A research project supported by the European Commission fp5: Energy, Environment and Sustainable Development

7City in Time

In the last decades of the XIX century, more than 600 epidemics broke out throughout Europe, about 70% of those caused by water-borne diseases. This led Milan’s public opinion to call for the construction of an aqueduct to serve the city. As a result, the city council appointed a special commission in October 1887 in order to evaluate the various options and report to the city council. The commission eventually decided to accept the proposal of the technical office of the commune of Milan, that is to say to dig wells and supply ground water. The first wells were constructed in the second half of 1888. The decision to use groundwater as a source since the beginning of aqueduct’s activity might be regarded as having created a technical path dependency. In fact, to date groundwater remains the only source of drinking water supplied to the city of Milan (Venegoni, 2000: pp. 20-22).
The first project for the construction of a sewerage network, although limited to the city centre, dates back to in 1868. Between 1868 and 1878, 3,584 metres of sewers were built with a total capacity of 8,304m³. In 1890, a comprehensive project for the city’s sewerage network was completed by the technical office of the commune of Milan (Venegoni, 2000: pp. 22-26).
It should be noted that the water supply service was set up as a department of the technical office of the commune of Milan in April 1887 (Venegoni, 2000: p. 26) and has remained under direct municipal management up to November 2002.

8Conclusions and discussion of findings

The following appear to be general conclusions to be drawn from the Milan case study, which might have a broader relevance to enhancing sustainability through urban water supply and sanitation services reform.

1. 
   Transparency appears to be an issue of particular concern when BOT-style contracts represent a sizeable long-term opportunity for rent-seeking actors. Corruption, anti-competitive practices, inflated construction and operating costs, not to mention expensive and time-consuming legal litigation, are all risks that should be carefully evaluated even by the most resourced municipal administrations if they are to retain control over the reform process. In fact, entering long-terms arrangements in conditions of dubious transparency might produce negative effects in terms of path dependency.
   

2. 
   State autonomy theory appears capable of explaining how the performance of an efficient municipally-owned undertaking might be adversely affected by the interests of local government. In the absence of checks and balances ensuring that operational decisions serve the intended purposes and without adequate transparency and accountability, the pursuit of fiscal considerations might prejudice sound management. However, fiscal considerations appear to be a persistent factor in decision making irrespective of the organisational form underlying water supply and sanitation and, due to their potentially damaging effect on the sustainability of water services, public and transparent debates on the implications of funding water and other municipal services should inform decisions on urban water reform.
   

3. 
   In a complex world where local authorities have to take decisions pursuing a variety of public interests in the light of technical and economic constraints and in a changing institutional environment, public enterprises appear to offer considerable potential in terms of both organisational and operational flexibility. More precisely, publicly-owned undertakings set up under different organisational modes appear particularly suited to adjust to changes in external circumstances and positively respond to the demands of local authorities in the light of relatively strong principal-agent relationships. Also, the public sector should not be regarded as a monolithic entity in the light of the diversity of organisational modes encompassed. Different arrangements can be found under municipal ownership and management of water supply and sanitation services, ranging from direct municipal management to “azienda speciale” or its international equivalent, to a wholly municipally-owned PLC. If any of the above organisational modes might enable efficient operations, depending on the underlying institutional framework, structural differences allow for ring-fencing finances, accelerating managerial decisions or accessing human and technical resources according to local requirements. Local authorities should carefully consider all the above when taking decisions on the reform of urban water services, bearing in mind the distinction between the responsibility of the principal and that of the agent and aiming at providing an adequate institutional framework for a reliable agent to pursue a variety of sustainability objectives.
   

4. 
   Depending on the local political setup, social values and traditions in terms of participation and deliberation, the lack of appreciable levels of public participation in the water supply and sanitation sector might be explained in the light of the absence of legal provisions requiring the adoption of specific forms of participation. Public participation might have much to contribute to decision making on the reform of urban water supply and sanitation systems by enhancing transparency and accountability and ensuring that a more comprehensive range of sustainability-oriented considerations are addressed in the process. In fact, the diversion of resources from sustainability objectives is often induced by the prevailing of interests carried by few or sometimes individual stakeholders, such as private operators (whereby interests coincide with profit maximisation) and municipalities (whereby interests coincide with the maximisation of fiscal revenues).
   

