WATER

The Top Five Reasons to Keep

Massachusetts’ Water in Public Hands
Fact Sheet • April 2009

The waters of Massachusetts must remain public to keep the resource safe and affordable. When drink-
ing water and sewer systems fall into private hands, costs multiply and consumers end up paying too much for water
that becomes a commodity for shareholders. It can lead to sewage spills and service problems. Because of these fail-
ures, taxpayer money should neither incentivize nor subsidize private ownership, management or operation of water
and sewer systems.

The research shows five main ways that private control of Figure 1: Annual Water Bill of the Typical Household in
water is a bad deal for Massachusetts. Massachusetts Using 7,500 Gallons a Month

1. High Water Rates. On average, households in Mas- 500 $481

sachusetts pay 35 percent more for water from private
utilities. That’s an extra $124 a year (see figure 1).1 400
$357
Gardner (water). After United Water demanded an 300

extra $270,000 a year to operate the city’s water sys-

tem, Gardner decided to increase water rates 35 per- 200
cent from 2006 to 2012.2 In 2006, the typical Garner
household already was paying $510 a year for water.3 100

Oxford (water). Aquarion Water Company plans to
increase Oxford’s water rates by 33 percent to finance
a treatment plant for another town. The typical
household will have to pay an extra $110 a year.4
2. Expensive Financing of Water and
Sewer Projects. Private financing is far more
expensive than public financing (see figure 2).
From 2006 to 2007, even the best-rated corporate
bonds were 15 percent more expensive than typical
municipal bonds issued in the state, and 250 percent
more expensive than loans from Massachusetts’ State
Revolving Fund program.5
500
0
Gloucester for sewer overflows at its wastewater
treatment plant, which is operated and maintained
by United Water. Later that year, the city entered into
a consent order with a $24,720 penalty because of
the system’s long history of noncompliance related to
failures and operation and maintenance problems.7
Cohasset (sewer). In 2008, after the fourth
wastewater overflow in two years, dozens of residents
met with the Cohasset sewer commission and Veolia,
the private operator, to demand that the wastewater
system stop spilling sewage in their backyards.8

