You Can Beat the Privatizers


Milton Fisk     


Creating a national
climate in which privatizers are put on the defensive is not going to be easy.
But they have to be put on the defensive if a turn is to be taken toward
strengthening needed social services. The right climate is being created in
cities like Bloomington, Indiana.

In early
February, a request for proposals for wastewater management went out from the
City of Bloomington Utilities (CBU) department to three private firms and to the
wastewater workers themselves. In mid July, the proposals received from the
private firms were rejected in favor of that of the workers. Both the private
firms and the city officials backing privatization were surprised by the public
outcry. Once the threat of privatization came to light, a public mobilization
coalesced quickly. The Bloomington mayor, John Fernandez, and the director of
CBU, Mike Phillips, were faced with the fact that accepting a proposal from any
of the private firms would lose the city administration a lot of good will.

The mayor, who in
his last campaign for office had promised no privatization, denied that
privatizing wastewater management would be a privatization. The privatization
movement of the last 20 years has, though, shown that privatization is not just
about ownership. It can also be about management and other tasks such as
accounting. For the point of privatization is to make public resources privately
profitable. This can be done not just by owning public facilities, but also by
using public money. A private outfit can push its way in to take an ever-greater
share of public money through taking on more tasks. Avoiding ownership is
actually viewed as a plus by many private firms since selling skills for public
money avoids the headaches of ownership. For one thing, the expectation of
profit from a property investment is less sure than that of income from a
management contract.

What surprised
the companies and the new Democrats in the city administration was that the
League of Women Voters, the White River Central Labor Council (AFL-CIO), several
members of the City Council, United Students Against Sweatshops, IBEW Local 2249
at GE, the Sierra Club, South Central Indiana Jobs with Justice, and the Monroe
County Green Party all came out to debate the issue of public wastewater
treatment. The biweekly meeting of the Utilities Service Board became the arena
for citizen action, with local media reporting what happened. Wastewater workers
also participated, along with officials of AFSCME Council 62, the relevant
regional body with offices in Indianapolis, and AFSCME Local 2487, a city
workers’ local in Bloomington to which its 34 wastewater workers belong.
Heightened participation roused the Board from the slumbers that had left it
incapable of answering the fundamental question: Why even consider
privatization? The board, the director, and the mayor understood that any
attempt to push a contract through rapidly with one of the private management
companies would provoke an even wider mobilization. Instead, to allow time for
the wastewater workers to draft their own proposal and for a task force called
for by the public to deliberate, the date for starting work under whatever
proposal might be accepted kept being shoved into the future.

A key part of the
background for the Bloomington response was the massive 1992-1998 privatization
in nearby Indianapolis under Mayor Stephen Goldsmith. The Indianapolis city
workforce was cut by over 2,000. The savings in salaries and benefits were,
though, dwarfed by the costs of privatizing. Private consultants, contractors,
and managers were paid $290 million in order to save—in the name of reinventing
government—$149 million in salaries and benefits. In a forum in May on
privatization organized by Bloom- ington’s community radio station, Jack Miller,
current president of the Hoosier Environmental Council, exposed the Goldsmith
myth for Bloomington activists.

One of the
proposals for managing Bloomington’s wastewater came from United Water (UW),
which has managed Indianapolis’s wastewater since the mid-1990s. UW is fully
owned by the French multinational Suez Lyonnaise des Eaux, the world’s largest
manager of water and wastewater systems, with yearly revenues of $32 billion
flowing from 100 countries. Fears arose among workers at the Bloomington
facilities when they learned that wastewater employment in Indianapolis had
fallen from over 300 to around 100 after privatization. In an unscheduled visit
by several Bloomington workers to the Belmont facility in Indianapolis, they
found workers there demoralized by tight discipline, a rundown plant, and a
gainsharing plan netting them nothing.


The reason given
by the director of CBU for sending out a request for proposals to private
management firms was the landslide of grievances under a past manager at
Bloomington’s Dillman facility. The other facility, Blucher-Poole, had had no
such problem. Despite the grievances at Dillman, records at both facilities
proved they were doing a fine job of meeting EPA and Indiana Department of
Environmental Management (IDEM) standards for treated wastewater. So some reason
was needed for going private in 2001 other than grievances under a plant manager
sacked in 2000.

