Private water firms might tap bond funds - California Governor planning controversial shift

By Will Shuck
The Record Capitol Bureau Chief

March 10, 2004

SACRAMENTO -- The Schwarzenegger administration is preparing this week to adopt a controversial policy that could give private water companies access to billions of dollars in state bond money. The policy could be final as early as Monday.

Critics say the move would be a dramatic shift in the way California spends its borrowed billions. They say taxpayers shouldn't be giving money to international water conglomerates, like the one struggling to hold on to a lucrative water deal in Stockton.

"It's kind of our worst fear, that Schwarzenegger would kowtow to the big corporate interests," said Juliette Beck, a senior organizer for the watchdog group Public Citizen.

Supporters of the move, including state Sen. Michael Machado, D-Linden, say that unless the state helps private water companies upgrade local systems, millions of Californians could get slapped with higher water bills.

"You have many areas where (the companies) wouldn't make the investment," Machado said. "Or if they did, they would be able to raise the rates and make a profit off that."

Machado has been instrumental in making the change. Last year, he wrote a bill to give private companies access to some of the $3.4 billion in water bond money that voters approved in 2002. But he dropped that measure amid criticism about a $20,000 campaign donation he received from one of the companies that would have benefited from the law.

More recently, Machado delivered to three state agencies a legal opinion he obtained from the Legislature's attorneys, saying nothing in state law prevents private firms from receiving public bond money.

Machado argued that the state already has rules to prevent the companies from making a profit off the bond money. ::: Advertisement :::

"The public interest is protected here," he said.

One agency charged with doling out the Proposition 50 money, the Department of Health Services, agreed with Machado and has drafted rules that give private companies a shot at the cash. Health Services intends to give a final draft of the new rule to the Legislature on Monday, a department spokeswoman said.

Other departments in Gov. Arnold Schwarzenegger's administration have yet to make their decisions.

Lucinda Chipponeri, deputy director for legislation at the Department of Water Resources, said her department hasn't yet decided whether to make its portion of the bond money available to for-profit companies.

"The question of whether or not private companies and investor-owned utilities are eligible is something we're researching today," Chipponeri said. "The two things we're looking at is, No. 1, is it legal? And No. 2, is it good public policy?"

Department lawyers are looking at the legal opinion offered by Machado and will draft their own, probably by summer, she said.

Chipponeri said it would be "very helpful" if the Legislature would clarify the matter with a bill. "In the meantime, we're doing our own research."

Beck, of Public Citizen, called the move a "dangerous precedent" and an "alarming advancement" of moves by private water companies to "gain access to public money."

"It's disconcerting that these agencies haven't had a robust public debate," she said.

"The voters that passed Proposition 50 did not vote to send public funds to shareholders in private companies."

Margaret Catzen, a lobbyist for the California Water Association, which represents investor-owned water utilities, said regular Californians benefit more than private companies.

"We're not making any money off of it," she said. "We're benefiting our ratepayers without our ratepayers having to pay for improvements through higher rates."

Catzen said it would be unfair if the 6 million people who get their water from private companies had to pay taxes to pay off the bonds but could not benefit from them.

"All of our ratepayers are taxpayers as well," she said.

About Public Citizen's President, Joan Claybrook

Public Citizen President Joan Claybrook has worked on improving highway and auto safety for the past thirty-five years. In 1966, she teamed up with Public Citizen founder Ralph Nader to successfully lobby for passage of the nation's first auto safety laws - the National Traffic and Motor Vehicle Safety Act and the Highway Safety Act. These acts empowered the government to establish safety standards for new vehicles and issue recalls for defective vehicles and parts. Despite industry resistance, the nation's highways are far safer today than they were then. For example, in 1966, there were 5.5 fatalities per 100 million miles traveled by the American public. By 1999, that ratio had dropped to 1.5 deaths per 100 million miles.

Joan Claybrook has served as President of Public Citizen since 1982. Prior to becoming President, she headed the National Highway Traffic Safety Administration (NHTSA) from 1977 to 1981. Among her other accomplishments in this capacity, she issued the first standards requiring air bags in all passenger vehicles and the first fuel economy laws requiring Detroit to produce fewer gas guzzlers.

Prior to her time with NHTSA, Joan founded and ran Public Citizen's Congress Watch, worked for the Public Interest Research Group (PIRG), the National Traffic Safety Bureau, the Social Security Administration, and the Department of Health, Education, and Welfare.

She graduated with a J.D. from Georgetown University Law Center in 1973 and currently serves on its Board of Visitors. She also holds positions on the boards of Consumers Union, Citizens for Tax Justice, Trial lawyers for Public Justice, Advocates for Highway and Auto Safety, the Goucher College Board of Trustees, and the California Wellness Foundation Advisory Board.

Her work on behalf of civic interests has been recognized through the following awards and honorary degrees:

Honorary Doctor of Law, Goucher College
Honorary Doctor of Public Service, University of Maryland
Philip Hart Distinguished Consumer Service Award, Consumer Federation of America
Excellence in Public Service Award, Georgetown Law Center
Honorary Doctor of Law, Georgetown University




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