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Print StoryHundreds of residents complained throughout the summer of brown water pouring from their taps, much of it studded with visible debris. One mother described her Kool-Aid as darker than iced tea with "little particles" floating in it. Officials from United Water Resources Inc., which had held the management contract in Atlanta since January 1999, blamed the red clay- and rust-tainted water on power outages and old, crumbling pipes. The water was merely ugly, not harmful, they said.
"A lot of people think that brown water equals private companies," said Jim Creedon, a spokesman for United Water. The problem comes from old infrastructure, not company mistakes, he said. Those repairs take time.
Atlanta Mayor Shirley Franklin, however, blamed United Water and, after six months of intense scrutiny of company operations, ended United Water's contract with the city on Jan. 24, 2003.
Atlanta Water System main tank (Photo: Frank Koller)
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Atlanta will again run its own water utility — a daunting task for a city that had an $82 million budget deficit last year. Officials had hoped that the United Water contract would be an answer to its budgetary woes.
But in a city-commissioned report last summer, Franklin criticized United Water for a pattern of neglect. Fire hydrants weren't replaced, billing lagged and maintenance work — on company grounds as well as underground — fell behind schedule.
A Feb. 6, 2002, letter from the state Department of Transportation, included in the report, chastised United Water for failing to repair a recurring leak and collapsed road on Peachtree Road at Peachtree Creek. The leak had been a problem for at least two years, the letter stated, and created a "cavernous hole." A week after the collapse, the state threatened to hire a contractor to fix the problem and to charge United Water for the work. United Water made the repairs.
Franklin also accused the company of failing to install meters and collect more than $60 million in late and current water bills. United fueled her anger in July after it cut off water service at a 40-unit apartment complex. United Water said it was owed $246,533 in late payments.
By August 2002, Franklin threatened to cancel the 20-year contract unless the company made dramatic improvements within 90 days.
Creedon, in a November interview, said that the city didn't notify the company during the bidding process of the true scope of Atlanta's water problems, and that United Water did not anticipate such a difficult workload.
A January 2003 report clinched Franklin's decision. The results of city audits from 1999 to 2001 showed that the company failed to deliver the savings it promised. In fact, the audit showed that the city saved $29.4 million during that time by contracting with United Water — or about half the company's projections, according to The Atlanta Journal-Constitution.
In a January 2003 press statement issued jointly with the city, United Water Chairman Michael Chesser said that the company had improved its performance. "United Water is proud to have made significant improvements to the city's water system including the virtual elimination of an enormous and unexpected backlog," Chesser said in the statement.
Both sides said publicly that the contract dissolution was amicable. "We have a contract that doesn't work; it simply doesn't work," said Greg Giornelli, Atlanta's chief policy officer. "The residents of Atlanta cannot get good water under the contract, and United Water cannot make money under the contract."[Listen to Richard Kessel of 
The cash-strapped city is now creating a 346-person department to run Atlanta's water system. It will operate the utility through a newly organized Bureau of Water within the Department of Watershed Management.
Meanwhile, the city and United Water had been embroiled in a separate conflict, revolving around the contents of several letters.
United Water sent the letters to city hall in December 2001 during the administration of former Mayor Bill Campbell, who had spearheaded the move to hire United Water.
Campbell, who left office in January 2002, signed the 20-year, $20.8 million annual contract that gave United Water control over the city's drinking water system, despite opposition to the length of the contract from several council members.
By the time Franklin took office, the two sides were in dispute over $80 million in compensation the company said it was owed for work performed that was not covered in the contract. The company sent the letter to Campbell requesting its money, and what it said was a negotiated $4 million annual raise over 17 years. Some of the letters authorized the changes and carry Campbell's signature, Creedon said.
But Campbell has denied publicly that he signed the letters and has called for an investigation. In October, Charles Johnson, a minority partner in United Water, stated publicly he turned over the letters to the U.S. Attorney's office. The office has been looking into the Campbell administration for eight years. The investigation in the United Water matter is ongoing.
Meanwhile, handwriting experts hired by the local press say the signatures on the letter closely resemble Campbell's. And former Atlanta Water Commissioner Remedios del Rosario has said publicly that a former chief operating officer summoned her and demanded she approve the increase. Del Rosario has said she declined.
Creedon said the letters were part of a typical dispute process with the city.
City attorneys claimed the letters were invalid, and United Water has withdrawn its claim for the extra money, he said.
Campbell's successor has her own ties to private water companies. Franklin, who was elected mayor with slightly more than 50 percent of the vote in November 2001, lobbied for one of United Water's main competitors — USFilter, a Vivendi Environnement subsidiary.
Franklin, known as a Democrat powerbroker in Atlanta who worked for several mayors, including Andrew Young, was a partner in a public relations company called Urban Environmental Solutions. Franklin, through UES, lobbied for USFilter to get the Atlanta water connection. According to USFilter spokesman Scott Edwards, Franklin's Urban Environmental would have been a partner of USFilter had the company won the contract.
The city contracted wastewater operations to USFilter in January 2002 in a 20-year, $200 million deal.
Edwards said the company did not work with Franklin on the deal. He said that the city asked for proposals in April 2001, while Campbell was still mayor, and that Franklin acted ethically at all times.
Franklin and her office declined repeated interview requests about the letters. A November e-mail from press assistant Jade Rutland stated: "The mayor is now focused on and inundated with the recent city layoffs and budget at this time. Your request is on the media request list and is being reviewed by the mayor's scheduler." The office did not respond for further comment.
Campbell could not be reached for comment.
The Atlanta region, home to 3.4 million people, faces significant water woes. Its water pipes are more than a century old, crumbling with age and unable to handle the region's growth. Atlanta is one of the fastest growing cities in America. The Atlanta Regional Commission, a planning board, forecasts that the regional demand for water will grow by 50 percent over the next two decades. Atlanta's water supply, however, is limited. More than 85 percent of its water comes from surface sources, such as rivers and lakes, most of which are already strained under the weight of population growth.
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