DETROIT, MI (Shea Howell) - This week an international for-profit corporation was hired to evaluate the Detroit Water and Sewerage Department. All 4 million customers should be concerned about this move by Emergency Manager Kevyn Orr to employ the services of Veolia Water. Once again EM Orr is making a decision against the interests of the people and laying the groundwork for turning water into a commodity. He has selected a company with a questionable reputation, whose interest is in turning water into private profits, not in protecting it as precious public trust, essential to all people.
The stated mission of this contract is to evaluate the department’s operations. This includes reviewing finances and staffing and will result in recommendations for cost savings, according to a memo written by Sue McCormick, water director.
The last decision Emergency Manager Orr made about the water department was disastrous. He has apparently learned nothing from the widespread pain and international embarrassment he caused the city when he ordered massive shut offs.
A major part of that decision was to hire a company that was only capable of shutting off households. By their own admission, Homrich had neither the expertise nor the inclination to go after large corporate debtors. Orr chose to attack thousands of residents rather than going after a small number of corporate and commercial accounts. These accounts owe nearly half of the total outstanding bills. Had Orr gone after 40 companies he would have brought in nearly all the outstanding corporate debt. Instead Orr approved a $5.7 million contract for 2 years to shut off residents. He has yet to account to anyone about these decision.
Orr’s desire to protect corporate profits does not stop with letting their water flow. He has consistently demonstrated his willingness to let public money flow to banks for exorbitant fees and payments. From his earliest offer to give banks nearly all of what was owed while cutting pensioners to 10%, to his refusal to challenge the water department debt, we see a pattern of decision making devoid of any sense of justice.
The London Financial Times reports it will cost Detroit $2.7 billion to pay back $1.4 billion. The $537 million that Orr has already handed over to banks to escape extra payments on questionable swap deals is more than four times the entire past due water bill at the beginning of March when the shut offs began.
Orr has never offered any explanation for why he refuses to go after the banks for what many believe to be unprincipled and possibly illegal swap deals in the water department. Instead he is offering refinancing options. This will save money in the short term, but continue public indebtedness and leave the banks and their disreputable practices untouched.
This move to use private companies to manage public goods is a step toward privatization, no matter what Orr says. His company of choice, Veolia, is one of the three largest for profit water corporations in the world. In 2003 these three announced their goal to take control of 70% of U.S. and Canadian public water utilities within a decade. The DWSD, with its strategic position along the Great Lakes would be a critical step toward that goal.
Privatization has consistently meant higher prices, fewer services, and poorer quality of drinking water globally. That is why governments and municipalities that were seduced into using private companies to manage their water systems are now taking back control.
Orr is trying to tell us this is merely a limited contract, confined to offering recommendations. Everyone knows that such recommendations are not neutral. They will point to the need to hire Veolia to manage whatever authority ultimately emerges. If you wonder how this process works, just ask Jones Day, the corporate law firm for the city. They can tell you how easy it is to move from advisor to long-term managers. And how profitable an arrangement it can be.
Bankruptcy Trail
The city's historic bankruptcy trial began in earnest Tuesday with a judge tasked with considering a mountain of evidence and witness testimony to determine whether the city's sweeping restructuring plan is fair and feasible.
Judge Steven Rhodes is set to hear opening statements in the trial today, following the consideration of several procedural matters this morning.
In several unrelated motions, bond insurers Syncora and Financial Guaranty Insurance Co. sought to block the city from introducing various evidence to support the city’s sweeping bankruptcy restructuring plan.
The city of Detroit filed for Chapter 9 bankruptcy on July 18, 2013. It is the largest municipal bankruptcy filing in U.S. history by debt, estimated at $18–20 billion, exceeding Jefferson County, Alabama's $4 billion filing in 2011.
Detroit is also the largest city by population in the U.S. history to file for Chapter 9 bankruptcy, more than twice as large as Stockton, California, which filed in 2012. Detroit’s population has declined from a peak of 1.8 million in 1950; recently, the New York Times called the city “home to 700,000 people, as well as to tens of thousands of abandoned buildings, vacant lots and unlit streets.”
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