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Opposition Grows to Sale of Providence Water Supply in Elorza Report

Tuesday, May 03, 2016

 

Could the Providence Water Supply Board be privatized?

Opponents to the sale of the Providence Water Supply Board (PWSB), which was mentioned as a possible “revenue initiative” in a recent consultant report commissioned by the city, are speaking out on the possibility of privatizing the state’s primary source of water distribution. 

The 167 page report conducted by the National Resources Network, who Providence Major Jorge Elorza partnered with to develop a plan to implement long-term budgeting solutions in the city, cited “Monetizing PWSB, Proceeds to Retiree Liability” of the sale of the approximately $370 million asset as one prospect to address the city’s long-term financial outlook. 

“Privatizing Providence Water was included in the City's list of possible actions to take to resolve its budgetary pressures. We want the City to know from the start that selling the Providence Water System assets is a non-starter with Rhode Island residents,” said Georgia Hollister Isman, the State Director for Rhode Island Working Families, who started a MoveOn.org petition entitled “Providence City Hall: Don’t Privatize Our Water!

Elorza’s office did not respond Monday when asked if any internal — or external — discussions have taken place regarding an asset sale or lease, which the report states would “help the City reduce its significant retiree liabilities, leveraged with significant, necessary actions for pension and OPEB sustainability [and] could meaningfully address the affordability for taxpayers and the sustainability of benefits for retirees.”

Taking Yet Another Look?“The option of selling the Providence Water Supply Board to help address the City’s financial challenges has been suggested numerous times over the past 30 years,” said former Rhode Island Director of Administration Gary Sasse. 

“In evaluating proposals to sell this valuable asset, the devil is truly in the details. There are difficult decisions that must be made in fairly valuing the Water Supply Board and ensuring that Providence taxpayers receive a fair and reasonable return on their investment. There is always the possibility in deciding these matters that decisions are made based on political expediency and not sound business practices that truly reflect taxpayer interests,” said Sasse. “Therefore, if this option is considered, Providence residents and municipal workers must have an extraordinarily high level of confidence in the negotiating skills of the Mayor and his team.”

Is Mayor Jorge Elorza considering the possibility? His office did not respond to questions on it on Monday.

“In a more general sense, selling assets to balance operating budgets can be a problematic alternative to addressing budget shortfalls,” added Sasse. “It is analogous to a family selling their car to pay the grocery bill. You can only sell the car once, but you would like to eat every day.”

The NRN report cited “many local governments have found they can stabilize long-term liabilities and other pressures by monetizing City asset” and listed Allentown and Reading in Pennsylvania, as well as Indianapolis, Indiana as successful examples of privatization efforts. 

Providence City Councilman Sam Zurier however questioned the political potential of such a move locally at this point in time. 

“it would require General Assembly approval because it's a state resource. So why would a Johnston [Representative] agree to higher rates to bail out Providence? I think it's a heavy lift,” said Zurier. “Then it becomes a question of is it the best use of goodwill at the General Assembly.”

“So I think there's a long way to go before something's even a possibility to consider,” said Zurier. “But suppose we got to that point, and there's an attractive price and, the interest of consumers were protected, and this could save the pension system, who would want to rule it out in advance? The value of a report like this is not that we'll act on those proposals tomorrow, but instead to show that we're looking under every rock and sofa cushion to go after all the pennies first.”

On Monday, Councilman Kevin Jackson said that he did not believe there would ever be an appetite in Providence to privatize the PWSB, even if faced with bankruptcy. 

“It's always come up and never gotten any further,” said Jackson. “We know what we have is valuable, and a good system. We’re ranked high nationally. We have a system that works, we're not like Flint.”

“So it's hard to say to run the risk and take the gamble.  I just feel that people are satisfied, we feel good about it, now we're trying to collect taxes on the [PWSB] building,” said Jackson. “The only time [privatization] should come up would be if the city had to declare bankruptcy - but even the receiver would deal with it in that case."

Constituents, Progressives on Record

Money, water, and politics - what's in the city's best interest?

Following the release of the report, residents have been voicing their opinions as to the merits -- or lack thereof -- for such a concept. 

“The city, under the former and current administrations, has cannibalized our resources - much to the residents' detriment. Selling various streets to Brown University is an example of this sort of this short-sight mentality. And, a disaster for anyone not affiliated with the university who is working or shopping in the areas where parking in now prohibited. With that as an example of the wisdom applied to such decisions, I am four-square against selling Prov Water to an outside vendor,” said Providence writer and photographer Kathie Florsheim. “Water is one of our most precious resources, and as such the city of Providence needs to guard Prov Water like the gem that it is. The sort of privatization of these kinds of resources has, in other cities, been a disaster, in every sense, and in many, resulted in the cities taking back their water systems to run them properly, themselves. For once, let's be pro-active by not following the herd-mentality that would lead us toward selling one of our prize possessions.”

“At first look this seems like a very bad idea. The operating agency should answer to the customers/voters not shareholders.  Privatizing prisons and schools has let to cost cutting and poor results. Aren't there privatized toll roads in the midwest? Those should be examined to see how they are doing,” said Rich Rudert. “My biggest concern is what happens to the lump sum payment the city will get (won't it?) for the system (hundreds of millions?). Or will we rent it out to the operator? Will our mayor resist all the demands which will be made on that money? It should be spent on infrastructure so we might need to borrow less but it could easily end up in the general fund for operating costs. Unions will launch legal actions to have a lot of it used for back pay/pensions/health care/COLAs.”

“Tobacco bonds were issued in anticipation of future revenues in the form of taxes and penalties some time ago,” added Rudert. “How did that turn out?”

Political interests are eyeing the issue closely, including Rhode Island’s Progressive Democrats, who are keeping tabs on the potential for further discussion and debate. 

“This issue is resonating--especially with voters who care about environmental safety and the long-term fiscal health of our city.  I expect Jorge Elorza to back down and declare this off the table soon. There is no way Providence voters will allow something so terrible to go through, even if it is proposed right before the presidential primary to avoid news coverage,” said Sam Bell with the RI Progressive Dems. 

“The backlash if they actually went ahead with this would be tremendous.  Jorge and his advisors must know that they can't push through water privatization or any of the other awful NRN recommendations.  It is time for Elorza to declare the NRN recommendations off the table--especially water privatization,” said Bell. “By delaying this, all he does is take more political damage.  It doesn't change the ultimate result.”

 

Providence Finances - Benchmark Report - 2016

 

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