9References

Corte dei Conti, “Relazione sul risultato dell’indagine riguardante i servizi pubblici locali con particolare riferimento ai servizi idrici e alla depurazione delle acque reflue urbane nelle regioni Lombardia e Lazio”, Delibera 2/2003 del 21/02/2003.
Global Water Report (2001) Bribery and delays keep Milan infrastructure waiting, in Global Water Report, Issue 131, 15^th October 2001, pp. 1-3.
Lecca S., 2003, “La dinamica dell’economia di Milano negli anni '80”, Impresa e Stato, 43. URL: http://www.mi.camcom.it/show.jsp?page=67780 accessed on 20/12/04.
Lobina, E., 2005. WaterTime National Context Report – Italy, WaterTime Deliverable D10f (www.watertime.net).
Molinaro (2000), Scheda sintetica sui problemi della depurazione delle acque a Milano e sull’ipotesi di commissariamento”
Servizio idrico integrato del Comune di Milano, Relazione alle previsioni di bilancio 2001/2003.Milano, 26 gennaio 2001.
Venegoni, F. M. (2000) SOGEA S.p.A. – Stima del valore del ramo d’azienda ex-articolo 2343 codice Civile. Allegato alla Proposta di Deliberazione Atti P.G. 3.690.021/2000, 13^th October 2000.

Notes

1 Relevant region must be regarded as the area served by the water undertaking, since it can be the city, as in Grenoble or Timisoara cases, or the autonomous community, as in Madrid case study

1 Source: http://www.comune.milano.it/WebCity/Documenti.nsf/a05ac22aa8296639012567b6005b1193/64858db7c1a72445c1256c590035217f?OpenDocument.

2 Source: Municipality of Milan, http://www.comune.milano.it/webcity/homepage.nsf/progetti?readForm&Cat=ambiente&Prog=depuratori/&Doc=/progetti/ambiente/depuratori/descrizione.html (accessed 26th February 2005).

3 Source: Municipality of Milan, http://www.comune.milano.it/webcity/homepage.nsf/progetti?readForm&Cat=ambiente&Prog=depuratori/&Doc=/progetti/ambiente/depuratori/descrizione.html (accessed 26th February 2005).

4 Number of municipal employees transferred to MM in June 2003. Source: Interview with Beatrice Dolfi and Roberto Recchia, Segreteria tecnica, ATO Città di Milano, 24th September 2004.

5 Source: Email communication with Beatrice Dolfi, Segreteria tecnica, ATO Città di Milano, February 2005; see also Comitato di Vigilanza per l’uso delle risorse idriche (2003), Relazione al Parlamento.

6 Source: Interview with Beatrice Dolfi and Roberto Recchia, Segreteria tecnica, ATO Città di Milano, 24th September 2004.

7 See Art. 10 del R.R. n. 5/2001 del 16 luglio 2001.

8 Source: http://www.metropolitanamilanese.it (accessed 25th January 2005).

9 See Venegoni, 2000.

10 http://www.metropolitanamilanese.it accessed on 20/12/04.

11 See Lecca S., 2003, “La dinamica dell’economia di Milano negli anni `80”, Impresa e Stato, 43. URL: http://www.mi.camcom.it/show.jsp?page=67780 accessed on 20/12/04.

12 The first project of sewerage in Milan was made in 1868 (Venegoni, 2000: p. 23).

13The treatment a fanghi attivi is a system of biological treatment (i.e. transforming the polluted sludge in inoffensive products for the environment), by the use of microorganisms.

14 Source: Municipality of Milan, http://www.comune.milano.it/webcity/homepage.nsf/progetti?readForm&Cat=ambiente&Prog=depuratori/&Doc=/progetti/ambiente/depuratori/descrizione.html (accessed 28th February 2005).

15 Source: Municipality of Milan, http://www.comune.milano.it/webcity/homepage.nsf/progetti?readForm&Cat=ambiente&Prog=depuratori/&Doc=/progetti/ambiente/depuratori/descrizione.html (accessed 26th February 2005).

16 Source: Molinaro (2000), Scheda sintetica sui problemi della depurazione delle acque a Milano e sull’ipotesi di commissariamento”.

17 ^ Source: Email communication with Beatrice Dolfi, Segreteria tecnica, ATO Città di Milano, February 2005.

18 ^ Source: Email communication with Beatrice Dolfi, Segreteria tecnica, ATO Città di Milano, February 2005.

19 ^ Source: Email communication with Beatrice Dolfi, Segreteria tecnica, ATO Città di Milano, February 2005.

20 Based on a January 2004 publication by Censis-Rur, based on data on municipalities, related to the period 2000-2003. Source: http://www.jobtel.it/rubriche/dossier/ArchivioDossier/Ricchezza_Italia_Censis.aspx#3 (accessed on 3rd March 2005).

21 ^ Source: Email communication with Beatrice Dolfi, Segreteria tecnica, ATO Città di Milano, February 2005.

