Stockton: Don’t Water Down Efficiency, Productivity

Contract enhances environmental control, authority

In one fell swoop, Superior Court Judge Bob McNatt has hijacked California’s Environmental Quality Act).

The act was intended for environmental protection. In San Joaquin County, it now has become a tool to put politics ahead of sound economics and public-policy decisions.

The issue is whether Stockton officials had considered environmental concerns properly when they decided to outsource water and wastewater services to OMI-Thames Water.

In ruling city officials had failed to scrutinize potential environmental effects properly, McNatt determined the mere existence of profit motive was enough to invalidate the contract – despite 30 years of water and wastewater contracting experience in California where such a challenge or premonition never has held up.

What’s worse is the basic misunderstanding of the power of contracts. Under the agreement, OMI-Thames actually is held to higher, stricter environmental standards than the city held itself to.

The plaintiff, the Sierra Club, is walking a tightrope. It knows the Regional Water Quality Control Board requires the city to upgrade wastewater facilities to protect the San Joaquin River.

It also knows the greatest innovation and cost savings for such facilities will come through the application of design/build delivery methods for capital improvements that can be included in the operations contract.

It also knows the city is preparing environmental impact reports and other CEQA-required documents for each capital improvement before it approves or authorizes them.

The Sierra Club knows its friends in public-employee unions want to stop this outsourcing. It’s prepared to delay these environmental improvements to satisfy them.

McNatt’s reliance on the profit motive for his decision has a flawed understanding of that, too. A profit motive exists. However, that motive helps ensure the work of OMI-Thames meets environmental standards or face severe penalties that would remove much of that profit.

If OMI-Thames constantly put profits ahead of environmental quality, it would be fired. The city has total authority to walk away from the contract at any minute.

Despite these environmental realities, the contract enhances environmental control and authority.

If the contract were to be terminated, Stockton residents would face a double-digit percentage rate increase. It’s common for cities to save upwards of 20 percent of their operating budgets when they outsource water and wastewater services. These savings will directly benefit taxpayers and water customers.

Let’s hope when McNatt reconsiders his opinion, he will re-read CEQA and conclude this unjustified extension of the act – from true environmental considerations to matters of municipal economic and social policy – is unwarranted and insupportable.

His suggestion that, in addition to EIRs for projects that actually impact the environment, a municipal operations contract requires CEQA action if “a profit motive” alone is involved, has no foundation in CEQA.

It’s an amazing and improbable extension of the act.

If this holds through the appeals process, it would have a profound effect on the ability of California cities to improve efficiency and productivity in municipal operations.

Geoffrey Segal is director of privatization and government reform at Reason Foundation