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Great Lakes Article:

City not alone in water fight
Illinois, Kentucky councils trying to buy back public rights
Jim Balow
Gazette Online
12/27/2002

Charleston Mayor Jay Goldman might have spoiled the holiday season for Chris Jarrett, president of West Virginia-American Water Co., when he announced plans to explore a possible city buyout of the company’s local water plant this week.

But in national terms, Goldman was not breaking any new ground with his proposal. Folks in Peoria, Ill., have been exploring the same idea for more than a decade and lately have won some court victories. Buyback negotiations are expected to start soon.

Ten miles away, people in Pekin, Ill., are trying to buy their water system through eminent domain.

In Lexington, Ky., the mayor and several City Council members who favor the purchase of their city’s water system won election last month, according to a lawyer for the citizens group Bluegrass For Local Ownership of Water (FLOW).

"This is a movement now, like Arlo Guthrie used to say," said Lexington lawyer Foster Ockerman Jr., referring to Guthrie’s song "Alice’s Restaurant."

Indeed. In the face of a worldwide movement to privatize water systems, there is another, perhaps less publicized effort to put private water systems back into public ownership and to keep public water systems out of private hands.

For example, the New Orleans Water and Sewerage Board in October rejected the country’s largest municipal water-privatization proposal. A coalition of churches, senior-citizen groups and environmentalists opposed the sale sought by subsidiaries of French companies Suez and Vivendi Universal.

The Charleston, Lexington, Peoria and Pekin cases differ in their details, but they share a common target: American Water Works. In each case, American Water Works subsidiaries own the local water systems. In Illinois, the cities of Peoria and Pekin are battling Illinois-American Water Co.; in Kentucky, Lexington is squaring off against Kentucky-American Water Co.; in the Mountain State, the corporate owner is West Virginia-American Water Co.

Jarrett already has indicated that a court fight might be brewing in Charleston. In other states, American Water Works affiliates have aggressively fought takeover attempts.

The company reportedly spent $6 million in 1998 alone fighting takeover attempts in Peoria and in Chattanooga, Tenn., according to an October 2001 report by Alex Tsybine of Public Citizen, the Washington nonprofit research group founded by Ralph Nader.

Terry Kohlbuss, executive director of the Tri-County Regional Planning Commission in Illinois, said the Peoria battle began around 1990, when a new city manager wondered why the city’s water system was in private hands.

Kohlbuss, then a private consultant, was part of a group that found a repurchase-option clause in the city’s 1889 franchise agreement with the water company. Despite an advisory public referendum called for by Illinois-American Water in 1994 that was overwhelmingly against a buyout, sentiment for the effort grew during the late 1990s, he said.

By 1998, the city served notice on the water company that it was invoking the repurchase option. The water company immediately filed suit, Kohlbuss said, but lost in circuit court and on appeal to appellate court. The state Supreme Court decided a few weeks ago not to hear an appeal of the lower court ruling, which allows the city to proceed with the buyout.

"We are now in the process of scheduling a first meeting to see if we can negotiate a purchase price," he said.

In Lexington, the citizens group Bluegrass FLOW was organized in early 2002 in reaction to the proposed sale of Kentucky-American Water and its parent, American Water Works, to the German firm RWE.

Lexington officials might have to go through condemnation proceedings to buy their water system, said Ockerman, the lawyer for Bluegrass FLOW.

"The city has hired a condemnation counsel," he said.

A city-financed consultant’s study of the proposed buyout is due in late February or early March, he said.

"We’re going into the new council in January with strong sentiment in favor of purchase," Ockerman said. "I feel strongly that Lexington will make an offer in the spring."

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