The American Prospect has a deep dive into one of the shebeen’s pet portfolio items: the commodification of the essentials of life, such as…water. The private equity cowboys are getting involved in a big way, which is never a good thing, and there’s a serious warning in the story about why we should keep an eye on where and to whom the infrastructure money, er, flows once the federal spigot is opened, whenever that is. Our scene opens in Fayetteville, North Carolina, where there were some flash floods a little while back. Private equity to the rescue!
Last year, Louisiana-based Bernhard Capital Partners (BCP), a private equity firm, came to city leaders and offered them a fix. BCP had $750 million available for the city to finance these and other overdue improvement projects. They would also invest in economic development programs, such as business incubators and training programs at Fayetteville State, a historically Black university. In return, BCP requested a contract to operate the city’s water and power utilities for the next 30 years, and keep the profits.
“Many of these municipalities really don’t need to be in the business of operating utilities,” BCP co-founder Jeff Jenkins explained in a phone interview with the Prospect. “Bringing a private investment opportunity to these types of communities can really bolster and empower, especially underserved communities.”
My favorite scene in The Big Short is the one in which Jeremy Strong, playing Vinny of Front Point Partners, calls Ryan Gosling while Strong’s firm is on the brink of going in on Gosling’s heretical speculation about the housing market. Strong asks the fundamental question that every thinking human should ask when presented with a deal that seems to be too good to be true.
“How are you fcking us?”
The overture is part of a public asset bonanza investors anticipate, amid much-needed federal investments in roads, bridges, and climate resilience. Private equity is seeking to capitalize on the one-off spending spree in President Biden’s infrastructure plans, using environmental violations and crumbling buildings to make the case that municipalities can’t manage their own assets.
One encouraging sign for private equity: talks over an infrastructure bill in Washington have included allowances for public-private partnerships (P3s), where companies manage new infrastructure assets. If federal dollars are shaved down enough, if the final P3 language is sufficiently business-friendly, or both, the forthcoming infrastructure package could mean open season for private-sector entrance into municipal utilities.
And if this next part doesn’t give you a chill, it ought to.
“We are in the business of being essential,” reads a Bernhard Capital banner in a trade publication for infrastructure investors.
No, folks. The water is essential. You are merely finding a way to turn a buck on it.
Agreements to put water, airports, and roads under private control often sour, because private firms guarantee investors that they will meet threshold profit targets. In Bayonne, KKR and Suez had guaranteed investors an 11 percent rate of return, and raised prices to keep up. Although private equity deals often involve flashy ribbon-cutting ceremonies and projects politicians can point to as progress, they often leave unglamorous maintenance spending to the city. KKR and Suez gave Bayonne $150 million upfront, but required the city to put in $157 million over the life of the contract to upgrade the water system, with yearly payments for infrastructure repairs. Added to the rate hikes, Bayonne’s mayor said, that became increasingly burdensome.
Read the whole thing because, I assure you, this is all coming soon to a water system near you.
No matter who controls it, your drinking water should not contain an excess of PFAS, the “forever chemicals.” On Thursday, the House of Representatives went long and…wait for it…bipartisan on a sweeping bill setting tough new standards for PFAS in drinking water, as well as muscled-up regulations by which the federal government can order PFAS clean-ups. From MLive:
As passed by the House, the bill would require the U.S. Environmental Protection Agency to establish nationwide drinking water standards within two years for PFOS and PFOA — which are only two individual compounds among of thousands of similar one[s] in the PFAS family. Presently, the EPA relies on a non-enforceable advisory level for the two chemicals in drinking water that’s far less stringent than legal limits multiple states have enacted. In Michigan, PFOS and PFOA must test below 16 and 8 parts-per-trillion (ppt), respectively, in public water supplies. The EPA advisory level for the two compounds is 70-ppt.
The bill also directs the EPA to designate PFOS and PFOA as “hazardous substances” within a year. That regulatory definition under federal Superfund law would give the EPA authority to force polluters to clean up PFAS contamination and recover some taxpayer costs.
Water, as they say, is life. One might even call it…essential.
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