Trump’s Infrastructure Plan Would Facilitate Water Privatization in Baltimore and Beyond
Mary Grant of Food and Water Watch says the package won’t yield water cost savings and will obstruct local efforts to make water more affordable
DHARNA NOOR: Welcome to The Real News Network. I’m Dharna Noor, joining you from Baltimore. On Tuesday, President Donald Trump will deliver his first State of the Union address. In it, he’s expected to address his long-anticipated infrastructure plan. Last week, Politico and Axios leaked a six-page draft of the 10-year plan, which showed that the majority of its funding will go to corporate subsidies and not to actual projects. In stark contrast to the 1 trillion dollar infrastructure plan he promised on the campaign trail, Trump has said in recent weeks that the federal share of the plan will be just 200 billion dollars. Instead, the plan largely relies on private and local government monies. What will this mean for US infrastructure and specifically for water across the nation?
Now joining us to talk about this plan is Mary Grant. She is the Public Water for All director at Food and Water Watch. Thanks for coming in today, Mary.
MARY GRANT: Thanks for having me.
DHARNA NOOR: We don’t know everything about this infrastructure plan, obviously. Many are really questioning where the funding is going to come from. We do know that this marks a significant decrease in how much federal money will be put into infrastructure. Could you talk about just your reaction to that and also your reaction to where it seems like the money will be coming from, from private corporations and from local governments?
MARY GRANT: Yeah. So far, what we know about Trump’s infrastructure plan, it’s mostly smoke and mirrors. He’s going to take away funding from other infrastructure projects, some other infrastructure funding pools to leverage to create this 200 billion dollar fund that he’s going to then levy out to mostly his corporate and his Wall Street cronies. He’s going to create different pools of money. The bulk of it is going to be 50% into this new infrastructure fund that he’s going to use that money to leverage with private financing and use state and local revenue, awarding these limited federal dollars to places that can already raise their own money as well as to places that privatize their infrastructure projects. And so, he’s going to award these federal dollars on the basis of your ability to raise your own money through privatization, through raising local water rates or other user fees. He’s not going to give it on the basis of needs. It’s not going to be on the basis of where the public health benefits will occur or where people are actually struggling with affordability.
DHARNA NOOR: Specifically, as you said in regards to water, this plan authorizes state funding for privately owned water treatment projects. It allows for private operations to be eligible for Inland Waterway federal funds. That’s new. What’s your reaction to all of this and what will the impact be on the ability of all Americans to have access to clean and healthy water?
MARY GRANT: Right now, nearly… people have water service from a government utility. So, this is a really big departure from what we have right now to incentivize privatization. It’s not going to benefit people. It’s not going to benefit working people. It’s not going to benefit communities of color that are struggling with affordability problems. Private companies, on average, charge 59% more than local governments do for water service. What privatization means for communities, it means rate hikes. It means that loss of local control over a service essential for public health and well-being.
The infrastructure plan has a lot of sneaky provisions in it that greatly facilitate the privatization of our water systems, opening up the Clean Water State Revolving Fund to privately owned entities. This is the main source of federal dollars for wastewater system projects. Baltimore, where we live, is under a consent decree right now. So, the State Revolving Fund program provides the federal dollars that help cities like Baltimore address these wastewater system problems to stop sewage from backing up in our homes.
I think the last figure I saw was that 97% of people have wastewater treatment service for a publicly owned entity. So, there’s 3% of people out there that have privatized wastewater systems. I know that some companies like American Water are really aggressive at buying wastewater systems in states like Pennsylvania. Opening up the Clean Water State Revolving Fund program could also mean a shift of money away from certain states, which could be bad for states where there’s no privately owned wastewater systems.
It also means when companies already have access to the Drinking Water State Revolving Fund program, and we’ve seen in other states like Pennsylvania and New Jersey where there are a lot of privately owned water systems, that even though they get these federal subsidies for drinking water projects, those federal dollars don’t go to benefit the communities that need it. Companies charge what are called uniform rates, so all communities across the state pay the same rate. You get a project that’s supposed to benefit that certain specific community that might be low-income with these federal subsidies but they’re not going to see that reflected in their rates because the costs are spread across all of their customers.
DHARNA NOOR: If it’s not communities who need it the most, if it’s not for instance low-income communities who will be benefiting from all of this, who will be benefiting? Who benefits from water privatization, for instance?
MARY GRANT: We know the largest companies, it’s American Water, Aqua America, which are US-based. We know it’s Suez and Veolia, which are two Parisian companies, two French companies, that are really active. These are the biggest water companies in the United States. They’re going to benefit. Their investors are going to benefit. Wall Street is going to benefit. Often when they come and they partner with Wall Street, private equity firms to take over water systems. That’s taking money out of communities to send to Wall Street, to send to investors around the world.
DHARNA NOOR: Last Thursday, as we talked about off-camera before, Trump’s infrastructure advisor D.J. Gribbin actually said that the infrastructure plan would include no new revenue for funding these 200 billion federal dollars for this infrastructure plan. Instead, they’ll be cutting transit programs like Amtrak and other ones. What’s your reaction to all of this? Where should that money be coming from instead?
