Interstate 11: Privatized Roads, Privatized Water

Last year Down & Drought published three articles from the excellent Stop CANAMEX blog, perhaps the only local resource for researched and detailed information on proposed infrastructure projects in Arizona.  In post after post, the blog produces the names of the projects and the players behind the push for massive new highway projects, international trade deals, and how they relate to economic zones like the proposed "Sun Corridor" megaregion.  As bloggers, academics, and journalists debate and opine over the future supplies of the region's water and the potential for shortages in the very near future, this latest piece from the Stop CANAMEX project names the names of the developers and how they plan to profit, while the potential for drought and water scarcity looms.


You might not think Interstate 11 has anything to do with water privatization, but it does, and considering our water shortages, we should be worried.

Pushes for water privatization cannot be separated from the increased move towards public-private partnerships (P3 or PPP) for infrastructure projects--especially when both consultants for the I-11 study are steeped in P3s in transportation and water.

This is not to imply that these consultants, CH2MHILL and AECOM, are involved with Interstate 11 because they also want to privatize our water (although it's possible). But the depth of their involvement in water privatization and P3s in general shows a likelihood that I-11, or parts of it, is intended to be a P3. The more experience Arizona has with P3s, the easier it will be to implement various projects including water. Water is privatized in many other countries, often due to conditions for loans by the World Bank, a tendency seen with structural adjustment programs. P3 arrangements make it more likely that the private side will call the shots. We might get a road we don't even want, just because some companies can make some money. And we may end up with a bigger water problem.

Obama made water privatization in the US easier, when on June 13 of this year, he signed the Water Resources Reform and Development Act (WRRDA) into law. This included the Water Infrastructure Finance and Innovation Authority (WIFIA) which is a 5-year pilot program providing financing for P3s for water projects.

Image: Denis Bocquet / Flickr

WIFIA, mirroring the "Transportation Infrastructure Finance and Innovation Act" (TIFIA), was a concept developed and promoted by the American Water Works Association (AWWA). What does this have to do with the I-11 Study consultants? AWWA, a non-profit, is supported by CH2MHILL and closely affiliated with AECOM. AECOM Senior Consultant Jim Chaffee was president of the AWWA until very recently.

There is no doubt that both consultants are immersed in the world of infrastructure P3 promotion. CH2MHILL supports The National Council for Public-Private Partnerships and has a couple members on the steering committee of the NCPPP's Water Institute. The Senior Vice President of the investment arm of AECOM, Samara Barend's testimony to congress back in May was meant to encourage federal facilitation of P3s on a larger scale. 

AECOM put out the white paper, Fostering a Larger Private-Sector Role in United States Infrastructure in which their number one recommendation in the executive summary reads, "Expand the use of PPPs for surface transportation projects. This can be achieved by extend [sic] the successful TIFIA and [Private Activity Bond (PAB)] programs before they expire in 2015." Number 2 includes, "Pass the proposed 'WIFIA' pilot program to provide long-term, flexible low-interest subordinated debt financing terms to water utilities...Enable the WIFIA program funds to be partnered with PABs, as has proven successful with TIFIA."

TIFIA loans and availability payments, and possibly tax-exempt PABs, are being considered for I-11, especially since collection of tolls on the future Interstate 11 would be controversial, even while concessions are still an option. You can listen to AECOM's Samara Barend, brimming with enthusiasm, break down different types of P3s and the financing options in the video Public-Private Partnerships: Lipinski Symposium On Transportation Policy & Strategy.

A previous post on this blog, Companies seek partnership with ADOT to profit on freeway, Part 2: The Methods, explains the draw these options have for companies seeking to make money off of infrastructure projects. These and more are listed as options in the I-11 Study draft Implementation Report.

As Ellin Dannin of Truthout pointed out, with programs like TIFIA and WIFIA, "rather than the private partner coming to the rescue of cash-strapped governments, it is the public that must subsidize private contractors."

ADOT just released a Request for Information regarding its Statewide Assets, on July 2 as part of their Public Private Partnership Initiative. Since ADOT has several projects on the table, this step allows them to feel out the industry's interest before putting out a Request for Proposals, either for the Loop 202 South Mountain Freeway, the Interstate 11, a North-South corridor, SR 189, or other projects listed on their website.

READ MORE COVERAGE OF PUBLIC PRIVATE PARTNERSHIPS (P3s)

While P3s are often framed as a better option for the public sector to accomplish their goals with their limited resources, in that they can leverage their assets, P3s are widely promoted by large companies who seek to make money. Construction companies, engineering firms, consultants, and banks all see dollar signs in these projects, and they host conferences and make other efforts to reach out to local officials to steer them in that direction. For example, JP Morgan, Morgan Stanley, and Goldman Sachs are involved with P3 conferences like the National P3 Symposium. Both AECOM and CH2MHill are sponsors and attendees of the ARTBA P3s in Transportation Conference and the 2015 Global Water Summit who uses the phrase "the water value revolution" and whose website is watermeetsmoney.com.