The CBU director
played the efficiency card. A manager supplied by a private firm would, he
thought, enable the city to tap into the firm’s rich fund of expertise. This
expertise could modernize the Bloomington facilities, providing a procedures
manual for operations and maintenance, a new program for a computerized
management system, and programs for both maintenance management and laboratory
information management. In some of the proposals, the companies promised that
they would also save the city money by better and cheaper chemicals for treating
wastewater. UW had saved Indianapolis money by switching from an ozone and
oxygen based treatment process to one based on chlorine. But the product
suffered. IDEM found that the chlorine process contributed to killing half a
million fish in two by-passes in 1994, a fact UW concealed in its proposal for
Bloomington.

The Bloomington
public took no time to respond to this appeal to efficiency. New software and a
new treatment process could, if needed, be developed under short- term contracts
with consultants. There would be no need to let a large management firm get its
nose under the public tent. Moreover, if a manager for the system couldn’t be
found inside, a search could be made outside for someone who would then become a
public employee. Ultimately, these were the ideas that won the day. Existing and
near-future needs did not call for a private management firm, except in the
minds of those for whom only private entrepreneurship can work.

At the board
meetings, the specter of the old spoils system was raised. A private company
would be free to fill the pockets of politicians both to obtain and to renew a
contract. This worry deepened as time went on. The Environmental Management
Corporation (EMC), with 50 contracts in the U.S. and affiliated with Anglian
Water in Britain, wanted to add Bloomington to the list of Indiana towns for
which it manages wastewater. Phone inquiries indicated that both city and union
officials in Terre Haute hoped to dump EMC when its contract expired. Yet the
same officials were full of praise when EMC asked them for statements that would
help EMC get the Bloomington contract. A letter signed by 35 wastewater workers
of Richmond, Indiana, and sent to their counterparts in Bloomington indicated
that under EMC management their plant had been cited by Indiana OSHA for health
and safety violations and that EMC’s treatment of them had led them to join
AFSCME. Nonetheless, the Richmond mayor praised EMC for its splendid job.

The drift toward
privatization started a year earlier in April 2000. A decision was made to hire
a manager from EMC for Dillman for May through July and one from UW for Dillman
for August through October. In September, a Dillman employees’ proposal was
accepted for an interim manager from their ranks for November through January.
Within this context of interim contracts, work started on a request for
proposals for long-term management. It dealt only with the management of
Dillman, whose workers decided they would leave the field to responses from
private firms. In December 2000, and January 2001, this changed in two ways.
First, the manager called for in the request for proposals would be over both
facilities, rather than Dillman alone. Second, the workers at Blucher Poole,
once it was included in the request, wanted there to be a proposal from workers
in both plants in response to the request. So, somewhat late and without the
resources of the private firms, drafting a workers’ proposal got underway.

The fundamental
part of their proposal called for a Labor/Management Committee (LMC) that would
cover day-to-day operating decisions and also determine benchmarks, best
practices, and cost-saving design. Internal union matters would be off-limits
for the LMC. According to their proposal, the eight members of the LMC would
include four appointed by the union, the superintendents of the two plants, the
new wastewater system manager, and a representative of CBU administration.

Nothing quite
like the Bloom- ington LMC emerged in Indianapolis. The Goldsmith revolution
involved two types of contract, one with outside vendors and another with
employees. Both are for delivering services to the city at a contracted price.
In the one case the vendor is a for-profit firm; in the other it is a group of
employees, or their union, acting as an independent entrepreneur. In
Bloomington, however, it will not be the employees but the LMC, or a
sub-committee of it, that will “take the lead” in acquiring specified
deliverables. Only a small portion of the Indianapolis budget was committed to
contracts with employees, letting large items like wastewater treatment go to
private management. Small as it was, it was enough to enable Goldsmith to get
AFSCME Council 62 to go along with his revolution.


