Watchdog Group Has Its Eye On Veolia, City's New Water Division Consultant

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Earlier this week, we broke news that the St. Louis Water Division has chosen Veolia Water, a Paris-based company and the largest water services provider in the world, to guide cost-cutting at the utility. The final contract has not yet been awarded, but a longtime employee of the department provided Daily RFT with internal memos showing that Veolia won the bid in early November.

Workers at the water division say they're concerned that "cost-cutting" really means layoffs, despite repeated assurances from Water Commissioner Curtis Skouby to the contrary.

But job security is not the only reason why locals are giving Veolia the side-eye. The nonprofit group Food & Water Watch, based in Washington D.C., has put out a number of reports questioning the company's motives, its commitment to the environment, and its track record in other cities.

Veolia is an enormous multinational company which services water facilities in 69 countries and in 2011 reported about $16 billion in revenue, mostly from Europe. It is involved in 385 water treatment facilities around North America. In some cases, it has taken over and fully privatized a city's utility, in others it has entered into a public-private partnership. The company's North American operation is based in Chicago.

As such a large, global firm, it's not shocking that Veolia has faced controversy in the past. But Mary Grant, a researcher with Food & Water Watch, says the company's reputation in the U.S. is troublesome and cities such as St. Louis should think twice before signing up.

"We have seen examples where they've managed sewage systems and under their management there have been sewage spills," she says. "Also, a lot of private companies, in general, when they take over, they do engage in corner-cutting."

Grant highlights several stateside examples, such as Veolia's short-lived acquisition of the Indianapolis water department, which at the time was the largest privately owned water utility in the country. The city bought Veolia out of its contract after the company was sued for alleged unfair rate hikes and the U.S. Attorney stepped in to investigate the safety of the city's drinking water. Veolia was sued by the nonprofit Baykeeper in two California towns for illegally dumping millions of gallons of sewage into the San Francisco Bay. A Veolia subsidiary in New Orleans was even accused of bribing officials for contracts and dumping sewage in the Mississippi River back in 2006.

For a comprehensive look at Food & Water Watch's concerns both locally and internationally, take a gander at reports here, here, and here. It's important to make clear that St. Louis' new contract with Veolia is not privatization, but rather something called "Peer Performance Solutions," according to a Veolia spokesperson. Over the next five years, a Veolia team will recommend various cost-saving measures for the water utility and help oversee their implementation. The company will be paid an upfront fee to start; the rest of its pay is contingent on the savings it is able to procure. According to the bid, Veolia believes its ideas can save St. Louis between $8.2 and $15.1 million over the course of five years. The bid says repeatedly that Veolia will not use layoffs as a means to save money. The company will assess everything from leaks to metering to chemical costs to power usage, according to the bid. The project will be overseen by a steering committee made up of Veolia officials, St. Louis' Chief Operating Officer Sam Dotson, and appointees from both the Board of Aldermen and the city comptroller. (We've attached the entire 124-page bid to the end of this post.)

Jeff Rainford, chief of staff for Mayor Francis Slay, says that Veolia is here to help the water department avoid massive rate hikes. He says escalating costs of treatment chemicals, plus the fact that the city has two water treatment facilities but not enough paying customers to justify their size, has the city on the path to jacking up water rates four-fold. He says Veolia will bring "new ideas" to the table.

He is also emphatic that this is not a step toward privatizing the utility.

"The city charter does not allow St. Louis to sell or lease or give away or in any way not control the water division. What you can help with," he tells Daily RFT, "is rumors that somebody is spreading for some reason other than the good of the city that this is some secret deal. It's not anything like that. There's nothing in the RFP that could lead anyone to that conclusion."

As for charges that Veolia has not acted responsibly in other markets, Rainford says he doesn't know who Food & Water Watch is affiliated with and can't respond to its allegations. He points to a pre-existing relationship between the City of St. Louis and Veolia as proof that the company is trustworthy.

"We have dealt with Veolia with the downtown steam loop and they have acted honorably, honestly, and above board," he says. " So I'm not going to argue with someone I don't know."

Veolia has similar contracts with Pittsburgh, New York City, and Winnipeg, though they are all fairly new. In its RFP bid, Veolia points to its work in New York City as an example of successful cost-cutting. According to a newsletter put out by the New York Department of Environmental Protection, Veolia's so-called "Operation Excellence" was able to cut the utility's costs on chlorine and fluoride, and save money on vehicle maintenance.

"The total savings of these and other quick wins is between $8 and $9 million annually. They are also a good representation of what OpX is working on: maintaining our standards but in a smarter and more efficient way," the newsletter concludes.

The partnership has not always gone over so smoothly. In Winnipeg the proposed relationship with Veolia received massive opposition over the same issues raised by Grant before its ultimate approval in 2010. Scrutiny of Veolia's presence in the city is even a central tenet of the Canadian branch of the Occupy movement.

In response to general questions about past troubles in other cities, Matt Demo, a spokesperson for Veolia Water North America, characterizes the company this way: "We've been doing this for 150 years ... We do a lot of crazy, exciting things. It's a very forward-thinking, environmentally-friendly company."

Grant, the researcher with Food & Water Watch, concedes that she's not sure what to expect from these types of consulting contracts and says it appears to be a relatively new model for Veolia. But she still has a lot of questions.

"It's concerning that the contract is so short-term, and they're going to share in the savings. It's going to give the company a huge incentive to recommend short-term cost reductions," says Grant. "Cutting corners on upkeep and maintenance could lead to greater capital improvement costs down the road."

After the jump, the full Veolia bid which outlines its plan to save St. Louis money.

Veolia Water Prop Slwd 9-7-2012

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