, ratepayers run the risk of seeing drastic inflation. For Jersey’s low-income communities, this is a frightening prospect.
  2. WIPA will diminish public control: Not only does the new bill strike public referendum, but it delivers the people’s water into the hands of an organization with few of the protections currently offered by the BPU. Consumer protection agencies like the DRC — groups that give consumers a “voice in setting energy, water and telecommunications policy” — may have little influence under the new bill. As a result, the public will have less to do with the management of their own water.
  3. Socialized costs for privatized gains: Tradition holds that when water facilities are privatized, shareholders usually shoulder “acquisition-related costs,” as they are the ones who stand to profit most from the deal. However, under the new bill, facility construction and other acquisition costs will be “recoverable in rates” — meaning ratepayers will subsidize the operation.

Concerns surrounding WIPA fit into a larger argument occurring nationally about the dangers of water privatization. In “The New Economy of Water,” a comprehensive report released by The Pacific Institute, analysts posited a number of risks to democratic and political institutions implicit in privatization. Many of these concerns are identical to those expressed by Brand and the DRC. Among the concerns, the report warns that:

  • Privatization can worsen economic inequality
  • Privatization may circumvent public participation, public ownership, and contract monitoring
  • Privatization of water systems may be irreversible

An analysis done by watchdog non-profit Food and Water Watch seems to support fears of worsening economic iniquities. The report found that on average, where privatization had already occurred in Jersey, households paid 64 percent more for their water. In other states, cases are similar. In Felton, CA, for instance, American Water (AW) bought up state facilities, after which RWE — its parent corporation — proposed raising rates on payers by 78%. In Urbana, Illinois, too, AW bought the public’s water, then quickly proposed a 60% increase in rates. Not exactly a better deal for middle-class ratepayers.

Fears of “irreversibility” also hold some credibility. For state officials in desperate municipalities, water facility sales may appear a short-term financial solution to budgetary ailments. However, these solutions often come with a long-term price tag: water contracts can last decades (WIPA, for instance, allows companies to own public facilities for up to 40 years) — making protracted and expensive lawsuits the only viable means of public reclamation.

In the past, communities have waged legal battles with their legislatures when privatization deals did not work out to their advantage. Yet WIPA’s waving of public referendum effectively negates that ability.

These debates over the dangers of water privatization come at a time when the international community is also discussing how to head off the global water shortage. Inefficient state facilities have forced scientists and politicians to rethink the means by which water can be stored and distributed. A growing number of analysts have argued that the private model is a more effective means of preserving dwindling water supplies. Smelling the aroma of fresh greenbacks, a small coalition of international corporations — accompanied by The World Bank — are pushing for a global water privatization initiative.

The Polaris Institute reports that:

There are ten major corporate players now delivering fresh water services for profit. Between them, the three biggest — Suez and Vivendi [recently renamed Veolia Environment] of France and RWE-AG of Germany — deliver water and wastewater services to almost 300 million customers in over 100 countries, and are in a race, along with the others such as Bouygues SAUR, Thames Water (owned by RWE) and Bechtel-United Utilities, to expand to every corner of the globe. Their growth is exponential; a decade ago, they serviced around 51 million people in just 12 countries. And, although less than 10 percent of the world’s water systems are currently under private control, at the rate they are expanding, the top three alone will control over 70 percent of the water systems in Europe and North America in a decade.

Yet in many third world countries where water supplies have already been privatized, communities have encountered the same problems that plague U.S. towns like Felton and Urbana. Rates skyrocket, which drives inequality up. In some cases, health concerns have arisen, as well. Management and efficiency, too –the supposed areas in which private companies are supposed to outperform state governments — are spotty. Al Jazeera America reported that there was a “34% failure rate for all private water and sewerage contracts entered into [globally] between 2000 and 2010.” Not exactly a ringing endorsement for corporate competency.

Global water, via Shutterstock

Global water, via Shutterstock

Tough decisions are ahead. The debate over water privatization goes beyond issues of safety, efficiency and profit, to the question of what exactly an American citizen is entitled to. Analyst Karen J. Bakker has said that while water has historically been considered a “public good,” a universal right, and a “necessary precondition for participation in public life,” privatization makes it: “no longer a public good…but a tradable good,” subject to the fluctuations of the market.

