Expansion Scheme Torpedoed in California

The UWUA’s campaign challenging corporate greed at American Water scored a big victory this summer when the city council in Rialto, California rejected a proposed 30-year lease of the city’s water system to the notoriously anti-worker company. The UWUA mobilized community opposition to the deal, which would have increased water rates in the southern California city by more than 84% in only two years. Hundreds of Rialto citizens packed a city council meeting to speak out against the scheme, which failed on a 2-2 vote by the council.

“This is a huge victory for Rialto ratepayers,” declared UWUA President Mike Langford after the vote. “We believe turning over Rialto’s water system to American Water would have been a bad deal for working families.”

Corporate Model Shot Down
The proposal would have required the city to pay American Water more than $23 million in annual service fees and capital charges. The corporate service fees would have increased every year under a mandated formula.

As an incentive for council members to vote in favor of the scheme, American Water offered a $30 million “up-front” payment to the city’s general fund. In the weeks leading up to the vote, however, the UWUA alerted voters to the fact that ratepayers would end up paying every dollar of that and more in higher rates.

American Water CEO Jeffry Sterba personally appeared at the city council meeting to lobby for the agreement. In an interview published by an industry journal last spring, Sterba described the Rialto proposal as his “model” for future municipal contracts.

Not surprisingly, the new “model” touted by American Water involves squeezing more profits from ratepayers, in part through automatic price escalation clauses locked in for decades under long-term agreements.

American Water invested months trying to nail down the Rialto contract, which was valued at more than $700 million over the 30-year term. With the rejection by Rialto City Council, the viability of the company’s new “model” for municipal contracts appears doubtful. Even so, in August Sterba announced during an investors’ conference call that the company was trying to salvage the deal in discussions with the City. The UWUA immediately alerted Rialto residents to the company’s plans, and is working with community activists once again to block any attempt to resurrect the flawed scheme.

More details are available at the UWUA’s website at www.StopRialtoWaterRateHikes.com.

UWUA members have been engaged in a contentious labor dispute with American Water for months, as management seeks to eliminate job security for workers in local negotiations and to slash healthcare benefits nation-wide under the National Benefits Agreement. In June 2010, the UWUA joined with community allies to successfully block American Water’s attempt to take over the suburban water system in Trenton, New Jersey. The UWUA’s actions in Rialto and Trenton are part of a larger commitment to partner with community groups to oppose American Water conduct that is harmful to consumers and workers.

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