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One Company Quietly Running Coast Utilities and Public Works
Filed 8/21/03

The next time you turn on your water, think about where it is coming from and who is managing it. Why? Because you may think that it is your city, but it isn’t if you live on the Mississippi Coast.

Quietly over the years, with very little public input, city and county officials from Long Beach to Pascagoula have been turning over the management and operations of your city’s utilities to private operators. Actually, they have turned your tax-built utility system over to just one out-of-state company that is out to make a buck on your tax dollars.

In Gulfport, the city turned over management of its water utility, billing system, as well as maintenance of streets and drainage, to an Atlanta, GA company called OpTech Inc. So too has Long Beach. OpTech was also recently awarded a contract by the City of Pascagoula. OpTech also runs the sewage plants for the Harrison County Wastewater District and the Harrison County Wastewater and Solid Waste District.

In Biloxi, the city’s water system and billing are handled by a company called ECO Resources, Inc., which also runs D’Iberville’s water system. ECO Resources is based in Houston, TX.

But the reality is that both of these companies, OpTech, and ECO Resources, are owned by California-based Southwest Water Company Inc., a for-profit utility whose stock is traded on NASDAQ. The West Covina, CA company owns all of ECO Resources, and purchased 90 percent of OpTech in 2001.

Did you know this? Many of the city officials don’t even know that these two companies are actually owned by Southwest, even though they have signed-off on the deals to allow OpTech and ECO Resources to takeover these traditionally city activities.

The argument supporting such privatization of traditional public services is that the private sector can operate more efficiently than the public sector. But should taxpayer paid city services, which are actually owned by the public, be allowed to form the basis for a private company’s profit? And who really oversees these private operations? Also, why just one company?

What seems to be missing from our elected officials is why they can’t seem to manage these services within budgets without having to contract the service out. Other cities do. In fact the only contracts OpTech and ECO Resources have in Mississippi are on the Coast. And why should our tax dollars be spent on an out-of-state company?

Using a private contractor to run a city’s utilities adds a level of separation between the politicians and citizens that should not exist when it is the public’s taxes that are being used. But what is interesting about these contracts, is that the city still owns the utility, but no longer manages it. The contracts are open-ended too. If something happens to the system that is not in the contract, the city pays it. I suppose every business would like to have such a contract. It also makes audits of how our tax dollars are being spent fuzzy. State auditors cannot audit private companies doing business with a city.

These service contracts also mean that the management companies obtain their materials from the cities they operate within. If they need chlorine, or a pipe, they use the city’s purchasing power. But how closely is this process actually monitored? The management company has both the keys the warehouse, and makes-out the purchasing requests to the cities.

While running a water system is under state regulations,  according to the state health department, the individual operator of water systems submit test samples to the health department for evaluation. The companies and cities collect the water samples to be submitted for testing and not the health department. There doesn’t seem to be a good enough check and balance system in place to cover the operations of for-profit utility service companies that have a good reason to show good performance and not rock the boat. There are no state regulations for companies that only manage water utilities.

Now these city and county contracts are not for peanuts. They are multi-million dollar service contracts, and according to Southwest’s documents, the contracts, along with some from other cities, represent nearly 60-percent of the company’s income. How big are these contracts? Gulfport, for example, signed a four-year $21-million contract with OpTech in 2001.

Perhaps all of this good and wonderful for the cities. But how do we know?

That question has begun to vex the Biloxi City Council, which was ready to end their ECO Resources contract with the city earlier this year, even though ECO had managed the city’s water utility since 1989. Some council members were concerned that ECO was sharing manpower with those being paid for in its other contract cities to get work done. One Biloxi councilman wanted to know who was working for whom and felt if ECO was using Biloxi paid-for ECO workers in D’Iberville the city should get a credit. The councilman said he was having trouble tracking the performance of the workers the city was paying for in the ECO contract.

While Biloxi’s Mayor A.J. Holloway sought to keep the ECO contract in place, the council later voted to reduce ECO’s responsibilities and extend the contract only until next spring. It appears that Biloxi, at least, is beginning to see things differently.

What is needed, regardless of what Biloxi does, is for the other coast cities to make sure that their utility management contractor actually does the work they are paying for, with the workers that the city is paying from each city’s tax dollars. If ECO and OpTech share workers between their workforce in the cities as a way to increase their profits for their parent company, then our tax dollars shouldn’t be paying for it.

The other question that comes up is just who is bidding on these contracts? And what choices do the councilmen have? OpTech and ECO Resources are not actually competitors since OpTech was purchased in 2001 by Southwest Water Company.

But, perhaps the most significant issue in using a private contractor for public works is not saving money, but political. By eliminating public works employees from the city payrolls, it also eliminates a source of voting power from disgruntled city workers, whose families might not like what is going in their city. Or from workers who have a claim-stake in keeping someone that can affect their jobs in office. As one councilman said, it is more a convenience.

Political convenience or not, it still our tax money that is being spent, and city officials are obligated to spend it where it gets the most return for the money.