Perhaps the most troubling aspect of the WIPA is the extent to which it fits into the larger privatization trend in the U.S., one in which middle-class rights are being declared as tradable goods. It’s a process that, in general, makes things less affordable to the average family: after school programs, universal child care and higher education — once state-subsidized programs — have become costly, privatized industries. Worker benefits such as retirement plans and pensions have evaporated. If the privatization enthusiasts had their way, we’d also be doing without the federal minimum wage and the weekend. In the private sector’s consumption of the public sector, boundaries between “natural rights” and “commodities” have dissolved and aspects of life that have traditionally been considered universal privileges have instead become privileges of wealth.

And now they’re coming for our water. Yikes.

Borders between government and big business are dissolving. Legislation like WIPA — fast-tracked and vetted of referendum as it was — is nothing more and nothing less than governments selling their people out to corporations. The communities both pay for the operation and forfeit their right to manage their own resources.

Doubts naturally persist over the ability of private entities to take on public responsibilities when their priorities remain profits, not people. In situations where government oversight has not sufficiently been included, the privatization of public institutions has lead not only to rising levels of inequality and circumvention of democratic process, but to severe abuses — with examples running the gamut from the current crisis over for-profit colleges like Corinthian, to the horrors of prison privatization, to Blackwater and the Nisour Square massacre.

The demand for water is perfectly inelastic: Regardless of price, people need to drink. This being the case, water would seem to be a product least-likely to be handled well by the private sector. Given the disastrous results in the places where it’s been tried, there’s no reason to be anything but skeptical at least and outraged at best over New Jersey’s plan to privatize their water supply.


Lucas Ropek is a journalist based in Massachusetts. He worked for the Working Families Party in NYC on issues of income inequality and worker rights. His interests include U.S. foreign policy, pop-culture, and freedom fries.

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  • Wolfenotes

    also meant to include this story which documents Dems’ role:

    Wide Range of Critics Blast Democrats’ Water Privatization Bill

    http://www.wolfenotes.com/2014/12/wide-range-of-critics-blast-democrats-water-privatization-bill/

  • Wolfenotes

    The NJ bill did not require that privatization of water systems MUST invade investment and upgrade.

    The only change in laws were to:

    1) eliminate the prior legal requirement that any privatization be democratically approved by the voters; and

    2) eliminate BPU economic regulatory review jurisdiction over the contract of sale

    This is certain to result in financially strapped towns selling their systems for pennies on the dollar and then acing huge rate increases.

  • Wolfenotes

    I loathe CHristie and am one of his biggest critics, and yes, the policy of the bill follows the CHristie privatization policy, but the bill was sponsored by democrats and received many democratic votes.

    Here’s the story:

    Why Are NJ Democrats Trying to Privatize Public Drinking Water & Sewer Systems?

    http://www.wolfenotes.com/2014/12/why-are-nj-democrats-trying-to-privatize-public-drinking-water-sewer-systems/

  • RoseFlorida

    I didn’t put words in your mouth, you said to profit from a necessity of life is immoral. I was just asking whether you though all profit was immoral. So now you answered. But the consequence is that it is moral to make a profit doing things that are unimportant, but immoral to make a profit doing things that are important. Do you not see that this philosophy gives an incentive to do unimportant things?

  • jabber1

    Yes. To make a profit for the pockets of an individual or a small group of individuals from the commons is morally wrong. Notice you are the one who said all profits are immoral. Not me. Go ahead. Put words in my mouth. Feed you ignorant stereotypes. Ignore common sense and common decency. Nothing wrong with making a profit from products and services not in the commons. Is it okay with you if people die from lack of water so that a couple of rapacious, greedy rich people can sit by the pool, drinking umbrella drinks while money pours into their offshore bank accounts?

  • paulb

    start organizing a water-commons group in your area – we’ve begun with others for a http://www.GreatLakesCommons.org

  • Olivia Lafgrin

    NJ Parkway was same deal. Dad said the rich bond holders wanted to keep earning the interest so it never became a free road. BTW, toll takers are a big expense

  • JAMES CLIFTON

    How were they built in the first place? By an efficiency that we no longer have any hope of achieving?

  • MedfordMan

    Absolutely correct. And they strive to strip the workers of any rights at all, whether that be collective bargaining or simple the right not to be fired without cause.

  • MedfordMan

    Spot on. The Republican Party, not satisfied that millions of Americans were recently throw out of their homes in a Wall Steet wealth grab sold as “deregulation” and “market efficiency.” Now, they want to steal our public resources as well.

  • MedfordMan

    A VERY important point. The public’s water will go to the highest bidder: Chinese, Russian, whoever.

  • MedfordMan

    I think you meant neoconservative, and to that, I certainly agree. This is no accident. It’s part of the now 30 or 40 year campaign of the Republican Party to fleece the suckers, i.e. the American people.