MARY GRANT: We need to have a progressive revenue stream to fund our infrastructure, water systems, sewer systems, as well as transportation. We need to tax the wealthy and make corporations pay their fair share. There is good models out there. The WATER Act is in Congress, the Water Affordability, Transparency, Equity and Reliability Act, which would tax offshore profits. So, making companies that operate overseas pay their fair share to fund our infrastructure, and make sure that we are having safe and affordable water for everyone.
DHARNA NOOR: As you’re pointing to, so much of the concern about this infrastructure plan is the expansion of public-private partnerships, but some say that privatization actually improves efficiency. Many people say that if we want infrastructure like water to be more efficient, for billing to be more efficient, that we should move to privatization. What’s your response to this argument?
MARY GRANT: It’s actually interesting. For water systems, that’s not what the empirical evidence actually shows. Mildred Warner is a professor from Cornell, and she’s looked at every single econometric study looking at privatization on water services. She found that there’s no difference in efficiency. When there are decreases in costs, it’s usually done on the backs of the workforce. Taking away jobs from city residents in order to send profits out of the community is not in the public interest. It’s not good for communities. It’s not good for the workforce. When we’ve seen companies tout cost savings in deals, it usually is done by cutting back the workforce. On average, privatization through these public-private partnership deals leads to a loss of one in three water system jobs. After you lose these jobs, customer service deteriorates. You get maintenance backlogs. That means brown water, water outages. Often when they refer to efficiency, it’s cutting corners and cutting back water system jobs. It’s not actually making systems work better or more effective.
DHARNA NOOR: This is something that we’re particularly concerned about here in Baltimore because there was a bid last month by the company Suez to buy out all of Baltimore’s water, which would mean that Baltimore had a private water system. Is there anything in Trump’s infrastructure plan that would affect that possibility?
MARY GRANT: Yeah. Suez is actually seeking a lease concession deal for Baltimore’s system. This is where the city actually retains ownership and responsibility ultimately of the water system, and Suez and KKR would come in and finance all the improvements. One of the things these companies have been pushing for for a long time, for years, is to change the defeasance rules when they take over systems through leases, in particular. What Trump’s leaked infrastructure agenda includes is a change to those defeasance rules, allowing a company that leases infrastructure assets to keep low-cost public debt without having to defease it. There’s a lot of really sneaky provisions within his leaked plan that would greatly facilitate water privatization, not only in Baltimore but across the country.
DHARNA NOOR: As your organization has been working on, city council president Jack Young here in Baltimore has promised to introduce income-based water billing for the city. Would this privatization in any way affect that push or that possibility here in the city?
MARY GRANT: Yeah. Suez’s privatization agenda would undermine our efforts to improve Baltimore’s water system and to increase water affordability in the system. Not only would it lead to dramatic rate increases, privatization itself would also hinder the ability of the local government to pass laws that would make water service affordable for everyone. It would tie the hands. The contract provisions would tie the hands of the local government, making it really difficult for the city to pass ordinances to set up affordability plans and also to set up a water ombuds office to address billing concerns.
DHARNA NOOR: The plan, the infrastructure proposal that was leaked, does also rely heavily on local money. Would the city of Baltimore be affected by that sort of push, the push towards local government money into funding such infrastructure?
MARY GRANT: Nationally, 90% of our water infrastructure is already funded by local governments. Most of Baltimore’s water system projects are already funded by the local government, by using revenue bonds. That’s why our water rates are going up so much. There isn’t that federal funding already. That’s been cut back by 74% since the late 1970s, funding for our water systems. The infrastructure plan won’t make it easier for local governments to raise money. In fact, Trump’s tax plan that already got passed is going to make it so much more difficult for Baltimore and other communities across the country to raise money on the municipal bond market. It’s going to make municipal bonds more expensive.
There’s certain provisions in the tax plan that will make it more expensive to raise revenue on the municipal bond market, making municipal bonds more expensive, because it lowers the corporate income tax rate, making corporate bonds more competitive, and so municipal bonds, cities like Baltimore will have to charge a higher interest rate in order to attract municipal bond buyers. It also limits the abilities of cities and states to raise revenue because of the change to the local and state taxes deductions. We won’t see the state of Maryland raising property taxes or income taxes in order to fund water projects. We won’t get those additional subsidies to help out. Again, we’re going to see more user fees, more rate hikes, as well as deterioration of infrastructure assets because governments can’t raise revenue to fund infrastructure projects.
DHARNA NOOR: This is in a city where we’re already seeing so many rate hikes. I know that your organization recently commissioned a study that showed that by next year half of all Baltimoreans won’t be able to afford their water.
MARY GRANT: Yes. Trump’s infrastructure plan, Trump’s tax agenda. All of this is going to mean more rate hikes for consumers. What we really need to have is a just and equitable infrastructure plan, one that invests in communities that need federal dollars, one that’s backed by a progressive revenue stream, making people who can pay pay their fair share and one that dedicates this funding to local systems with the greatest needs, with affordability challenges, public health challenges. Trump’s infrastructure plan is not going to help fund, it’s not going to help Baltimore. It’s not going to help rural areas like Martin County, Kentucky, where communities are experiencing water crises.
DHARNA NOOR: All right. Thank you so much for joining us today, Mary. Thanks to Amy… for research help today. And thank you for joining us on The Real News Network.