By Sarah Fenske
By Danny Wicentowski
By Lindsay Toler
By Danny Wicentowski
By Danny Wicentowski
By Jessica Lussenhop
By Lindsay Toler
By Lindsay Toler
On June 7, 2010, a cadre of St. Louis officials arrived at city hall to try to pull the city's water department back from the brink of disaster. The group included top managers from the St. Louis Water Division, the head of the board of aldermen's Public Utilities Committee and the mayor's chief of staff. Also on hand, at their own request, were representatives from Anheuser-Busch InBev.
Though AB InBev had only acquired the latter half of its unwieldy name a year and a half earlier, Anheuser-Busch had a long working relationship with the public utility. It was symbiotic — the brewery was by far the department's biggest water customer, and A-B relied on the city to produce clean, tasty water for the base of its beer. Employees of the water department even characterized A-B as a "watchdog," eager to report to the city any irregularities it saw in the water that could affect not only its product, but also the drinking water for the people of St. Louis.
While the collaboration was friendly, the tone of the June 7 meeting was grim.
"It was stated that the company holds the Water Division in very high regard for the quality of the product delivered and at a low tiered price compared to AB's other brewery locations," read a memo documenting the event. "That being said, AB was very concerned about the effect of a substantial rate increase on its budget for 2010."
The fiscal situation at the department was growing increasingly alarming. Like many public utilities all across the country, the economic crash of 2008 was punching huge, unanticipated holes in the budget. Revenue was on the decline, thanks to an overall shrinking city population coupled with customers abandoning their bills along with their underwater mortgages. At the same time, the cost of water-treatment chemicals had skyrocketed.
That winter, the division asked the board of aldermen's Public Utilities Committee to consider passing the third rate hike in as many years to make ends meet. Without it, expenses would have to be reduced by $5 million. The division could only make that happen with more than 100 layoffs.
By the spring, the division, along with the mayor and the board of aldermen, began work on a two-year plan with an initial rate increase of 21 percent and a second of 14 percent. A-B, having caught wind of the planned hikes, was not happy.
At the June meeting the beermaker suggested — both for the good of its bottom line and the residents of St. Louis — that the 2010 rate increase be lowered or even tabled in order to let A-B workers take a look at the books. The city agreed.
"They were offering to do it at no cost," recalls former alderman Matt Villa who sat in the meeting as the head of board's Public Utilities Committee. "So we said, 'Why not? Let's give it a try.'"
The brewery brass left promising to be in contact the next day with ideas.
While news of the rate increase made the papers that month, a key hiring decision by a Paris-based company named Veolia did not. Veolia signed with the firm of prominent St. Louis attorney John Temporiti, a power player known for lobbying hard on behalf of clients who need friendly political waters to do business in, such as developers, waste management companies and hotels.
Veolia's timing was at the very least fortuitous. While the two events — A-B's involvement and Temporiti's hire — seemed unrelated, each set off a chain of events that would culminate this past November when the city green-lit a controversial consulting contract with Veolia, the world's largest water-service company.
In an off-election year the deal may not have made a ripple. But in the fevered climate of campaign season, a wonky municipal matter has swelled into a politically charged fiasco. On one side of the debate over the contract is the Slay administration, which says the water division needs retooling to prevent some of the fiscal nightmares that are looming on the utility's horizon. On the other side are a hodgepodge of critics including Slay's political adversaries (most notably his mayoral challenger, Lewis Reed), employees of the water division, environmentalists and even the St. Louis Palestine Solidarity Committee. In the eyes of these detractors, Veolia is the last company on Earth that should oversee one of St. Louis' most prized assets.
As he faces a tough battle to dethrone Slay, Reed — who did not answer calls for comment — has been happy to take up the mantle of the city's water warrior.
"Why would we hire the worst performer in the U.S. to tell us how to take our water and make it better, even though right now we're the number-one tasting water in the country? I don't get it," he told the audience at a recent campaign event. "This is a very important issue. I'm asking everyone to stay tuned on this."