This contributed
to a lingering doubt about where Council 62 and Local 2487 really stood in the
Bloomington struggle. After all, Council 62 had become a supporter of
Goldsmith’s reinventing government, though initially opposing it. That support
has abetted private firms elsewhere in their efforts to get contracts with
government and then weaken unions.

How strongly,
then, would AFSCME officials oppose privatization in Bloomington? There was
ambiguity in their instructions. They were saying that their members should work
against privatization, but at the same time be prepared to retreat to
privatization. Hardly an all-out call to victory. Having been unable to stop
Goldsmith in Indianapolis, AFSCME didn’t want to go all out in yet one more
failed anti-privatization drive. It showed little faith in the public
mobilization, and put little effort into working with it. Instead, it got caught
up in the game of speculating about which of the private firms would be best to
work with.

None of this did
anything to change the pro-privatization sentiment among those Dillman workers
who had been impressed by the UW interim manager in 2000. Without a determined
union effort, UW was emboldened, on March 1, to send Tim Erwin, president of
Local 2487, a letter, addressed to itself and for him to sign, endorsing UW for
the Bloomington job. The letter did not get signed, but the union did organize a
vote on whether to endorse UW if there were to be a private management. An
endorsement was narrowly defeated in the vote.

Despite this
ambiguity, AFSCME played a key role in defeating privatization through
publications and advisors. Evaluating Privatization: A Guide for Labor and
Community Activists written for AFSCME by Roland Zullo of the Industrial
Relations Research Institute in Madison, Wisconsin, was widely used in answering
arguments about the savings of privatization. Dennis Houllihan, a labor
economist with AFSCME, gave the employees in Bloom- ington encouragement in the
initial stages of thinking about their own proposal. AFSCME recommended Lee
Balliet, a former director of Labor Studies at Indiana University, to CBU as a
person to call upon to help draft the employees’ proposal. In contrast with the
self-serving verbiage of the private firms’ proposals, his idea of a
labor/management committee, which he had used in various other places, gave
substance to the notion of shared day-to-day decision making.

There was another
factor that loomed large in defeating privatization. It was the formation of an
advisory task force. After the public and the Board had listened to the
presentations from the competing firms, after the community radio forum, which
the private firms boycotted, had alerted more people, and after all the
arguments against privatization had been made in the Board meetings, it was
still not clear where the Board stood and, even more importantly since he would
make the final decision, where the director of CBU stood.

What was there to
do next? It was learned that Fort Wayne had defeated privatization in water and
wastewater in the late 1990s after an advisory task force had looked at the
issue. Since in Bloomington privatization was, as city councilman Andy Ruff put
it, a solution in search of a problem, a task force might well advise that the
problem couldn’t be found.

A local citizen,
Stacy Ream, proposed a task force to the Board, which approved its formation on
April 23. It soon became clear from the task force’s discussions that a majority
of its members could not find a sufficient reason to recommend an outside vendor
of management services. Instead of letting the task force end its deliberations
and make a public report, the Mayor and the Director wanted to move to an
immediate decision so that the utilities part of the city budget could be put in
place in time to propose the budget. In a press release on July 13, the city
announced the decision to hire a wastewater manager rather than a management
firm and to accept the workers proposal.

Dealing with a
public body made it less difficult to win this struggle. After all, where a
major decision affecting a public body is to be made, everyone can claim
standing in discussing it. Private firms can and do deny standing to outsiders.
The practical difference is simply that public officials ignore citizens at
their own risk and can thus often be held to a higher standard of
accountability. Mayor Goldsmith had made sure that private firms working with
public funds would, instead, be less accountable. Thanks to his lobbying,
Indiana law now exempts private firms contracting with municipalities from state
laws regulating public bodies.

Those firms can
cut private deals, avoid competitive bidding, and treat the public funds they
receive as private. Had the mobilization in Bloomington been one against the
abuses of a private management firm already hired by the city, all doors to that
firm’s decision-makers would have been closed to the public. The lesson for
those opposed to corporate domination is: Don’t wait for privatization to happen
to start fighting.                                   Z