The Center for Public Integrity

It was as if someone tugged at a thread that long weekend in November, split the nation's seam and exposed a nasty wound in its guts.

It happened first in downtown Baltimore. On Nov. 8, a 20-inch pipe burst, sending hundreds of thousands of gallons of water into the streets, closing businesses, snarling traffic and flooding the underground, where cars floated in garages.

Then in Chicago, a broken water main created a 43-foot sinkhole that swallowed several cars as millions of gallons of water gushed onto streets near busy Lake Shore Drive on the city's North side.

Finally on Nov. 10, near San Francisco, a pipe that carries water to 2.4 million people burst, shooting a 100-foot geyser into the air. A shut-off valve was jammed for three days, and the area lost more than 70 million gallons of water.

By and large, Americans have a safe, plentiful and cheap water supply, but those three days in 2002 were a case study in the nation's water woes. The country's geriatric water pipes need to be fixed or replaced, and government and industry studies have estimated that it will take between $150 billion and $1 trillion over the next three decades to do the job.

Both public and private water purveyors are battling for a piece of that new market. But private water companies, led by French and German multinationals, appear poised to take the lead in providing drinking water to American consumers. With money and free-market ideology on their side, they appear to be winning battles in Congress, although the going is still rough in the court of public opinion.

INDIANAPOLIS — For 131 years, Indianapolis Water Company, a private utility, owned the water that flowed from the taps of the city's 1.6 million residents.

Except for a summertime blue-green algae problem that fouled the water in parts of the city, the water was pretty good. But in 2000, the company's parent, NiSource, decided to sell Indianapolis Water, giving city officials the chance to take control of the city's life blood.

"We wanted to protect our most precious resource," said city attorney Robert Clifford.

So it designed a savvy type of contract to keep that control. It built an incentive-based contract that tied at least 20 percent of a company's pay to "political" standards such as customer service or taste and odor. Most contracts focus on regulatory benchmarks and do not tie bonuses to performance, said William G. Reinhardt, editor of Public Works Financing, an industry newsletter.

"It was important to the political management of the water system," he said. "At the end of the day, you don't want people calling you up saying, 'What's wrong with our water, Mayor?'"

The city was up against some powerful adversaries. European giants Suez, Vivendi Environnement and RWE AG all bid for IWC. City attorneys, however, ferreting through the archives discovered an 1870 ordinance that gave Indianapolis first option on the purchase.

After a short court battle, Indianapolis in July 2001 paid $522.5 million for IWC, ending 131 years of private ownership.

The city, however, didn't want the problems of managing and staffing the utility, Clifford said. So it contracted out the management.

CAMDEN, N.J. — Camden is the poorest city in the state of New Jersey, and one of the five poorest in the nation. It sits on the banks of the Delaware River, a mere shadow in the glittering Philadelphia limelight.

Camden was home for a time to 19th century poet Walt Whitman, and was once a bustling, industrial hub. But over time, business fled across the river to Philadelphia, taking with it more than one-third of Camden's population.

Camden suffered through race riots in the 1960s and, in the 1970s, many city assets were sold in an effort to balance its budget. By the 1980s, a dwindling tax base and lack of economic development were exacerbated by a long line of mayors convicted for corruption and bribery.

All along, the city's water suffered, too. Heavy metals and poisonous chemicals have been detected in the city's wells since the 1970s. And some of the city's water infrastructure dates back to the days of Whitman, who died in 1892.

Camden sits atop the Potomac-Raritan-Magothy aquifer, a shale-protected underground water bed that is fairly clean. In the Camden area, most contamination leaches down into wells before it reaches the deep aquifer. Magnesium, iron and lead — all which have fouled citizens' water — comes from century-old pipes.

Consultants who worked on Camden's 1999 privatization deal said that the pipes — some of which are still hollowed logs — regularly collapse. The old, city-run water department regularly lost records and often could not keep track of its own billing.

In the mid 1980s, the state Department of Environmental Protection ordered the city to reduce its use of the aquifer because it was siphoning water faster than nature could replenish it.

BOGOTA, Colombia — Residents of the low-lying areas of Bogotá used to perform a rather strange ritual before going to work.

They would dress in old, ragged clothes and rubber boots and wade through the flooded and muddy streets of their neighborhoods until they reached friends' homes on dry land, where they would change into their suits and dresses for work.