Late in the afternoon on the Martin Luther King Jr. holiday, the sky is easing into shades of amber that glint off of the surface of the sediment basins visible from the road at the Chain of Rocks Plant, about eleven miles north of downtown. The water lapping through the system is coming in from the Mississippi and Missouri rivers, which converge five miles north of the plant. "Ted," a water-division worker with decades under his belt, explains from behind the wheel of his truck that of the two-river cocktail, what St. Louisans drink is mainly Missouri River water.
"Missouri water is easier to treat," he explains. "It's a gold mine."
As the Chain of Rocks Plant fades in the rearview mirror, he turns west toward the smaller Howard Bend facility, tucked away behind a hill on a cornfield in Chesterfield. Chain of Rocks treats about 240 million gallons a day; Howard Bend churns out roughly 120 million.
Unlike other municipalities that rely on aquifers or wells, or suffer in long periods without rain, St. Louis enjoys an abundant supply from the Mississippi and Missouri rivers at its back door. In 2012 the two treatment facilities collectively pumped 46.6 billion gallons of water to residents and businesses throughout the city and parts of the county.
Ted agreed to take Riverfront Times on a driving tour of the city's water-treatment facilities after corresponding with the paper for weeks. He was the first in a string of water-division employees to reach out to RFT after it became clear that the city was poised to strike a deal with Veolia. None agreed to be named for fear of losing their jobs.
"I'm not a disgruntled employee," Ted insists. "I'm proud of what I do. But this is wrong, the way it's going down."
The water department — like the airport — is a self-sustaining enterprise that pays for itself. Historically, that has afforded St. Louis the luxury of relatively cheap water. The same is true today, even though rates have increased 50 percent since 2004. The few city residents whose water use is metered pay 25 percent less per gallon than their counterparts in the county. The vast majority of the city's residents — about 80,000 customers — pay a flat rate for their water that's even cheaper, based on the number of rooms ($3.76 each), and showers and baths ($12.35 each).
It's a low price for a great product. Just six years ago St. Louis earned the title of "Best Tasting City Water in America" at the 2007 U.S. Conference of Mayors. Ironically, perhaps, it was Veolia that wrote the city a $15,000 check for winning the award.
And while much is being made today about fiscal uncertainties at the water department, the issues it faced two years are no longer as dire. Since the summer of 2010, chemical costs dropped, revenue increased slightly, and the utility's costs remained roughly flat. Still, the mayor's office has concerns.
Slay's chief of staff, Jeff Rainford, says the utility's two facilities are too large for the city's population. Plus, he says, the cost of chemicals is volatile and could rise again, and the utility is still using crumbling infrastructure that will need to be replaced in the very near future.
"We think if we do nothing we will be in almost the same situation as before," Rainford says.
So for the past two and a half years the city has been searching for the right impartial third party to assess the water division and make it more efficient.
But impartiality was the furthest thing from Ted's mind the day he first noticed Veolia employees touring the plant.
"It's absolutely a sin to let them come in here," he says. "Everybody is on edge."
Former alderman Villa remembers when the calls started coming in the fall of 2010.
"I used to have water-division employees call me. They said, 'The rumor around here is Veolia is taking tours of our facilities, and they're going to buy the asset,'" he recalls. "The employees were fearful."
It seems likely that most of the initial paranoia stemmed from Veolia's reputation. The company is almost as old as the 178-year-old St. Louis Water Division itself, tracing its earliest roots to Napoleon III's initiative to bring the first water service to Paris. Today, it has become a multinational juggernaut that runs water, waste, energy and transportation services all over the world. It provides water services in 8,500 cities. In 2011 it reported $39.8 billion in revenue.
"We're number-one in the world," says Matt Demo, spokesperson for Veolia Waters North America from their U.S. headquarters in Chicago.
One of the things Veolia specializes in is turning public utilities into public-private hybrids. Veolia runs the operations for profit, but cities retain ownership of the asset. Until 2010 it ran the water department in Paris. Just last week it was awarded a 30-year contract to run the water system in Rialto, California.