Many such companies worry about their fate if the economy doesn't allow for governments to implement as many infrastructure projects. For example, Goldman Sachs listed AECOM as one of the companies that would go under if government spending was severely limited, considering that AECOM has 62% sales exposure to government. Their survival largely hinges on access to P3 deals. No wonder they're pushing the idea.

They have already made some money from the the I-11 Study which cost approximately 2.5 million dollars. While it would likely be a conflict of interest for either consultant to get a Design-Build, etc. deal on I-11, their interest in P3s remain. Corporate Accountability International warns that private water companies often get a foot hold on further water privatization deals by entering into consultation partnerships first.

An interesting fact is that Mike Kies, the ADOT project director for the I-11 Study has worked for AECOM. He worked for AECOM on the Arizona Rail Framework Study and the State Rail Plan. He was an AECOM project consultant on an ADOT project to make I-10 5 lanes each way from Tangerine Road to I-8. The article on this project stated, "An improved I-10 can 'support the objectives of the CANAMEX trade corridor, which includes this important segment of I-10,' literature indicates. The CANAMEX corridor presumes greater traffic between Mexico and Canada through the U.S. I-10 is 'not only an important east-west freight route,' but decision-makers 'expect freight movements to increase north and south.'"

Also interesting is that John McNamara of AECOM, then of BRW, Inc., was involved back in 1993 on an Arizona Trade Corridor Study, which is one of the earliest references to CANAMEX.

The Arizona Transportation and Trade Corridor Alliance (TTCA), which "encompasses the former CANAMEX Task Force" just released their Strategic Roadmap, which primarily promotes trade corridors through Arizona, and P3s, with an emphasis on encouraging an effort to get local policy makers and others to understand the "benefits" of trade infrastructure and private involvement in financing. The TTCA was started in 2012, bringing together the public and private sector, including Jim Kolbe, CANAMEX expert of the Arizona Mexico Commission (AMC). This sort of public-private partnership unit allows private interests to influence policy behind closed doors.

From "Scientists on where to be in the 21st century based on sustainability"

Trade and transportation infrastructure of the scale intended by organizations like the AMC/TTCA would require massive amounts of natural resources including water. In addition, the more roads, the more traffic, the more sprawl, the more pollution and use of resources. It's an endless cycle. At the June 25 I-11 in the Phoenix area, Franco Habre asked, "With the current and looming water shortages shouldn't we be applying a moratorium on proposed infrastructure projects?" to which ADOT's Mike Kies responded that it's not his job to be concerned about water. Those whose job it is to be concerned about water, such as the Arizona Department of Water Resources, toured Arizona stating that water desalination is a likely necessity a few years from now. The desalination would likely occur in Mexico or California and be transported to Arizona.

AMC is already moving forward on this, and just announced that,

"This year’s plenary included the signing of an Agreement of Cooperation between the states of Arizona and Sonora through the Arizona Department of Water Resources and Sonora’s State Commission on Water.  This agreement allows both states to jointly evaluate the feasibility of Sea of Cortez desalination to augment and increase water supply resiliency in Arizona and Sonora.  This agreement is signed at a time where the Arizona-Sonora region is facing critical water supply challenges and experiencing extended droughts."

It is highly unlikely that water desalinated and transported from the ocean will not be privatized, especially if the pro-P3 Arizona-Mexico Commission gets in the middle. Desalination plants are increasingly being built in the US for use with brackish water, including one in California which is a public-private partnership, and incidentally, Poseidon Resources Corp, the company behind this plant, held a presentation about this facility for the AMC 2014 Plenary Environment and Water Committee (titled 2-IDE Powerpoint Arizona.pdf within the zip file). Is a water pipeline a possibility for AMC's god-child CANAMEX/I-11?

AMC's interest in water may also have something to do with their relationship with Freeport McMoran, one of their biggest sponsors who's also had someone on their board for several years. Freeport is responsible for massive pollution and human rights violations, particularly in West Papua. In January, Freeport hired the previous director of the Arizona Department of Water Resources as their director of water strategy. And while Freeport has been key in changing Arizona water legislation to be in their favor, they might be worrying that Arizona will mandate that mines use desalinated water as Chile, another location of Freeport's mines, has recently done. Even if Freeport is not worried about being required to use desalinated water, they may be looking ahead to when they've used all other options, having bought up farm land for their water rights and swindling native water rights from various tribes. It may also be significant that Michael J. Lacey, Director of Arizona Department of Water Resources is co-chair of AMC's Environment and Water committee.

The AMC and the World Bank, are interested in opening up public services to market forces, and businesses want to make money off of these deals. Private water companies across the world have experienced resistance to their plans. They therefore know they have to frame their project in a way that is more acceptable to people, such as a public-private partnership leveraging the assets of the municipal government, despite many of the pro-P3 arguments being false. And what is a worse to privatize than a basic need which is a finite resource? Privatizing water means poor people go without it, and conservation is counter to the profit-interest of companies.

With all these plans for transportation infrastructure, water is an issue even if it's not privatized. The more development, the more pollution and wasting of water. They may try to sell their projects as "green" or "sustainable" but increased growth in this region is not sustainable. Additionally, private or not, desalinated water will cost more. We need to halt development and many of the wasteful industrial projects such as the Freeport McMoran mines.