The cause of this rush-hour costume change was too few drainage sewers. What few sewers existed in those neighborhoods often backed up because the pipes were below the level of the Bogotá River.

"Many times I could not go to work because I had to stay home and help my family dry the flooded house," said Hernando Contreras, a member of the Local Administration Board of Bosa, a neighborhood close to the river. "In the last year, we have not seen this problem anymore."

Many who lived in mountaintop communities surrounding the city did not fare much better. They had no access to tap water and had to collect rainwater in buckets and pans.

Bogotá is a fast-growing city of 7 million people spread across a broad plateau, the Sabana de Bogotá, which sweeps up the forested slopes of the Andes, 2,600 meters (8,500 feet) above sea level. High forest-green mountains, covered in part by native woods, frame the Sabana. The Colombian capital gets most of its water from tropical highlands about 4,000 meters (13,000 feet) above sea level, which act as a natural sponge, sucking moisture out of the clouds and mists — a unique ecosystem called a páramo. The water drains to rivers and lakes and from these is channeled down into the city.

JAKARTA, Indonesia — When Indonesian dictator Suharto resigned on May 21, 1998, the city of Jakarta was a war zone. More than 2,500 people had died in clashes with Suharto's soldiers and in fires that swept the riot-torn city.

Among the thousands of foreigners who fled the chaos were about 30 executives and family members of two multinational utility companies, Thames Water and Suez Lyonnaise des Eaux. Just four months earlier, the companies had taken control of Jakarta's waterworks by forming partnerships with Suharto's children and cronies.

Both Thames and Suez executives abandoned their posh offices in the central business district, whose streets were strewn with broken glass and cloaked with fire and smoke, and boarded chartered jets for Singapore.

Indonesian water officials said they left no clear chain of command and only three days worth of chemicals required to clean the city's drinking water. (The companies said their executives left for only several days and that there were enough treatment chemicals for 20 days.)

Djoni Heryanto, who ran Jakarta's largest water treatment plant, said the riots had halted delivery of crucial chemicals, such as chlorine and aluminum sulphate, from a plant 500 miles away. The threat of waterborne illness suddenly posed a danger for the teetering city of 7.5 million people. The government officials who had managed the waterworks before privatization were, de facto, back in charge.

Heryanto placed a series of panicked calls to Rama Boedi, then-president of the public water authority, Perusahaan Air Minum Jakarta Raya (PAM Jaya), which was nominally responsible for overseeing the privatized system.

"Should I stop the water supply?" Heryanto asked.

MANILA, Philippines — In thousands of poor homes in this sprawling tropical city that is as hot as it is Catholic, the privatization of the waterworks by two major foreign companies in 1997 at first seemed as miraculous as the loaves and the fishes.

The private companies quickly moved to expand service around the capital, and before long taps that had been mostly dry suddenly ran with cool water. Residents like Mely Gagalonia, 50, a housewife living in a Manila slum, had clean water for the first time.

No more fights in the water line, no more spending long hours waiting in line to buy water from vendors who charged her more than a third of the family's income, said Gagalonia.

"Life has become easier for all of us," she said, "since Manila Water came to our place."

That was not the case for everyone. Still, there's no denying that the pre-privatization water situation was grim.

Cora Concepción, 60, a former cleaning supervisor at a hotel who lives in a middle-class neighborhood connected to the public water utility, often went without water because the pressure would drop to such a low level her tap would run dry.

Water shortages were widespread. At the National Hydraulic Research Center in Diliman, Manila's university suburb, leading water experts had to suffer right alongside the poor souls whose problems they studied. "It was ironic," said Angel Alejandrino, a founder of the center. "We also had no water for our toilets."

BUENOS AIRES, Argentina — Mario Parravicino, who lives with his family in the dusty city of La Matanza, gets up each morning praying silently that it won't rain.

"When it rains it often floods and the sewage gets into everything," says the 60-year-old factory worker. "You can't use the toilet because it backs up. It's disgusting."

La Matanza is among the poorest districts in the Buenos Aires metropolitan area, a maze of tiny cinder-block homes wedged together along dirt roads. There are no sewers, so the rains flood its houses and septic tanks, which often overflow into wells. Boiling is the only form of water treatment, and not everyone can afford the gas to boil the water. Nitrate levels, caused by sewage contamination, are dangerously high and waterborne diseases common. In Argentina, agonizing intestinal bugs cause 20 percent of infant deaths.