Given that fact, it struck some as an odd coincidence that Veolia managers were spotted at the utility a mere three months after the publication of a study by the Show-Me Institute, the libertarian think tank run by multimillionaire political financier Rex Sinquefield. The paper, written by policy analyst David Stokes, makes an enthusiastic case for privatizing St. Louis' water utility.
"The Saint Louis Water Division can be described as a municipal utility that provides high-quality water at an affordable price to the people of Saint Louis," Stokes wrote. "It is also a valuable asset that could be auctioned to a private water utility, generating an enormous amount of money for the city and its taxpayers."
Villa says that when he followed up with the mayor's office, he was assured that the Veolia representatives were merely taking a tour. David Hunn of the St. Louis Post-Dispatch wrote a story saying as much, quoting from an e-mail Rainford sent to a water-division employee:
"There will be no mass layoffs," Rainford wrote. "However, we do have to look at how we configure the water division and how we can sell more water to non-city customers. So, the water division is likely to retain an outside consultant to help us with both sides of the ledger."
Despite promises that neither privatization nor layoffs were on the table, on October 6, 2010, several managers and other employees of the water division attended a Veolia presentation at the Drury Inn on Hampton Avenue. Some noted the attendance of Veolia's attorney John Temporiti as he welcomed the water-division invitees in the parking lot.
In the ecosystem of St. Louis politics, Temporiti ranks high on the food chain. He was the chief of staff for former St. Louis mayor Vincent C. Schoemehl Jr. and chair of the state Democratic Party. He served as St. Louis County Executive Charlie Dooley's campaign manager and as the county's lobbyist. And he's been accused more than once of using his political ties to lobby on behalf of his clients. Most recently, eyebrows rose when Temporiti's son was given a $70,000 a year job with the county at a time when there was a supposed hiring freeze.
"John Temporiti has been a power broker. He's been involved in a lot of significant deals political and commercial," says former Democratic State Senator Joan Bray. "He's been in a key position in a lot of things in the region."
Temporiti referred questions for this story to Veolia's press department. Demo, at Veolia, confirms that the company hired Temporiti's former law firm — Gallop, Johnson & Neuman — back in June 2010, and that Temporiti was one of the attorney's tapped to help the company with the "contract procurement process." When Gallop closed its doors last spring, Veolia kept Temporiti on retainer as a "legal consultant."
"Veolia's going to want to work with people with the deepest understanding of the local community," says Demo of Temporiti's well-known political connections.
At the Drury Inn, employees for Veolia gave a long PowerPoint presentation titled "Veolia Water North America Sustainable Initiatives for Saint Louis." It pointed out many of the utility's ongoing challenges: shrinking revenue and population, aging infrastructure, a rate-hike-fatigued customer base. The slides suggested making the utility a "stand-alone authority" that would be controlled by the city but run by Veolia. Perhaps most alarming to the assembled water workers was the slide that addressed staffing.
"Staffing levels are high when compared to benchmarks," the slide read.
"Currently stated at 325-330...1:500 employee-to-customer ratio is approximate industry benchmark."
That worked out to roughly 180 to 200 employees.
"That was totally bogus," says a water-division manager who was at the meeting. "That certainly raised our ire. It was an extremely contentious meeting. Extremely contentious."
Stephen Siegfried, director of business management for Veolia, was a part of the presentation and conceded that it was a tense gathering. But he disputes the characterization of Veolia's intent.
"We were there just to do a cursory review of the system and what kind of findings we could, what kind of system they had. And that's all we did," he says. "There was never a conversation about taking over the system."
A few months later, in December 2010, Veolia followed up the presentation with a letter proposing a "Try Before You Buy" option.
The letter proposed a $250,000 contract to set up a "parallel command structure" and work with the division to cut costs. It included a mention of the 1:500 employee-to-customer ratio.
"They moved things around a little bit but not much," says the water-division manager. "It was the same thing they'd come in with."
Without the support of the division, the Veolia partnership went belly up.
