“The government should be run like a great American company,” Jared Kushner, Trump’s son-in-law and senior adviser (who is also an alleged slumlord and the future broker of peace in the Middle East) told The Washington Post last March. “Our hope is that we can achieves successes and efficiencies for our customers, who are the citizens.” President Trump’s administration touts private enterprise as the solution to any and all challenges faced by public projects—from budget waste to bureaucratic delays to low test scores, the market can fix it all.
It’s not surprising that this is the Trump team’s philosophy: The private sector is Trump’s only realm of experience. Unlike government, businesses are not concerned with providing for the welfare of diverse groups of people; neither is Trump.
Yet governments, local and federal, frequently look to the private sector to solve their problems. And it’s no wonder: They need help. The American Society of Civil Engineers gave the entire country a D+ on its 2017 infrastructure report card. “From the crumbling bridges of California to the overflowing sewage drains of Houston and the rusting railroad tracks in the Northeast Corridor,” reads a 2016 piece in The New Yorker, “decaying infrastructure is all around us.”
Pittsburgh, in an attempt to deal with entrenched infrastructure problems, turned to the private sector in 2012 when it partnered with the French management firm Veolia North America, the same water-management company that would fail to disclose Flint’s lead-contamination problem in 2015. Alongside aging infrastructure that produced frequent water-main breaks, flush and boil advisories, and wildly incorrect billing statements, PWSA was in massive debt. Veolia promised to streamline the public utility—in fact, its Peer Performance Solutions model, which embeds private-sector consultants with public-sector employees, won the company an award from the National Council for Public-Private Partnerships in 2014, a little more than a year after it began partnering with PWSA. The organization lauded Veolia for identifying $2.3 million in new PWSA revenue and $3 million more in operating savings, a move incentivized by their contract that stipulated the company could keep 40 percent of every dollar it saved the city. The Pittsburgh Post-Gazette published a glowing account of PWSA’s partnership with Veolia, despite reports that it laid off 23 employees, many of whom were longtime employees with critical institutional knowledge. The private sector had seemingly done its job, weeding out inefficiencies and saving the authority millions.
Popular
"swipe left below to view more authors"Swipe →
But this August, a consulting group hired to assess the organization’s current state announced in a public meeting that PWSA was “a failed organization atop a dangerous and crumbling structure” with “an aging system in demonstrably worse condition than any water utility of its size in the country.” Not only that, water tests showed that since the partnership began, Pittsburgh’s water had been tainted with dangerously high levels of lead.
Few infrastructure systems are more critical than water systems, which include the management of sewers, waste, and storm water; treatment of wastewater and drinking water; and distribution of treated water. Not only that—the condition of water systems impacts the price of water for citizens. According to a 2015 study, average water system rates rose 41 percent between 2010 and 2015, and experts predict the average monthly cost of water will increase by $49 over the next five years, up from the current national average of about $120 a month. If that happens, water will become unaffordable for one-third of American households. (According to the EPA, the threshold for water affordability is 4.5 percent of household income.)
And this isn’t just an issue in Pittsburgh. “Regardless of location,” said Leonard Casson, water-quality expert and member of PWSA’s Water Quality Advisory Committee, “community water systems are all at least about 50 to 60 years old,” while their distribution pipes have an average life expectancy of 75 to 100 years. If pipes have not already outlived their usefulness, chances are they’re approaching the end of it soon. The implications of this aging hardware become more alarming with each passing year. The American Society of Civil Engineers estimates that 2 trillion gallons of treated water are wasted each year owing to main breaks.
PWSA, like community water systems across the country, had been dealing with the challenges of operating aging infrastructure long before the public-private partnership. And these issues were only complicated further by poor management—the authority was infamous for its high rates and billing mistakes that verged on the absurd. But at least the water didn’t boast dangerously high rates of lead.
In the summer of 2016, when Pittsburgh’s water was tested for the first time since Veolia began instituting changes, the resulting lead levels exceeded the federal limit. Before Veolia, the water authority had long supplemented its water with soda ash, a substance very similar to baking soda that lines the inside of pipes to prevent corrosion. But under Veolia’s management, it switched to caustic soda—which, while approved for use, is generally acknowledged as an inferior, cheaper, means of corrosion control. The switch to caustic soda stripped the inside of PWSA’s pipes, removing the layer of minerals previously deposited by soda ash, helping leach lead into the city’s drinking water.
The mayor and the City of Pittsburgh say they were never notified of the change. The state Department of Environmental Protection demanded immediate testing when notified PWSA had switched back to soda ash and chastised PWSA for making unapproved modifications to the water-treatment process. Recently, Veolia pointed to an investigation by a local Pittsburgh news station that showed PWSA employees discussing the switch to soda ash before it was implemented, which the mayor’s chief of staff pointed out may have been motivated by Veolia’s cost-cutting priorities. Veolia has also argued that the PWSA board of directors had the ultimate authority over the switch.But before it could make it to the board, the decision had passed through a separate steering committee made up of two Veolia executives and three members of PWSA’s Board of Directors. And according to The Guardian, “Under Veolia’s management, PWSA’s new executive director, James Good, a longtime Veolia employee and former private water lobbyist, became the second-highest paid public employee in the region. He earned $240,000 a year with generous benefits.”
