North Miami Beach Gives Public Water Utility Serving 180,000 People to Private Firm

Courtesy of AFSCME Florida
Here is a brief but not exhaustive list of negatives surrounding North Miami Beach's plan to outsource its water utility to a massive private company: The FBI looked into the deal. So did the Miami-Dade County State Attorney's Office. The city's own Public Utilities Commission did not sign off on the plan. The city's workers' union opposed the move. Scores of residents (and multiple city employees) allege everything from willful negligence to shady dealings on the part of commissioners. One of the other major companies bidding for the project quit and said the deal had essentially been rigged for a single bidder. A pile of research exists warning that deals like the one in question don't tend to be financially prudent.

None of those facts stopped the North Miami Beach City Commission last night from voting 4 to 2 to outsource its public water utility to global engineering firm CH2M Hill. From here on out, the company will control virtually every operational facet of a water plant that serves more than 180,000 people in North Miami Beach, Aventura, Sunny Isles Beach, and Miami Gardens.

"Every time you do something bold and significant, people are going to be afraid, and there will be naysayers," Mayor George Vallejo said from the dais just before the vote. (A separate state criminal investigation into Vallejo's conduct as mayor remains open.)

He added, "I’m voting yes because I care about my kids. I care about everybody’s children in this community."

CH2M says it can provide safer, cleaner, and more reliable water service for $190 million over 15 years. The city maintains that price tag is $56 million cheaper than what repairs to the plant would cost the city in that same timeframe.

The vote, which was conducted around 11 p.m., capped off what seemed to be hours of nonstop shouting and insult-hurling. Multiple commissioners screamed at others who'd cut them off, while city officials, including Vallejo, City Attorney Jose Smith, and Commissioner Anthony DeFilippo, accused the news media of peddling falsehoods about the plan's parameters. At least one attendee was thrown out, and Commissioner Barbara Kramer angrily told the people in the audience that none of them understodd how hard it is to do her job.

When Juan Cuba, the chair of the Miami-Dade County Democratic Party's Executive Committee, brought up the fact that DeFilippo had taken a $500 campaign donation from CH2M, Mayor Vallejo threatened to throw Cuba out.

"If you identified the problems, why didn’t you fix it?" Cuba asked. "If a consultant would have been hired to identify the 'best practices' in your police department, you wouldn’t privatize your whole department."

After the period of public comment ended, the commissioners communicated only in screams from roughly 10 to 11 p.m. At one point, during a debate about the parameters of the decades-long contract they were about to approve, Vallejo shut down debate over whether the contract let CH2M hire out its own private firms, stating that "we're not going to dissect minutiae in a contract" tonight. Decorum only fell apart further from there.

"Today's my daughter's graduation, and I couldn't be there because I came here first!" one commissioner shouted just after 10 p.m. before storming out of the room.
In short, the four commissioners who voted to hand over control of the water utility believed the plant had become rundown and dilapidated in the past few years. In May 2014, CH2M, a company known for overseeing the Qatar World Cup construction project — which is marred by allegations of slave labor and migrant-worker abuse — earned a consulting contract with North Miami Beach to help improve conditions at the plant.

Instead, the situation worsened, and a 2016 audit said the plant was in failing conditions across the board. In October 2016, the CH2M subsidiary OMI was given a no-bid emergency contract to take over most of the plant's operations. Some commissioners claim that conditions worsened still — and that instead of paying for the city to repair the plant, North Miami Beach should outsource the utility to a private firm that could do so cheaply.

So, in November 2016, the city sent out a request for qualifications to see which companies were best suited to take over the utility. And — surprise — CH2M, which was already working at the job, was named the top firm. (The third-ranked firm, French company Veolia, had ties to lead crises in both Flint, Michigan; and Pittsburgh, Pennsylvania.) During this process, one of the largest private water firms in the world, British company Severn Trent, said it was bowing out of the bidding process because the city procurement procedures seemed to be stacked in favor of CH2M.

The qualifications "essentially excluded all but one company, to our knowledge," a Severn Trent representative wrote to the city January 26, according to a letter New Times obtained.
By February, the FBI was looking into the deal. City Attorney Jose Smith confirmed to New Times earlier this year that an agent had interviewed city employees about the privatization plan. On March 30, Smith initially told New Times that he spoke via phone to an FBI agent, who confirmed to him that the feds had "investigated allegations against a staff member but found no wrongdoing."

