Mayor Withdraws Plans to Privatize Providence Water System
April 5, 2019
PROVIDENCE — Bowing to pressure from nearly every corner of the community, Mayor Jorge Elorza has dropped his support for legislation to monetize the city’s public water system.
During an April 4 press conference, Elorza explained his failed three-year mission to pay down the city’s ominous $1 billion pension deficit with Providence Water, the city-owned manager of the Scituate Reservoir.
“Pulling this off would have been massively complicated, politically, financially, logistically. From an environmental standpoint there were really significant concerns,” Elorza said.
Providence Water certainly has value as a water source for 60 percent of Rhode Islanders. Yet, the city receives little remuneration. Although it is a department of the city, the water system operates as an enterprise fund, meaning it is self-funded. Therefore, little of the revenue can be channeled to other municipal services and expenses.
The water network was recently appraised at $400 million and Elorza, as previous mayors have tried, sought to leverage the asset to pay down debt. But sustained opposition from the public, politicians, and environmentalists derailed his and previous efforts.
Most of the objection was based on fears of a for-profit entity running a public service that many consider a human right. Opponents drew comparisons to Flint, Mich., and envisioned higher fees, reduced water quality, and loss of public oversight.
During a recent series of public meetings, Elorza put forth a plan to lease the water system to a private water management company. In return for annual lease fees or a one-time, upfront payment, the pension debt would be reduced to a more manageable level, while freeing up money for city services, such as school repairs. Elorza’s plan promised to maintain pubic ownership, unions would remain in place, and rate changes would require approval from the state Public Utilities Commission.
But for many, a 30- or 50-year lease posed too many unforeseen risks. Environmental groups were unanimous in their opposition to selling any management of the water system. They noted a litany of failed agreements between municipalities and private water managers.
At the recent press conference, Meg Kerr, president of the Environment Council of Rhode Island, noted that climate change and sea-level rise threaten public water supplies.
Kerr applauded Elorza’s decision to scrap the legislation. “We all know that water is basically a necessary human right,” she said.
Elorza said monetizing the water system is no longer an option, but that a joint commission will be created with the City Council to explore the future of what is ultimately a state issue. Public workshops are planned to begin later in the year.
“There’s broad agreement that doing nothing is simply not an option. We can’t kick the can down the road … we have to take action,” Elorza said.
Elorza admitted that the bill had a difficult path ahead, especially after defeats the two previous years. The public campaign, however, informed and engaged the public and officials about the problems and potential solutions, he said.
When asked if bankruptcy would be a consideration because it may make it easier to restructure government services, Elorza said the experience would be very painful for the city. He referred to other cities, such as Detroit, which lost residents after declaring bankruptcy. Central Falls closed its recreation centers, cut library hours, and increased taxes.
“You have no idea the pain that will be inflicted if we do go into receivership or bankruptcy,” Elorza said. “Under every scenario bankruptcy should be avoided.”
The decision to pull the legislation, which never had a hearing in the General Assembly, was praised by City Council president Sabina Matos.
“We feel that selling of city water was not an option,” she said.
Matos said it will take time to find a creative solution to the pending pension crisis.
City Council member Helen Anthony said the pension problem must be addressed within the next four years or the “city will be headed for receivership.” She urged residents to get involved with finding solutions and not just protest.