The Novato Sanitary District board recently voted 4-0 to approve a contract with private water company Veolia Water to turn over the operations of its new $90 million wastewater treatment plant. While privatization is often sought primarily to achieve cost savings, the Novato Sanitary deal illustrates other benefits of privatization. The arrangement will offer the district access to management expertise that might not be available in-house, and will transfer the risk of regulatory compliance from the district to the company.
According to a Marin Independent Journal article about the deal,
District general manager Beverly James hailed the contract as making Veolia responsible for regulatory compliance and fines incurred for non-compliance, as well as liability protection, guaranteed operating costs and long-term stability. "We feel that we have negotiated a fair contract that protects the district's interests," James said.
The compliance and liability issues have been a big concern for the district, as the U.S. Environmental Protection Agency is currently conducting a criminal investigation of apparent environmental violations that occurred in the district in 2006 and 2007. The district could potentially face fines if the EPA finds that violations did, in fact, occur. Under the terms of the Veolia contract, the company would not be responsible for any fines related to violations prior to the deal taking effect.
"This business has gotten too complicated to continue running it with our hometown staff," said board member Bill Long. "This is a new era where you can get a million-dollar fine, and the people of Novato do not want to be exposed to those kinds of fines."
» Reason Policy Brief: Frequently Asked Questions About Water / Wastewater Privatization