  • MedfordMan

    Anybody recall how well it went for rate-payers when the energy market was deregulated for betterment of the campaign contributors at Enron?

  • MedfordMan

    Exactly. Anyone who hasn’t read the infamous Citibank “plutonomy” memos should download and read them. None of this is happening by accident. In New Jersey, they’ve come for the water. You can’t live without it. In the plutonomy memos, the kleptocrats discuss the “threat” of democracy that the poorest American still has the same single vote as the richest. So, first take our water, later take away your vote!

  • MedfordMan

    Apparently, the Bolivians are smarter than the folks in New Jersey.

  • MedfordMan

    Water is life. It is part of the commonweal. Whatever the greed head rationales, it belongs in public hands. No good will come from this “privatization,” the real name for this is “theft of public resources.” Anecdotal evidence about this or that water agency that is poorly run is beside the point. The Wall Street pirates threw millions of people all over this country out of their homes in very recent memory. Yet, they rail that their industry shouldn’t be re-regulated, and Glass-Steagall can never be reinstated. The idea that privatization is presumptively better for anyone other than the speculators is laughable.

  • MedfordMan

    The people of New Jersey should start a class action to sue Gov. Christie and obtain some sort of injunctive relief. Water is a human right. It’s not something to be handed off to the highest bidding corporation.

  • Stevie

    If Christie has his way he’ll be charging people for water coming from the sky.

  • RoseFlorida

    “To make a profit out of it is immoral.” So are all profits immoral? Or only profits that are derived from necessities of life? If I make a profit doing something silly, such as selling hula hoops, that would be okay and moral, but if I do something important that really counts in people’s lives, I would be immoral if I sought a reward in the form of a profit?

  • MaximumOvertroll

    Will he be stealing the people’s air next? Christie is a Mel Brooksian villain.

  • Phytoist

    True cost of water is O as it is a natural phenomenal gift to planet earth by its own way. NJ is sold off to privates in many ways since GOPer’s control & as Christie is dreaming of WH,he is securing funds from more privatization.

  • mawil1013

    The Indiana Toll Road was constructed using taxer payer money with promises that as soon as the debt was paid of it would become a Freeway, but the tolls never stopped and now an Australian group owns the Indiana Toll Road and tolls continue.

  • mawil1013

    England used salt to dominate India and opium to force China to accept
    foreign trade. Fracking is destroying much ground water around this
    country, the great Lakes have been a legal dumping grounds for extremely
    toxic chemicals for a hundred years, now they are starting to sell
    public tax paid for water utilities to any corporation without
    discussion, even foreign corporations. Many counties are refusing to
    allow private water wells by saying the water is contaminated requiring a
    lawyer and private testing to over come county testing. The so called
    Privatization Plan is actually selling off everything, schools,
    utilities, etc to corporations, which are owned by the wealthiest
    people, who will rule everything, “Company Town/ County” problem.
    Feeling that noose tightening yet?

  • stacibutters

    I’ve been freelancing over internet for quite some time now, by completing simple jobs that only requires from you desktop or laptop computer and access to internet and I am happier than ever… Six months have passed since i started this and i earned so far in total 36,000 dollars… Basicly i earn close to 80 dollars each hour and work for 3 to 4 h most of the days.And awesome thing about this job is that you can work when it’s convenient to you and you get paid weekly. -> Work from home opportunity! <-

  • jabber1

    Yes. Privatizing public education is being done through charter schools and vouchers. It is disguised as reform and personal choice. But in the end it will fill the pockets of a few individuals and deny a decent education to many. It is also a subtle way to re segregate the schools. Don’t be fooled by the not for profit status of charters. They are allowed to use a for profit management company to run the school. The right wing have been pulling the over our eyes since the late 1970’s. Still they are so good at spinning the message that most people have fallen for it.

  • jabber1

    This is a neo liberal, supply side, trickle down “free” market system. The idea is that people have actually fallen for this since St. Ronnie Raygun and his merry band of thieves began the transfer of wealth from the middle class to the top 1% is horrifying.

  • jabber1

    This would be the role of a decent graduated tax system. Provide an adequate commons affordable to all.

  • Mike L.

    We have never paid the true cost of water. Rates must increase whether the water systems remain public or are privatized. That is the only way we can repair our crumbling infrastructure. Public water facilities need to start operating like a business so that they have enough revenue coming in to maintain and upgrade treatment and distribution systems.

