Residents Fight Back Against Pittsburgh’s Privatized Water Authority

Sandy, who didn’t want to give her last name for fear of reprisal, is trembling with anger. For the last six months, the Pittsburgh resident hasn’t gotten a bill for water in the mail, and she’s fearful she’ll be hit all at once by an avalanche of charges. But the worst part is that the charges, should they ever arrive, may not even be accurate; the last time she got a bill it had tripled for no rational reason.

“I had to cut back on everything else,” says Sandy, a retiree who lives alone in an apartment. “You don’t know if it’s going to come in, whether it’s late or not, how much it will be. Then you get it and there’s a late charge.”

Sandy is in a room full of people, most of them older and on a fixed income, who echo her woes. After months of second guessing themselves in isolation, wondering if their showers had run too long or if they’d forgotten to turn off a faucet, neighbors in sleepy Millvale, Pennsylvania, near Pittsburgh, are finally talking to each other and realizing they share the same problem. Only it’s much bigger than most had realized: Over 42,000 people, based on an estimate from the Pittsburgh Water and Sewer Authority (PWSA), have received inaccurate and/or delayed water bills for months on end, about 14 percent of the population.

On June 24, dozens of Millvale residents have gathered in a community space to learn about a class-action lawsuit recently filed on their behalf against the PWSA, as well as the private water corporation Veolia Water North America, and the authority’s collection agency, Jordan Tax Service. The group behind the lawsuit, Campaign to Reform PWSA, hopes to end what they see as the PWSA’s coercive, slapdash attempts to shake down citizens for money. They also hope to alter the PWSA so that it is more transparent and responsive, because right now, they contend, the PWSA has become a smokescreen for France-based Veolia Environment, the largest private water company in the world. Its unbalanced partnership with the PWSA is supposed to represent the company’s new approach to managing cities’ water systems after a decade of failures with outright privatization, but if the anger in the room is any measure, residents in Pittsburgh may be souring on Veolia, too.

A few hours before the community meeting, a man named Chuck Pupich and one of his employees, Amanda Wade, sat in the conference room of their office, where stacks of water bills, meeting fliers and other documents covered the floor, table and stair steps. Pupich owns hundreds of homes in Millvale and across Pittsburgh through his company Residential Properties, but in recent weeks, he’s become a leading community advocate, his office transformed into a war room for Campaign to Reform PWSA.

Wade is Pupich’s trusted numbers cruncher, and she was the first person to notice the PWSA’s problem. Because Residential Properties handles billing for so many properties, Wade says, she has a bird’s eye view of any strange patterns that may emerge in billing.

“For months, no bills came in [from the PWSA],” Wade said. “Then we finally saw them come in [last] November, and tenants were very upset. They’re not sure how much they’re getting charged at one time.”

Wade also noticed that some of the bills seemed high, but didn’t yet suspect there was any problem with the billing system. Because so many of their tenants are on a fixed income, Wade says Residential Properties offered to pay the PWSA directly for struggling tenants’ delinquent bills and put them on a payment plan to pay back Residential Properties. The PWSA was authorized to automatically charge delinquent bills to Residential Properties – but it never did, and 40 people had their water shut off as a result of “nonpayment.”

“I called PWSA, [and] they said there’s an error with the bank,” she said. “Then no bills came again in January. Then they sent a letter saying, ‘Here’s a plan to catch up with the payments.'”

In addition to shutting off residents’ water even after payment was proffered, bills that did come in from the PWSA were sometimes outrageously expensive, occasionally 600 percent higher than normal, Wade claims. Residential Properties was soon inundated with calls from angry tenants who were inexplicably charged hundreds of dollars for water. Triple-digit bills even came in for empty homes where water had been shut off for decades.

By the time water bills stopped coming in to Residential Properties’ Millvale households between March and late June, Wade realized that homes affected by billing errors were the same homes the PWSA was installing new automatic rate readers that are supposed to instantaneously send accurate information on water usage back to the PWSA. The authority told Truthout the errors were temporary, and would be alleviated by the end of July.