3. Clean Water Act Penalties. In Massa- 4. High Operating Costs. Public control is a
chusetts, private operators of major sewage treatment better deal for the ratepayer and the taxpayer.
plants were nearly three times more likely than their
Lynn (sewer). Private management of a sewer
public counterparts to have received penalties in the last
system project cost Lynn nearly twice as much as
five years for violations under the Clean Water Act (see
comparable work under public control. The city paid
figure 3).6 Penalties can translate into higher rates for
an extra $22 million. The commonwealth’s inspector
consumers.
general said that although Lynn’s leaders paid more
than $3 million to privatization consultants, “this
Gloucester (sewer). In 2008 the Massachusetts
expensive investment in expertise has not protected
Department of Environmental Protection cited
ratepayers from a bad deal.”9
 Figure 2: Average Interest Rates for Massachusetts
Public Bonds and National Corporate Bonds, 2006 to
2007 (in Percent)
8 Water Information System Pivot Tables, Detailed Inventory.
7 October 2007. Available at www.epa.gov/ogwdw000/databases/
6.5%
6
5.6%
5 4.9%
4 Gazette, December 12, 2008.
3 4 Oleson, Ellie. “Manager wants to take over water company.”
2 1.8%
1.4%
1
0
Massachusetts Massachusetts Municipal Top-Rated Corporate Bonds
Drinking Water State Clean Water Bonds in Corporate Bonds Nationwide
Revolving Fund State Revolving Massachusetts Nationwide (Moody’s Baa)
Fund (Moody’s Aaa)
The higher the interest rate, the greater the financing cost. That’s why private
financing is more expensive. Note: Municipal bond rate is the market interest
rate based on Bond Buyer Index for 20-year general obligation (GO) bonds
rated Moody’s Aa issued in Massachusetts. Corporate bond rate is Moody’s
yield on seasoned corporate bonds — all industries, rated Aaa and Baa
Lee (water and sewer). In 2004 Lee rejected a
proposal from Veolia to privatize their water and
sewer systems after a town official found that the
public could operate the sewers for $900,000 less
than it would have cost the company.10
5. Corruption. Privatization reduces public
accountability and breeds an environment ripe for
corruption.
Rockland (sewer). In 2007 a U.S. District Court
found that Veolia’s subsidiary Professional Services
Group, Inc., “acted unfairly and deceptively” to win
its sewer contract in Rockland and required it to pay
the town more than $230,000 in damages because
of “willful misconduct.” A company employee had
colluded with a town official to tailor the contract to
ensure it would receive the deal.11 In 2004 the official
received 18 months in prison and the employee
received a five-year probation for stealing from the
town.12 The Inspector General’s Office later identified
a town water commissioner as a conduit for the
kickbacks, and found that he was also skimming
money off the top for himself.13
The Solution: Public Money for
Public Utilities
Local governments should keep their water and sewer
services in public hands and reject privatization. Instead
of allowing irresponsible private control of our water, we
need to plan ahead for future generations and create a
dedicated source of public funding so that communities
across the country can keep their water clean, safe, af-
fordable and publicly controlled.
A federal Clean Water Trust Fund for water and sewer
systems would realize this goal and take the burden of re-
juvenating our water infrastructure off state and munici-
pal coffers. To maximize the public benefit and to protect
taxpayers and ratepayers, this money should be available
to only public entities and public projects. Massachusetts
needs a federal trust fund to ensure safe and sound water
and wastewater systems now and for future generations.
End Notes
1 Tighe & Bond. “2006 Massachusetts Water Rate Survey.”
2006; U.S. Environmental Protection Agency. Safe Drinking
pivottables.html.
2 Williamson, Danielle. “Water rate increase in the works – DPW
chief cites drop in enterprise fund.” Worcester Telegram &
3 Tighe & Bond. 2006.
Worcester Telegram and Gazette, February 12, 2009.
5 Office of Water, U.S. Environmental Protection Agency.
“Weighted Average Interest Rate of Clean Water SRF
Assistance, by State.” October 26, 2007; Office of Water, U.S.
Environmental Protection Agency. “Interest Rates for Drinking
Water SRF Assistance, by State.” October 24, 2007; the Federal
Reserve Board. Data Download Program. Available at www.
federalreserve.gov, accessed November 20, 2008.
6 U.S. Environmental Protection Agency. Enforcement &
Compliance History Online (ECHO) – Water Data, Integrated
Compliance Information System. Available at www.epa-echo.
gov, accessed February 20, 2009; Contract operations on file
with Food & Water Watch.
7 Massachusetts Department of Environmental Protection,
Commonwealth of Massachusetts. “Enforcement actions - 2008.”
February 26, 2008 and May 29, 2008 at 42 and 61; Gaines,
Richard. “City’s water ‘not for sale.’” Gloucester Daily Times,
September 27, 2008.
8 White, Nancy. “Overflow meeting – plant upgrades needs (sic) to
be tested before new connections.” Cohasset Mariner, February
29, 2008.
9 Cerasoli, Robert A. Office of the Inspector General,
Commonwealth of Massachusetts. “Privatization of wastewater
facilities in Lynn, Massachusetts.” June 2001.
10 Saldo, Carrie. “Lee says no to Veolia.” Berkshire Eagle (MA),
September 24, 2004.
11 Saris, Patti B., United States District Court, District of
Massachusetts, Professional Services Group, Inc., plaintiff,
v. Town of Rockland, et al., defendants. Civil Action No.
04-11131-PBS, September 26, 2007 at 1.
12 Stockton, Paysha. “Manager pleads guilty in sewer case.” Boston
Globe, November 11, 2004.
13 Valencia, Milton J. “State says official joined in kickbacks.” The
Boston Globe, February 10, 2008.
Figure 3: Portion of Private and Publicly Operated Major
Sewerage Facilities in Massachusetts Fined for Viola-
tions Under the Clean Water Act in the Last Five Years
15% 14.3%
12%
9%
6% 5.3%
3%
0
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Copyright © April 2009 Food & Water Watch