A year later the water division, working in conjunction with the mayor's office, went public with its desire for a third-party pair of eyes to review the utility. According to the request for qualifications sent out, the bid asked for someone to come in and assess all levels of the water division's operations, from addressing declining water sales and aging infrastructure, to staffing levels, to rethinking the governance of the utility.
Three firms made the short list. On January 14, 2011, a search committee made up of water commissioner Curt Skouby, the utility's chief financial officer Jim Kummer and representatives from the Board of Public Service settled on the Kansas City-based firm Black & Veatch.
"They were doing a great job for us," says a water-division manager familiar with the search process.
The committee drew up the contract with Black & Veatch for $245,100. The only formality left was final approval from city's Board of Estimate and Apportionment.
It never happened.
Five months later the water division sent Black & Veatch a letter informing the company that "it will not be necessary to execute a contract for these consulting services at this time."
"I don't understand either," says Tom Ratzki, vice president of Black & Veatch, today. "We were told that we were selected, but then never were presented with a contract to sign."
According to sources who worked on the contract within the water division, no explanation was given to them either, from Skouby or from the mayor's office.
"The reason I believe is that Veolia had not gone away," says the same division manager.
Roughly a year later, Ratzki says he got a call from the city.
"They reminded us, not that we didn't know ourselves, that we were not awarded that contract," he recalls. "They asked would we be willing to write the proposal for a different contract."
On Valentine's Day of last year, Black & Veatch inked a new deal with the city to draft a second public notice asking an outside consultant to assess the financial state of the utility. Black & Veatch carried out its significantly slimmed-down list of responsibilities for the very same price tag — $245,100.
The new request, titled "Operational Efficiency and Value Creation Analysis," asked for a two-phase plan aimed at "reducing overall cost of water treatment," "increase wholesale water sales" and "maintain or improve water main repair time and efficiency." The second phase would involve crafting an implementation plan.
According to Eddie Roth, the mayor's director of operations, the second request for proposals "broadened the scope of the advice sought."
"The first-round RFP was focused on retaining a consulting engineer, and the subject matter had more to do with the design of our facilities," he says. "After all that came in, the water division made a reassessment that we have to look beyond design. We need broader experience in the operation of a utility."
Sources in the water division disagree.
"[The first RFP] was going to be far reaching.... They were going to look at a different governing authority, maybe a board should run us, because there are so many barriers to efficiency," says a source in the division. "We thought, 'Something's fishy here,' but we went through the process again."
The RFP went out on July 17, 2012. Four firms answered: Johnson Controls, Missouri American Water, Siemens and Veolia North America. This time the water division, not the Board of Public Service, handled the search. The team included Skouby and Kummer from the water division; Tom Shepard from Lewis Reed's office; John Zakibe from the comptroller's office; and Sam Dotson, the city's new police chief who at the time served as director of operations for the mayor's office.
Veolia's bid suggested a two-phased operation. In the second, implementation phase, it would be paid a percentage of the overall savings it was able to uncover. It estimated it could come up with $8 to $15 million over the course of five years. It also promised that layoffs would play no part in its cost-saving efforts.
As the second search committee got under way, sources within the water division allege that Skouby became increasingly nervous and unwilling to discuss his opinions on the bidding companies with his coworkers. (The mayor's office did not make Skouby available for an interview for this story. Not only is Skouby the acting water commissioner, he also carries the title of Mayor Slay's director of public utilities. Campaign finance records show he donated $900 to the mayor's reelection efforts this past fall.)
"After the first introduction to Veolia, Skouby made no attempt to hide from the management of the water division that he was not supportive of Veolia," says an upper-level manager at the plant. "All that changed when he made his recommendation."
It certainly didn't help the air of conspiracy that immediately after Veolia's presentation to the search committee at city hall, John Temporiti took a private meeting with Mayor Slay. Through Veolia spokesperson Matt Demo, Temporiti claims that the Veolia contract was not the topic of conversation during the closed-door session.
In the final vote, Skouby nominated Veolia, Dotson made a motion to pass it, and Zakibe seconded. Kummer voted no. Shepard abstained, saying he didn't know enough about the company.
