Atlanta Ends Failed Water Privatization Deal


| January 2003


Atlanta city officials last week pulled the plug on the country?s largest water privatization deal, claiming that the promised savings never materialized.

Mayor Shirley Franklin and United Water chief Michael Chesser on Friday agreed to the end the 20-year agreement after only four years. The company has agreed to pay the city $6 million to settle all legal claims and the city will pay the company $1 million, according to The Atlanta Journal-Constitution. ?After careful consideration, the city of Atlanta and United Water have agreed that the 20-year contract is not in the best interest of either party,? Mayor Franklin said.

The agreement comes on the heels of an audit that showed the city was saving only about half the amount?about $10 million a year?promised by United Water, as part of the $21.4 million-a-year contract to manage the city?s water system. But beyond the dubious cost-effectiveness of the deal, the city found evidence of poor service, fraudulent billing, and poor water quality.

Mayor Franklin assured city residents that the transition from a privately operated water system to a city-run operation would be seamless, but others were less sanguine. Councilman Howard Shook, vice-chair of the city?s utilities committee, said he was ?terrified? at the amount of work required to reconstruct a 346-employee water department before the city takes over the system in the coming months. ?There's an awfully lot that has to happen in a short time frame,? he said. ?Water is not just another city service. Can you expect a seamless transition of something this huge in such a short time frame??

The move was heralded by Public Citizen, a leading consumer activist group, as a repudiation of privatization and a warning to other communities. ?United Water and the rest of the private water industry touted the company?s contract in Atlanta as the wave of the future,? the group said in a statement. ?But the company?s debacle in Atlanta has instead become a powerful warning for communities across the nation of just how empty privateers? promises can be.?