WATER

The Top Five Reasons to Keep

California’s Water in Public Hands
Fact Sheet • April 2009
“All water within the State is the property of the people of the State…”
– California Water Code, Section 102

T he waters of California belong to the people of California. The resource must

remain public to keep it safe and affordable. When water and sewer systems fall
into private hands, costs grow and consumers end up paying too much for poor-
quality water. It can lead to sewage spills and service problems. Because of these
failures, taxpayer money should neither incentivize nor subsidize private ownership,
management or operation of water and sewer systems.
The research shows five main ways that private control of
Figure 1: Annual Water Bill of the Typical Household in
water is a bad deal for California. California Using 11,000 Gallons a Month
$600
1. High Water Rates. On average, California
households pay 20 percent more for water from private $500
utilities. That’s an extra $85 a year (see figure 1).1
$400
Felton (water). Public acquisition of Felton’s water
$300
system from California American Water in 2008 will
save the typical household $870 a year on their water $200
bills.2
$100
Chualar (water). After California American Water
took over the water system of this farm-worker 0
community in Monterey County, some monthly water
bills jumped from $21 to as much as $600.3
Richmond (sewer). In 2006 Richmond and
2. Expensive Financing of Water and West County agreed to spend $25 million on sewer
Sewer Projects. Private financing is far more improvements to settle a lawsuit alleging that it and
expensive than public financing (see figure 2). Veolia, the private operator, spilled 17 million gallons
of wastewater.6
From 2000 to 2007, even the best-rated corporate
bonds were 23 percent more expensive than typical Burlingame (sewer). In 2008 Burlingame agreed
municipal bonds issued in the state and more than to make multimillion-dollar improvements to its
three times as expensive as loans from California’s sewer system to settle a lawsuit alleging that it and
State Revolving Fund programs.4 Veolia spilled millions of gallons of wastewater.7

3. Clean Water Act Violations. Compared
to their public counterparts, private operators of major
wastewater treatment plants in California were 60
percent more likely to have significant alleged violations
of their wastewater permits (see figure 3).5
4. High Operating Costs. Public control is a
better deal for the ratepayer and the taxpayer.
Fairfield and Suisun (sewer). In 2008 the
Fairfield-Suisun Sewer District ended its wastewater

Figure 2: Interest Rates on Corporate Bonds
Nationwide, Municipal Bonds in California and
California State Revolving Fund Loans, 2000 to 2007
8%
7%
6.1%
6%
5.0%
5%
4%
3%
1.9%
2% 1.7%
1%
0 3 Melendez, Claudia. “Water rate increase on hold.” The Califor-
California Clean California Municipal Top-Rated
Water State Drinking Water Bonds in Corporate Bonds Nationwide
Revolving Fund State Revolving
Fund
California Nationwide
(Moody’s Aaa)
The higher the interest rate, the greater the financing cost. That’s why
private financing is more expensive.
Note: Municipal bond rate is the market interest rate based on Bond Buyer
Index for 20-year general obligation (GO) bonds rated Moody’s Aa issued
in California. Corporate bond rate is Moody’s yield on seasoned corporate
bonds — all industries, rated Aaa and Baa
contract with United Water. Consultants hired by
the district found that public operation will save 10
to 15 percent a year and that these savings will come
without the detrimental cuts that the company would
have made to employee retirement plans.8
Petaluma (sewer). In 2007 Petaluma ended its
wastewater contract with Veolia. In the first three
years, it expects public operation to save $1.6 million,
which is 18 percent of the total cost of operating its
recycling plant.9
5. Corruption. Privatization reduces public
accountability and breeds an environment ripe for
corruption.
Carson City (water). In 2005 a judge sentenced
R. Keith McDonald, the president of the West Basin
Water District, to 41 months in federal prison for
kickback and votes-for-cash schemes involving
contractors for the water district.10
East Palo Alto (water). In 2001 a judge sentenced
R.B. Jones, a former mayor and councilmember of
East Palo Alto, to 27 months in federal prison for
accepting a $5,000 bribe from California Water
Services and a kickback from another contractor.11
The Solution: Public Money for
Public Utilities
Local governments should keep their water and sewer
services in public hands and reject privatization. Instead
of allowing irresponsible private control of our water, we
need to plan ahead for future generations and create a
dedicated source of public funding so that communities
across the country can keep their water clean, safe,
affordable and publicly controlled.
A federal Clean Water Trust Fund for water and sewer
systems would realize this goal and take the burden
of rejuvenating our water infrastructure off state and
municipal coffers. To maximize the public benefit and
7.0% to protect taxpayers and ratepayers, this money should
be available to only public entities and public projects.
California needs a federal trust fund to ensure safe and
sound water and wastewater systems now and for future
generations.
Endnotes
1 Black & Veatch. “2006 California Water Rate Survey.” 2006.
2 Sideman, Roger. “Felton water bills set to drop next month, overall
savings still not determined.” The Valley Post. July 1, 2008.
Corporate Bonds
nian. December 17, 2004.
(Moody’s Baa)
4 U.S. Environmental Protection Agency. Office of Water. “Weight-
ed Average Interest Rate of Clean Water SRF Assistance, by
State.” October 26, 2007; U.S. Environmental Protection Agency.
Office of Water. “Interest Rates for Drinking Water SRF Assis-
tance, by State.” October 24, 2007; Federal Reserve Board. Data
Download Program. Available at www.federalreserve.gov, ac-
cessed November 20, 2008.
5 U.S. Environmental Protection Agency. Enforcement & Compli-
ance History Online (ECHO) – Water Data, Integrated Com-
pliance Information System. Available at www.epa-echo.gov,
accessed February 20, 2009; Sources for contract operations
compiled from corporate releases and may be incomplete, on file
with Food & Water Watch.
6 San Francisco Baykeeper. [Press release]. “City of Richmond
pledges to clean up its sewage system.” October 18, 2006.
7 Kay, Jane. “Burlingame, S.F. Baykeeper settle over sewage.” San
Francisco Chronicle. August 21, 2008; San Francisco Baykeeper v.
City of Burlingame, Veolia Water North America Operating Ser-
vice. Complaint for Declaratory and Injunctive Relief and Civil Pen-
alties. February 11, 2008 (Northern District of California 2008).
8 Fairfield-Suisun Sewer District. Board of Directors Meeting.
“Analysis of the Use of Contract Operations.” January 28, 2008 at
46, 56;
Figure 3: Portion of Major Sewerage Facilities in Cali-
fornia with Alleged Current Significant Violations Under
the Clean Water Act by Public and Private Operation
50%
42.9%
40%
30% 26.8%
20%
10%
0
Note: Significant violations include reporting violations and other effluent
violations. Source: Enforcement and Compliance History Online, U.S.
Environmental Protection Agency.
For more information:
web: www.foodandwaterwatch.org
email: info@fwwatch.org
phone: (202) 683-2500 (DC) • (415) 293-9900 (CA)
Copyright © April 2009 Food & Water Watch