Workers at the utility mutinied at the news. Skouby responded with memos assuring employees that there would be absolutely no layoffs if Veolia came in. But the damage was done.
Days after the approval "Ted" reached out to Riverfront Times.
"They're trying to keep this all under the radar," he said at the time. "This Veolia company is just bad news."
After Riverfront Times broke news of the pending deal with Veolia in December, something unexpected happened. A small but steadily growing coalition of social-justice and environmental activists have given the deal — once destined for the rubber stamp — a violent shove off of the table and into campaign discourse.
The founding organization of Dump Veolia is a group called the St. Louis Palestine Solidarity Committee, which since its inception in 2009 has been researching Veolia's reputation.
As a participant in the Boycott, Divestment and Sanctions Movement, STL-PSC researches companies that in any way facilitate occupation of Palestinian land and seek commitments from governments, businesses and private citizens not to engage financially with them. The BDS movement targets companies as diverse as Timberland, SodaStream and Caterpillar.
STL-PSC member Anna Baltzer says she was surprised to read that Veolia had contracts in her own back yard.
"There needs to be time to share information and concerns," she says of the contract. "Our hope is that if not voted against, it would at least be postponed."
Since then, Dump Veolia has been calling attention to the blemishes on Veolia's reputation. In Indianapolis, where the company ran the water utility, the company is currently the defendant in two class-action lawsuits that accuse them of over-billing customers. The city bought Veolia out of its contract early after a slew of allegations of mismanagement, price gouging and even lowering the water quality to save money. A nonprofit watchdog group out of Washington, D.C., called Food & Water Watch has also had its eye on Veolia for years.
"We have seen examples where they've managed sewage systems; under their management there's been sewage spills," says Mary Grant, a researcher at Food & Water Watch. "There's also a lot of private companies in general when they take over, they do engage in corner cutting."
Kat Logan Smith, the director of environmental policy for the Missouri Coalition for the Environment, is one of the local environmentalists opposed to working with Veolia.
"This is a company with a bad record," she says. "We don't necessarily want this particular company making any decisions about [our water] at all, end of story."
On December 19, 2012, the Veolia contract was set to be approved by the Board of Estimate and Apportionment, a three-member board made of Slay, Reed and Comptroller Darlene Green. After Dump Veolia inundated Reed and Green's offices with calls, both politicians balked at the vote and suggested the contract should go back to the search committee. When the contract — unchanged — found its way back onto the next E&A meeting agenda on January 16, several dozen Dump Veolia members lined the hallway in front of the mayor's office.
Rather than force the contract through on January 16, the E&A Board pulled it from the meeting. Afterward, Green made public a letter she wrote to Reed asking him to hold hearings on the contract "as soon as possible."
"There is unending controversy surrounding this proposed contract. There are allegations regarding the purpose and intent of the Water Division in the proposed collaboration with Veolia, as well as serious allegations regarding Veolia's performances and results in other cities," she wrote. "Veolia deserves to be heard in a public forum as well."
Veolia's voice has been largely silent in the ensuing public uproar. While it has faced legal action elsewhere, there are also water managers in other cities who will vouch for the company's services. Siegfried, the study manager for the St. Louis contract should it ever move forward, says the meetings that have already taken place at the water division have given him some idea of what he would tackle. The department's vehicle fleet would need an upgrade; he would assess why water usage is so high per customer in St. Louis as compared to other cities and attempt to find ways to pay for badly needed capital improvements. Siegfried is also adamant that the Veolia recommendations would never touch the St. Louis water formula.
"They have excellent-tasting water. They have never had an EPA violation for water. That is not something that can be compromised," he says.
Siegfried also emphatically echoes the answer that Slay has given in public whenever asked about the contract: no layoffs, no privatization.
"What we're there to do is help you have a more efficient operation," he says, "Why would you be upset about that?"
The mayor is running late.