“PWSA is currently in the final phase of the implementation of automated meter reading technology,” an authority spokesperson said. “During this process, some customers have raised concerns over recent bills and PWSA is working diligently with customers to resolve any outstanding issues. Because of current litigation, PWSA cannot address specific circumstances or customer complaints.”

Pupich says that the billing errors, though egregious, aren’t the most sinister thing about the PWSA’s billing mess. It’s that the authority and the company overseeing it know there is a problem, but still hound customers for payments and shut their water off anyway.

“The problem is the administration of the problem,” Pupich told Truthout. “You have a collection agency shutting us off. A collection agency has no power to shut your water off. But they do. [The PWSA] says, ‘This is how we do it.'”

He pulled out a 10-day PWSA disconnect notice to prove his point. In it, a homeowner is informed they must immediately pay their delinquent water balance to an entity called Jordan Tax Services, which bills for the authority, to avoid a shut off. The notice not only includes the balance, but also two “restoration of service” fees that together nearly exceed the original bill.

Pupich certainly doesn’t identify as an activist; in fact, he was a corporate executive at Siemens for 30 years before retiring to manage his properties full-time. With buildings in Millvale and across Pittsburgh, he’s just the guy everybody in town knows. But even he says the doggedness with which the PWSA has pursued customers for their inaccurate bills belies a mission informed not by compassion and service, but profit.

“Jordan Tax Service collects for the PWSA,” he says, “and Veolia is running PWSA.”

Unequal Partnership

How did a private company come to control a vital public service in this city? It began in 2012. Pittsburgh Water and Sewer Authority officials were staring down a hole of $780 million of debt, and they contracted French corporation Veolia to provide “interim management” of the utility for a year. The company was tasked with studying where and how the PWSA could improve its bottom line, and then implementing changes – otherwise known as its “Peer Performance Solution” business model.

“Every dollar that the PWSA-Veolia Water team saves through efficiencies or identifies in new revenue means another dollar to manage PWSA’s debt portfolio or make capital investment in aging infrastructure without tapping ratepayers for additional funds,” reads a company brochure about its services in Pittsburgh.

Though the company calls it a partnership, its relationship with PWSA is hardly one between equals, as the latter is not only saddled with nearly a billion dollars of debt, but also faces the seemingly impossible challenge of repairing its century-old water mains as they approach complete collapse. “A lot of us felt we were struggling and we needed some help,” Tom Palmosina, who jointly headed the PWSA before 2012, told the Pittsburgh Post-Gazette on the eve of Veolia’s entrance.

When the corporation came to the rescue later that year, the company flew in its West region executive vice president, James Good, all the way from California to be the new interim director of the PWSA. A steering committee composed of two Veolia representatives and three PWSA board members was convened to oversee the company’s progress toward benchmarks set by Veolia itself. For the company, it wasn’t a bad deal: In addition to the standard $150,000 Veolia received from the city each month, it also received an undisclosed amount in bonuses for each benchmark reached. In addition, the company got a 50 percent cut on all new savings and revenue generated by the PWSA for up to four years after the end of the contract. So in 2013, after the PWSA hauled in a welcome $1 million in new revenue, at least half went to Veolia.

Veolia’s influence is now bleeding into the PWSA’s top ranks. In May, James Good graduated from interim to permanent executive director of the PWSA, and will earn the second-highest salary of any government worker in the city. Veolia is now “assist[ing] in the recruitment and transition” of a permanent finance director and operations director – both of which are currently Veolia executives. Veolia spokesperson Paul Whitmore told Truthout that the authority “asked the company for help to fill vacant leadership positions within the PWSA.”

Although the initial contract was for one year, Veolia is still in Pittsburgh today, and will remain for the foreseeable future. In July 2013, the “partnership” was extended for 18 additional months; then last November, it was again extended for a year and “up to two six-month extensions.” In a press release about the latest extension, Veolia claimed the annual cost to the city for its services would be lowered by nearly 25 percent and that “generally,” savings earned after 2016 would go to the authority.