  • Roger Migchelbrink

    I have worked in the public and private water industry for years. There are times, and my liberal or leftist heart rails at this, that privatization does work in some instances. And, it is normally a monetary option because those who were elected to govern and care for are poor at their jobs. All that said, the kicker in this bill is that the Public Utility Commission does not have final say over rates. That is just asking for a raping and is unreasonable. One issue not often discussed is that in public utilities, rates are most often set by Council or Boards and these are elected positions. Want to stay in power (as opposed to the public service of governance) and the best way is to not raise rates. So often rates aren’t raised, maintenance suffers, new regulations impose stricter standards (which have been telegraphed for years) and presto, the utility is in trouble and for sale. I even live an American Water run system and the water quality is poor, and my rates were raised a bunch for repairs in another Cal American facility repair elsewhere. Again, this is not good. When a large corporation can bunch all their holdings together, everyone pays for improvements somewhere else. This is not a condemnation of the system, but perhaps a character test. Some folks are just good people and managers with a conscience, other are psychopaths and in it for their bonus. These regulations or some form of them will be on your doorstep someday. Make sure that there are Buy back agreements in place. Make sure that all holdings of a private water system are not lumped together. Make sure the PUC can ride hers on profiteers. and maybe make sure your public utility is well run. I can tell you that no more than 25% actually have their rates match their infrastructure renewal needs. You hear about 100 year old water lines often. They have at best a 40 year life span and they are not replaced because no one wants rates to actually cover repair.

  • ComradeRutherford

    That we are not paying One Million Dollars a year for water to come out of our kitchen faucet is a HUGE failure to the Conservative Party.

  • markofthebeasts

    Didn’t Bechtel try something like this in Bolivia, thankfully, unsuccessfully?

  • Two more words: Kleptocratic Capitalism

  • Indigo

    Two words. New. Jersey.

  • mirth

    My first reaction to this post was to feel grateful I have lived long enough to accumulate memories of when this country functioned better for her citizens, but then I realized it was better for only some citizens and, because we have been marching towards the cliff for all of my adult life, what prompted my gratitude was more an illusion than reality. Still, I feel a deep sadness for those younger than I am and their memories as they age and for their bluntness of their reality.

  • Texas has already had private water companies for a while, and those people served by them pay easily twice the rate for the same amount of water as someone down the street on a publicly-owned supply. Privatizing public services never ever goes well, and never EVER saves the tax payers money.

  • emjayay

    It’s kind of baffling that governments at all levels sell or lease all kinds of stuff to collect money to fix their budget problems today in exchange for universally higher costs to the public, often far higher costs, for years or decades into the future. Then the money paid for the service partly goes to lobbying, political donations, and profits. They could usually fix or update whatever the problem is themselves for half the cost.
    I guess the answer is ideology, payoffs, and….people are stupid.

  • Strepsi

    Excellent reading: “Blue Gold” and “Blue Covenant” by Canadian author Maude Barlow — she works tirelessly to make water part of the public ‘commons’ — especially important for Canadians, because as soon as water is a ‘commodity’ it can be traded, and under Free Trade agreements like Canada / U.S. FTA. corporations supercede national governments .

    http://en.wikipedia.org/wiki/Maude_Barlow

  • People have been predicting this for a long time now and it’s starting to happen. We are looking at serious drinking water shortages and look now it’s privatized! I wonder how many public officials were bribed to make that happen. Shame on all of us for allowing our government at every level to be for sale.

  • RepubAnon

    It’s simple, really – publicly-owned utilities are far less capable of making donations to politicians than privately-held companies. Isn’t it more efficient to force the rate-payers to hire the lobbyists who advocate against consumer rights than for the 0.1% to have to buy politicians out-of-pocket?

    (/snark – if you hadn’t guessed)

  • The_Fixer

    Of course they’re trying to privatize the distribution of water – why not? They’re doing it with any government function that they can. It’s the “American Way” to be hyper-capitalistic.

    Of course, it inevitably will result in cutting corners to increase the bottom line, and a public resource that is controlled by private entities will no longer be safe. Look at the products and services provided by major corporations. From Comcast’s lousy customer service to to PG&E’s hexane in the water, higher profit motives have proven that unrestrained capitalism doesn’t work for the public good. Thanks, Ronnie Reagan and your band of merry co-conspirators! It’s yet another relinquishing of the ability to regulate so that somebody can get rich(er).

    This will not end well. I am certain that people will get sick and die from tainted water. Not that they aren’t already, but do we really want to compound this problem? Of course not.

    Unless you’re wealthy and can afford “good” water, then it’s no problem at all.

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