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A Critical Examination of Private Sector Participation in United States Municipal Water Services

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A Critical Examination of Private Sector Participation in United States Municipal Water Services SECURING WATER SUPPLY: A CRITICAL EXAMINATION OF PRIVATE SECTOR PARTICIPATION IN UNITED STATES MUNICIPAL WATER SERVICES by Dan Gilner A Thesis Presented to The Faculty of Humboldt State University In Partial Fulfillment of the Requirements for the Degree Master of Arts in Social Science: Environment and Community Committee Membership Dr. Mark Baker, Committee Chair Dr. Noah Zerbe, Committee Member Dr. Elizabeth Watson, Committee Member May 2014 ABSTRACT SECURING WATER SUPPLY: A CRITICAL EXAMINATION OF PRIVATE SECTOR PARTICIPATION IN UNITED STATES MUNICIPAL WATER SERVICES Dan Gilner The United States is currently confronting a critical need to invest in, and update, its water delivery and treatment systems. Historically, the United States government provided communities with most of their water systems funding through federal grants for infrastructure development and maintenance. However, in the early 1980s, there was a paradigm shift as to who should provide such investments. Since the early 2000s, the Environmental Protection Agency has recommended that communities that do not receive enough federal grants for the necessary investment in their water and wastewater systems pursue partnerships with the private sector to generate investment capital. From the 1980s through the early 2000s, executive order, legislation, and tax reform enabled the gradual implementation of private sector involvement in the water services sector. Private sector participation (PSP or “Privatization”) has changed the landscape of United States water services governance. It also raises questions as to the overall effectiveness of such programs in creating and maintaining both the necessary infrastructure and level of investment in communities across the United States. Experience with PSP has also raised ii a host of questions regarding various aspects of both the social and labor relations of production in these arrangements. My research explores the development and effects of private sector participation in municipal water services throughout the United States. The relevant issues are examined employing a political-economic framework, utilizing an understanding of neoliberal globalization as a lens for the current trend of PSP. My research methodology employs literature analysis and comparative case study to identify the most important issues in public-private water services arrangements. Identifying the effects through empirical case study and current literature analysis, will allow me to develop a clear presentation of the most critical problems and challenges involved with private sector participation in municipal water services, as well as alternative solutions to current problems. iii ACKNOWLEDGEMENTS I would like to thank my family for all of the love and support that they gave to me during the process of completing my master’s program and writing my thesis. In specific, I would like to thank my grandfather and grandmother, Dr. Abraham and Anita Gilner, without whom I would have been unable to complete this arduous academic journey. I would like to thank my father, Dr. David Gilner, for the countless hours he spent guiding me in editing my work and giving me feedback so it could be the best product possible. I would also like to thank my mother, Penelope Pope, who gave me constant encouragement and support. I would also like to specially acknowledge my grandfather Dr. Charles Pope Jr., whose memory has been a constant inspiration to me in my academic journey. Without these beloved people in my life, this thesis would not have been able to be produced. Thank you all from the bottom of my heart. iv TABLE OF CONTENTS SECURING WATER SUPPLY: A CRITICAL EXAMINATION OF PRIVATE SECTOR PARTICIPATION IN UNITED STATES MUNICIPAL WATER SERVICES .. ii ACKNOWLEDGEMENTS ................................................................................. iv THE NEOLIBERALIZATION OF WATER SERVICES: A BACKGROUND .....1 RESEARCH APPROACH .....................................................................................5 Identifying the Issue of Bias ...................................................................................5 Identifying the Inquiry Process ..............................................................................5 Identifying my Case Studies ..................................................................................7 Identifying the Limitations of the Research ...........................................................8 A CRITICAL REVIEW OF NEOLIBERALISM AND THE NEOLIBERALIZATION OF GLOBAL MUNICIPAL WATER SERVICE ..................10 The Political-Economics of Neoliberalism ..........................................................11 The Globalization of Neoliberalism .....................................................................14 Neoliberalism and the Environment .....................................................................18 The Neoliberalization of Water Services ..............................................................21 Key Questions Identified for Further Research ....................................................31 A CHANGING LANDSCAPE: GOVERNANCE REGIMES IN THE UNITED STATES .............................................................................................................................33 Community Water Systems Composition and Configuration ..............................35 A Shift in Funding Policy .....................................................................................39 The Neoliberalization of Community Water Systems Governance ......................41 Private Sector Participation Modes of Operation .................................................46 The Rise of Private Sector Participation ..............................................................51 Identifying the Current PSP Landscape ...............................................................53 Conclusion ............................................................................................................64 PRIVATE SECTOR PARTICIPATION IN UNITED STATES MUNICIPAL WATER SYSTEMS: COMPARATIVE CASE STUDIES OF ATLANTA, GEORGIA AND INDIANAPOLIS, INDIANA ...........................................................................................68 v Private Sector Participation in Atlanta, Georgia: A Failed Contract, Labor Dislocation, and Corruption ..............................................................................................69 Contractual issues ................................................................................................70 Labor dislocation issues .......................................................................................75 Maintenance concerns ..........................................................................................78 Water quality concerns ................................................................................................81 Loss of expertise ...................................................................................................82 Pricing issues ........................................................................................................83 Corruption issues ..................................................................................................83 Private Sector Participation in Indianapolis, Indiana: Contract Failure, Labor Dislocation, and the Loss of Expertise ..............................................................................86 Contract issues ......................................................................................................88 Labor dislocation ..................................................................................................92 Water and service quality concerns ................................................................................95 Pricing issues ........................................................................................................98 Loss of expertise ...................................................................................................99 Corruption issues ................................................................................................101 Conclusion ..........................................................................................................102 PUBLIC-PUBLIC PARTNERSHIP GOVERNANCE REGIMES IN THE UNITED STATES WATER SECTOR: A CASE STUDY OF REGIONALIZATION IN FELTON, CALIFORNIA ................................................................................................105 Community Benefits of Regionalization ............................................................108 The Municipalization and Regionalization of Felton, California .......................112 Evaluating PUP and PSP Through the Case of Felton, California .....................118 Evaluating the Benefits of Regionalization in Felton, California .......................122 THE NEOLIBERALIZATION OF WATER SERVICES: LESSONS LEARNED .........................................................................................................................................128 NOTES ...............................................................................................................133 REFERENCES ...................................................................................................164 vi 1 THE NEOLIBERALIZATION OF WATER SERVICES: A BACKGROUND In the late 1970s and early 1980s, a new political-economic philosophy was embraced within the United States. This political-economic philosophy that has
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