“The Board renewed its contract with Veolia in November 2014, extending our relationship through the end of 2015, in part because of the successes we’ve achieved together,” including $5 million in new revenue, Whitmore told Truthout.

The company’s “partnership” strategy in Pittsburgh represents a shift from the company’s failed previous experiments, most notably in Indianapolis, where the company tried to stick the city with a bill for millions of dollars in lost revenue. Food and Water Watch, a consumer advocacy group, explains:

In 2011, still struggling to grow and unable to convince big cities to privatize, Veolia switched to pursuing consulting deals through a business model that it branded “Peer Performance Solutions.” In these contracts, the company recommends ways for a city to cut costs or increase revenue. The model differs from a traditional consulting contract in that instead of just receiving a fixed fee for its work, Veolia also gets a share of the money generated from its recommendations.

Waiting to Get Clobbered

As a municipal authority, the PWSA is not regulated by the state. Its executives are only answerable to the authority’s governing board, which has members appointed by the mayor.

Nils Hagen-Frederiksen, the communications director of the Pennsylvania Public Utilities Commission, which regulates utility rates in Pennsylvania, explained to Truthout that if a municipally run water system only serves residents within the municipality, it’s treated as a city service, not a public utility – and therefore it is not regulated by state commissioners.

“[Municipal only systems] are governed by the municipality and city leaders and residents in those areas,” he said.

In other words, it’s supposed to be accountable to locals, but Pupich says a lack of accountability is precisely the problem with the PWSA.

“If you’re going to work for the public, then you should be accountable to the public,” he said. “Elected officials do their jobs, [and] you have the right to throw them out.”

Asked to respond, the PWSA refuted the claim that it was not accountable to the public.

“The PWSA is governed by a board of directors that is appointed by the Mayor of Pittsburgh and confirmed by the Pittsburgh City Council,” a PWSA spokesperson told Truthout.

Pittsburgh resident Crystal Bocka says the authority isn’t even attentive to the problems of water customers, let alone accountable.

“We got a shutoff notice for a bill we already paid months before; when I asked them how we were supposed to pay, they said ‘Just put the money aside,'” she said.

Often, residents say, they can’t even get through to the authority. When they finally reach somebody over the phone or via email, they claim, a representative might scapegoat computer problems for the billing errors but still insist they pay their bills and delinquent notices.

“I’m waiting to get clobbered,” said Ruth Zeckowski. “I’ve got eight months of bills I’m waiting for. Be reasonable. I can’t do eight months.”

Somebody Knows the Answer

At the community meeting in Millvale, Chuck Pupich hushes confused and angry residents so he can explain just what is going on with their water bills. Somebody whistles in awe as he explains what Veolia Water is and where it fits in to the PWSA debacle.

“Water is the only thing you don’t have rights on,” Pupich said. “Why do we let that happen?”

Later, attorney John Corcoran, who is handling the class-action lawsuit filed on residents’ behalf, delved into the details of the suit. Audience members smacked their lips, gasped and murmured at all the ways Corcoran confirmed they were being screwed: arbitrary shutoffs, astronomically high bills and a mountain of late bills built on erroneous information. One woman asked if there was any possible way to know whether her bills were accurate, because she still wanted to pay something to the PWSA in good faith.

“That’s the point: You have no idea how long, for when, how much or why,” Corcoran said. “They know, the guys who work there, somebody knows the answer.”

The next step, Corcoran said, will be to spread the message outside the center of resistance in Millvale and bring the thousands of other residents across the city into the fold.

In the meantime, the only respite residents have from unjustly high bills is to argue their case in front of the PWSA’s exoneration board. There is only one person on the board: Julie Quigley, utility billing manager of Jordan Tax Service.

“They’re just like any other collection agency,” Pupich said. “How are you going to shut my water off and then send a tax collector when I can’t pay?”