As for PWSA’s management, the consultant group’s recent report showed, little had changed. Post-Veolia, PWSA still does not have the structure or organizational cohesion needed to adequately address the vast physical repairs and replacements necessary to preserve city’s water system. Yet Veolia, before its partnership with Pittsburgh ended in 2015, “cashed in on $4.9 million in performance improvement payments, according to an auditor’s report, in addition to the company’s monthly fees of $90,000 to $120,000,” reveals the The Guardian. Almost every piece of rotating equipment that wasn’t brand-new, the recent report notes, “was in a condition of significant neglect.” The water that reaches consumers is only 50 percent of the total amount treated by PWSA. Half of the potable water PWSA generates escapes through its crumbling network of leaky pipes into the Western Pennsylvania soil, a rate far higher than the 16 percent national average. Steve Steckler of Infrastructure Management Group, the firm currently tasked with assessing the organization, calls PWSA “one of the largest irrigation systems in the country.”
Veolia is not the only private firm drawing criticism for its performance in a public-private partnership. Too often, public-private partnerships gone wrong result in loss of life and public health disasters—often at exorbitant public expense. And even if a public-private partnership is constructed with careful planning, oversight, and codified public protections, a private company is never going to do any more than it must; its priorities are its paying customers and its shareholders, not all citizens. Yet any organization that deals in something as life-sustaining as water must prioritize the public’s welfare over all else. In the case of Pittsburgh, Veolia argued that infrastructure maintenance was beyond the scope of its agreement with PWSA, which is technically true: The agreement outlined no explicit provision for maintenance. Of course, despite the fact that maintenance is a fundamental part of any water company’s responsibilities, this meant that no significant maintenance was done, and the water infrastructure continued to deteriorate. Government officials in Flint, Michigan, and Plymouth, Massachusetts, have also charged Veolia with negligence in the wake of their own water and sewer disasters.
Regardless of whether Veolia is responsible for the switch in corrosion-control methods, the structure of its public-private partnership agreement with the city incentivized the pursuit of profit over the public good. According to the mayor’s chief of staff, Kevin Acklin, the contractual provision that split any savings generated by Veolia’s management of PWSA was fatal to the partnership. Acklin told Mother Jones, “[Veolia] had the incentive under the contract to not make capital investments in property, planning, and equipment—to basically not fix the pipes when needed, to pass off those costs to other agencies, including the city and private homes.… Ultimately they were fiduciaries for the public authority, but they also served the business needs of a large multinational corporation.”
As American cities look for solutions to their myriad water-system problems, PWSA’s failed partnership with Veolia is a reminder that private enterprise is not a silver bullet. The problem can’t be optimized away or cured with a new workplace culture, as Veolia aimed to do. The cost alone of addressing our nation’s aging infrastructure is immense. Senate Democrats’ January infrastructure spending bill proposed $1 trillion in funding over the next 10 years for a variety of infrastructure projects, delegating $110 billion to fix aging water systems. However, water-policy experts estimate that adequately addressing our troubled water systems will cost $1 trillion on its own. Meanwhile, federal spending on water infrastructure has declined since the 1980s, leaving the massive costs of wholesale replacement of water mains and pipes to state and local governments who simply cannot afford it on their own. In this context, privatization is tempting: Companies like Veolia promise efficiency and reliability as a natural outcome of its self interest and priority, its bottom line. But when we see water systems poisoned with lead, the cost of overhauling our infrastructure without cutting corners pales in comparison to the long-term cost of placing profit over people.
Pittsburgh, for its part, isn’t turning away from public-private partnerships in the wake of Veolia. Instead, the city is seriously considering the consulting group IMG’s recommendation to establish a new, nonprofit Independent Water Trust that will own the water system’s assets—distribution pipes, treatment equipment, and so on—which it will lease to a (likely private-sector) partner. This new public-private partnership, IMG has been sure to emphasize, will differ from the city’s failed collaboration with Veolia in terms of both lease length and methods of accountability and oversight. Time will only tell. But as the city of Pittsburgh gears up to accommodate a relationship with the private sector yet again, it’s worth asking: How many times will private companies fail us before we acknowledge that if they’re not contractually obligated to care, they won’t?
Editor’s Note:
In a previous version of this article, the PWSA steering committee was mischaracterized as not separate from the PWSA board. As well, it said the steering committee was made up of half Veolia exeutives and half PWSA directors; it was a two-three split. The piece also did not include a recent investigation that showed PWSA staff discussing the switch to soda ash before it was implemented. The piece has been amended to include this.
