While USFilter appears to be financially sound, Vivendi Universal clearly is
not, and we are concerned that Vivendi Universal could siphon money from the more
profitable company. Communities whose water systems are USFilter-operated could
face deterioration of service quality and grapple with aging infrastructure not
receiving needed repairs. (Vivendi Universal owns 40 percent of Vivendi Environnement.
USFilter is a wholly owned subsidiary of Vivendi Environnement.)
It wouldn’t be the first time Vivendi Universal has used a subsidiary
to obtain much-needed cash. In June, news reports said that USFilter was selling
its distribution business to generate cash for Vivendi Universal. The beleaguered
French parent company is a media and entertainment giant that has amassed a $33
billion debt during an ambitious acquisition drive. The debt was recently downgraded
to "junk bond" status on fears that the company lacks enough cash to
make payments on it. More than a third of the debt belongs to Vivendi Environnement.
In June, Vivendi Universal reduced its stake in the environment subsidiary from
65 to 40 percent to get the subsidiary’s debt off its books.
Given its parent company’s problems, the future ability of USFilter to
meet its current contract obligations is uncertain. It would be foolhardy to transfer
the responsibility of providing water and wastewater services to a company with
an enormous debt and a questionable future.
Our local governments should continue to own and operate their water and sewer
systems. If improvements are necessary, the answer is not to hand over public
resources to private interests but instead to make a commitment to increase efficiency
and introduce savings within the framework of municipal operation. Communities
should be aware that the companies taking over water systems promise cost savings
and better service but rarely explain the risks of privatization, such as hidden
costs, inadequate maintenance and service lapses. Only public utilities, when
run well, can ensure that everyone has access to safe and affordable drinking