Across town in Laferrere, the Rusman family has the same problem. Their well is only two meters from the septic tank, and the water is often suspiciously murky after a rainfall.

"Whenever we can we boil it before drinking," Alejandra Rusman explained. "But we don't often have money to pay for gas." The local church provides drinking water to those who can't pay for gas, but the Rusmans don't wish to be beggars. Alejandra worries constantly about her two sons Pablo and Martin, aged 7 and 4. "This situation is dangerous because we forget and the boys drink this cloudy water and it makes them sick," she said.

JOHANNESBURG, South Africa — Every morning, as the sun rises over the Indian Ocean and paints the sky a brilliant yellow, David Radebe crosses the N2 freeway into another world.

Winding like a black snake through green sugar cane fields and over rolling hills, the freeway divides two very different communities along KwaZulu-Natal's spectacular Dolphin Coast.

Thirty miles (50 kilometers) north of the harbor city of Durban, the turnoff to the right leads to the resort towns of Ballito Bay, Salt Rock and Tinley Manor, where holiday homes of the upwardly mobile and absentee landlords perch on rocky cliffs overlooking brilliant white beaches. Radebe comes here to look for work.

On the other side of the freeway, heading toward the interior and scattered between sugar cane estates, lie the houses and dwellings of small ethnic Indian communities and three black township settlements that are home to about 12,000 people. This is Nkobongo, where Radebe lives.

Rows of new government housing line the tidy township streets. Roads and curbs are well maintained. Electrical cables crisscross the landscape above the tin roofs, and township kids, dressed neatly in blue uniforms, make their way to "Indian schools" that now have been integrated.

But the air of progress and order belies a quiet desperation. Eighty percent of township residents live in dire poverty, well below the minimum living standard of R800 ($80) per household a month. The mobile clinic that serves the townships reports an alarming increase in cases of HIV/AIDS, tuberculosis and malnourished children. Six in 10 residents say their children went hungry in the last year.

Their biggest problem, however, is water. Not because of a shortage, but because they can't afford it.

PARIS — "You don't send God to prison," goes the bitter joke that circulated among citizens of the alpine city of Grenoble. Jérôme Monod must be God, they said — otherwise, how did the world's leading water executive manage to avoid prison? Only God, after all, can walk on water.

While serving as CEO of the largest water utility, Suez Lyonnaise des Eaux, from 1987 to 2000, Monod helped plan the privatization of Grenoble's water, a process that was enabled by bribes and resulted in the price gouging of customers. The city's mayor and three water company officials were convicted of corruption in 1995, and the water concession was canceled. Monod, a close adviser to French President Jacques Chirac, was accused in testimony during the trials of having instigated the corruption, but he denied those accusations and was never charged.

Chirac and Monod, both Gaullist conservatives, have been close allies for most of Chirac's four-decade political career, in which he has served as cabinet minister, Paris mayor, French prime minister and president. Yet despite evidence that Chirac's party's finances owe a debt to illegal payments from multinational French water companies, Chirac, too, has managed to float above the scandal.

PARIS — While peddling the benefits of free-market privatization abroad, France carefully guards its own borders against foreign companies, claiming water is too important to be controlled by outsiders.

In late 2002, when debt-ridden Vivendi Universal announced it would sell its shares in its water division, Vivendi Environnement, the French government was not enthusiastic about the prospect of foreigners gaining control of it. "Water supply is very much a public service, and we should pay attention that Vivendi doesn't fall into bad hands," said President Jacques Chirac, who was in the middle of his successful re-election campaign.

The finance ministry assembled a group of investors to consider taking over Vivendi Environnement. They included the state-owned power company, Electricité de France (EdF), which took 4 percent, with an option to buy another 4 percent, and the 186-year-old state bank, the Caisse des Depots et Consignations, which bought 3.2 percent with an option on another 5.6 percent.

No one seemed to be particularly put out by the arrangement. Unions and consumer groups were in accord with the wary government. "We have to be extremely vigilant about...foreign participation in French water supply," the water union of the Ile-de-France, the province surrounding Paris, warned in September 2002.

Vivendi's leading competitor seemed to agree.

"Because water is highly symbolic, water markets are always xenophobic," explained Jean-Luc Trancart, director general at Suez.