A separate source with knowledge of the bidding process for North Miami Beach's water plan told New Times in April that the FBI was still interviewing water firm employees as late as the last week of March.

But from the dais last night, Smith was adamant that the FBI had closed its investigation in February. He said he possessed a "close-out memo" from the FBI that he was willing to show the meeting's attendees. New Times then asked Smith for a copy of the close-out memo, which New Times would gladly publish.

"Your 'sources' are unreliable and you should have known better," Smith wrote in response. "Your lack of journalistic ethics is remarkable. You can quote me. I will of course respond to your public records request within a reasonable time."

He did not supply a copy of the close-out memo last night.

Update: While not a "close-out memo," Smith provided a copy of an email between Commissioner Beth Spiegel and an FBI agent, who said the investigation had closed as of February.

According to emails New Times also obtained, Smith filed his own public records requests in an admitted attempt at weeding out a possible FBI whistleblower within the city government. On February 13, Smith asked a city records officer for "all documents from whatever source reflecting communications (oral or written) between yourself and Charles Cook or Mubarak Kazan regarding outsourcing of the city’s water utility, including communications with the Federal Bureau of Investigation (FBI)."

After his request was apparently not answered, Smith then filed a follow-up request March 3 for any communications Commissioner Beth Spiegel, who opposed the privatization move, might have had with the FBI. Asked why he was trying to figure out who spoke to investigators or what was said, Smith said in March that his "public records requests to Beth Spiegel, who passionately opposes outsourcing the water utility, were intended to find out who those people were and clear the air. Interestingly, her emails, hidden in her private email account, helped me determine the source of the allegations. Regardless of how one feels about outsourcing [a policy issue], my only goal was to maintain the integrity of the process."

On April 3, the city held a special meeting to begin formal negotiations with CH2M. In the leadup to that meeting, the city's municipal worker's union, the American Federation of State, County and Municipal Employees, spoke out against the privatization plan as an attempt at union-busting. The ASFCME warned that privatization deals tend to lead to job or benefits cuts to workers.

Though the final contract guarantees that all city workers who pass a drug test and physical must be rehired by CH2M, the contract does not say what will happen to those workers in the following years. (During that April 3 meeting, multiple city workers accused the government of willfully underfunding the plant to create an excuse to privatize it.)

Instead, city documents say thatCH2M will provide a $2 million savings in "labor" in year two of the project, without explaining where those cost reductions will come from. On May 11, the ASFCME wrote a letter opposing the contract.

Two days ago, the City of North Miami Beach's Public Utilities Commission — the body that oversees the second-largest water plant in Miami-Dade County — also said it could not sign off on the move. The Utilities Commission said the city had handed it the privatization contracts and documents far too late in the process, and the utility regulator said it couldn't bless the deal without reading the paperwork first.

In the meantime, a load of research shows that rates tend to increase when private companies, which are mandated by stockholders to increase profits yearly, take over public water utilities. The nonprofit Food and Water Watch, which is run by a former United Nations adviser, warns that rates at both privately owned firms and public/private partnerships, like the one CH2M has proposed, don't tend to be cheap for ratepayers.

Last night, city officials disputed that idea, stressing that the city's Public Utilities Commission (which, again, refused to endorse the contract) would be tasked with approving any of CH2M's rate-hike requests. Mayor Vallejo also mentioned rates have increased over the past five years anyway.

"Pensions, health care, other employment benefits, those other things fall on City of North Miami Beach’s taxpayers if those costs go up," Vallejo said from the dais. "If we do this agreement, we have a guaranteed cost. The cost line is locked in for the next 15 years." Vallejo said the utility's poor conditions allegedly cost taxpayers $10,000 per day.

During the public comment period, an elderly woman with caramel-colored hair loudly chided the commissioners for letting the water utility fall into disrepair and then passing it off to a private firm instead of fixing it themselves.

"How did we let it get so rundown all of a sudden?" she asked. "This should have been taken care of. What is wrong with us? I mean everyone. The citizens, the people, the dais, everybody around. That is our cash cow, and we’re not taking care of it! When you have a home and the roof is leaking, you damn well take care of it."

The rest of the attendees applauded.