FBI Eyes Miami Water Utility

A Florida city’s proposal to outsource water utility management to a private firm appears to have launched an FBI investigation.

“Federal and state authorities probed North Miami Beach's pending deal to potentially privatize its water system,” the Miami New Times reported, citing North Miami Beach City Attorney Jose Smith.

“They found no wrongdoing,” Smith said, per the report.

The Miami New Times says the investigation may not be through.

“A separate source with knowledge of the probe tells New Times the FBI is still investigating and has been in contact with potential witnesses within the past week,” said the report, published March 30.

The privatization proposal from the city of North Miami Beach has sparked furious opposition from union officials and other detractors. Under the plan, the city would maintain ownership of its water utility, but a private firm would manage operations, reports said.

“Blasting the effort as a money grab, the city’s AFSCME chapter has teamed up with the local Democratic Party and a deep-pocketed political action committee to rail against the city’s plan. The acrimony has grown so intense that the FBI began asking questions,” the Miami Herald reported.

City commissioners voted this month to move ahead on the water utility proposal, according to the Miami New Times.

“The vote authorizes the city to begin negotiating a contract with CH2M, which is angling to take over the full operation of the city's water plant. The plant services nearly 200,000 people in North Miami-Dade, in towns including Miami Gardens, Aventura, and Sunny Isles Beach. The water plant serves the second-largest number of people in all of Miami-Dade County,” the report said.

After negotiations are finished, the contract terms will go up for an additional vote, the report said.

The conflict in North Miami Beach highlights a major debate in the water industry right now: What is the ideal role for private firms in delivering tap water?

In North Miami Beach, opponents of the deal say privatizing water utility operations will raise rates.

“Myriad studies show that privatizing water utilities makes them more expensive and less efficient. The very idea that private systems are inherently cheaper for consumers than public ones is silly: A private company is mandated by investors to make profit off the utility, and there's only so much an outside firm can cut before rates begin to rise,” according to an analysis in the Miami New Times.

But others say private firms should have a role in tap water, arguing that public-private partnerships benefit customers.

“Proponents of the public-private partnerships, citing recent studies in Canada and Europe, argue that private businesses operate more efficiently than governments do and that this translates into cost savings for citizens,” according to a New York Times analysis. “Supporters also say that the deals require private equity to spend millions of dollars a year to fix things (money that towns may not spend on their own), and that the firms sometimes pay towns millions more up front.”

To read more about how utilities finance their operations visit Water Online’s Funding Solutions Center.