Every seat in the basement of the Carpenter branch of the St. Louis Public Library in Tower Grove South is filled for a January 24 mayoral-candidate forum. By the time Slay arrives, his opponent, board of aldermen president Lewis Reed, has come and gone.
Slay unwinds a scarf from his neck and is ushered to the front of the room where he leaps into a five-minute pitch on why he should become the first St. Louis mayor ever to win a fourth consecutive term. He covers crime, education, the fight against homelessness, the economy, public health.
"I've got a great team, an honest team in place," he concludes. "We get things done."
The moderator steps up and begins reading question cards submitted from the audience. Then he reads a question he wrote himself.
"One of my big concerns is the city's relationship with Veolia," he begins. "Why should St. Louis spend $250,000 on a consultation contract with a company which makes its money from running and owning water supplies?"
In the audience several members are wearing "Dump Veolia" stickers. There's anti-Veolia literature on a back table. And when Reed answered the same question ten minutes earlier by slamming Veolia, the entire room broke into applause.
"I appreciate the question," Slay begins. "It gives me an opportunity to clarify a lot of misinformation. And believe me there's a lot."
Slay reemphasizes that the contract is not a path to privatization.
"They're not going to run the water department; they're not going to make any decisions in our water department whatsoever," he says emphatically. "Maybe we won't get the votes. You know, others are afraid that these fears and misinformation may come to reality. I can promise you as your mayor that they will not. This department is not going to be sold."
Adding to the intrigue surrounding the contract is Rex Sinquefield's ties to both Slay and Temporiti. Sinquefield's political-action committee is Slay's top donor, haven already given the campaign $100,000. Sinquefield has also dropped big cash with Temporiti, $92,500 in consulting fees over the course of the past election season. Just last week Temporiti officially registered as a lobbyist for Sinquefield's political firm Pelopidas and Veolia Water North America.
At the conclusion of the forum Slay moves toward the door, shaking hands along the way. A "Dump Veolia" activist tries to hand him a flier about the tram lines and buses in Palestine. Slay declines politely.
"I've seen your material," he says. "I get it. I get it."
At the door, Riverfront Times asks about the rumor that Curt Skouby was directed by the mayor's office to vote for Veolia.
"That is absolutely not true," he says. "I've heard more misinformation and more ridiculous accusations on this issue than I have on a whole heck of a lot of other ones since I've been mayor."
He bristles at the idea that Temporiti gave Veolia an advantage and says this is just an attempt to discredit him ahead of the election.
"I don't represent Veolia. I don't represent any special interest. I represent the people of St. Louis," he says. "I'm interested in three things: quality water, a good department that's well run and for a price that is affordable for the people of St. Louis. That's all I'm interested in."
Finally, Riverfront Times asks about the private meeting with Temporiti after the Veolia presentation — a meeting Temporiti claimed had nothing to do with Veolia.
"There's a lot of misinformation he's trying to dispel, and that's what we talked about," says Slay. "We talked about the fact that, you know, about what kind of information is out there and, you know, how do we address it and what's going on. That's all."
The future of the contract is still unknown. Lewis Reed's office has taken steps toward a public forum — which will invite all activist groups to participate as well as Veolia — but the time frame is still fluid. Eddie Roth is also meeting with all the interested parties.
"My instructions are to take all the time we need to make people feel satisfied," says Roth. "We'll come back in a very public way with what I'm able to find out."
It is all but certain that any kind of investigation or final determination will not be ready in time for the next scheduled Board of Estimate and Apportionment meeting on February 20. That means the next opportunity to take up the contract will come after the mayoral election.
Should Reed pull off the underdog upset and stick to his campaign promises, Veolia's prospects are down the drain. But with Green the deciding vote on the E&A Board, even a Slay win doesn't secure the company's fortunes.
In the deluge of ambition and politics, it's hard to parse out what's truly at stake — the water, the utility, the mayorship or the more abstract moral standing of the city.
"Our responsibilities aren't to litigate or adjudicate some sort of broader political issues," says Roth. "I'm glad people are interested in turning on the tap and getting clean, delicious, cold water at an affordable price. That's what we're all after."