22 ^ Source: Email communication with Beatrice Dolfi, Segreteria tecnica, ATO Città di Milano, February 2005.

23 ^ Source: Email communication with Beatrice Dolfi, Segreteria tecnica, ATO Città di Milano, February 2005.

24 Source: Municipality of Milan, http://www.comune.milano.it/webcity/homepage.nsf/progetti?readForm&Cat=ambiente&Prog=depuratori/&Doc=/progetti/ambiente/depuratori/descrizione.html (accessed 28th February 2005).

25 See Interview with Valter Molinaro, on 23^rd September 2004.

26 Queste sono individuate nella diversa composizione degli scarichi da depurare (da prevalentemente industriali a civili e commerciali) e nella diminuzione dei prelievi della risorsa. Su questo punto v. intervista con V. Molinaro del 23 settembre 2004.

27 Acronym of Not In My Back Yard.

28 Source: Molinaro (2000).

29 The competitive tendering system is adopted when, for the execution of works and supplies presenting particular technical features, the Administration decides to invite different firms to present the economic bids and the technical projects. The choice takes place not only on the basis of the economic convenience, but also of the technical perfection of the projects and of its fit related to the Administration needs, so that a bid economically more expensive, but better under other profiles can be chosen..

30 See Sentenza n. 4683/2001 del Consiglio di Stato del 24 luglio 2001.

31 TAR stands for “Tribunale Amministrativo Regionale”, i.e. Administrative Regional Court of Justice.

32 Tribunale ordinario di Milano, 4° Sezione Penale, Sentenza del 18 luglio 2001.

33 Thames Water acquired 75% of Pridesa in September 2002 and bought the remaining 25% which was still owned by Iberdrola in October 2004. Source: “Thames takes Iberdrola minorities”, Utility Week, 5^th November 2004, p. 9.

34 Source: Municipality of Milan, http://www.comune.milano.it/webcity/homepage.nsf/progetti?readForm&Cat=ambiente&Prog=depuratori/&Doc=/progetti/ambiente/depuratori/descrizione.html (accessed 26th February 2005).

35 Tribunale ordinario di Milano, 4° Sezione Penale, Sentenza del 18 luglio 2001.

36 Sorce: ANSA, “Tangenti: depuratore Milano; Ridotta Condanna De Carolis”, Milan, 9th May 2003, 15:18.

37 In April 2004, former Italian minister Rino Formica received a prison sentence to 4 and a half years in connection to an ITL 5 billion bribe allegedly paid by the Pisante brother’s Emit in the late 1980’s to obtain works in the port of Manfredonia. Source: “Tangenti: Manfredonia; 4 anni e mezzo a Rino Formica; per vicende risalenti alla fine degli anni ottanta”, ANSA Notiziario Generale in Italiano, 22nd April 2004; “Quattro anni all’ex ministro socialista Rino Formica - Per le tangenti al porto di Manfredonia condannati imprenditori ed ex politici”, La Stampa, 23rd April 2004, p. 9.

38 See Press release del Comune di Milano del 29 giugno 2001: “Via libera della giunta al depuratore di Nosedo”.

39 Source: Municipality of Milan, http://www.comune.milano.it/webcity/homepage.nsf/progetti?readForm&Cat=ambiente&Prog=depuratori/&Doc=/progetti/ambiente/depuratori/descrizione.html (accessed 26th February 2005).

40 In the competitive tendering with a restricted procedure the Administration invites more firms (by choosing or by a competitive tender notice), that are qualified on the basis of evaluations realized at any one time, more frequently the firms whose qualification is proved by the enrollment in special lists elaborated by the Public Administration or in special rolls (es. ANC). The competitive bid is conducted among these firms and the choice will be made on the basis of the best economic offer. It is the most frequent system, because the preventive selection of the competitors guarantees the Public Administration.

41 See Sentence n. 1577/03 of the Council of state January 7, 2003.

42 Source: “L'Odissea di un esposto - Parla il tecnico che preparò il documento di 103 pagine”, La Padania, 5th August 1998, p. 6 (http://old.lapadania.com/1998/agosto/05/050898p06a2.htm).

43 See Proposta della Giunta Comunale del 7 marzo 1997, p. 1.

44 See Proposta della Giunta Comunale del 7 marzo 1997, p. 2.

45 See Interview with V. Molinaro on 23/09/04.

46 Interview with Giuseppe Raimondi, Director, Settore Ambiente ed Energia, Municipality of Milan, Milan, 27^th September 2004.

47 See Proposta della Giunta Comunale del 7 marzo 1997, p. 1.

48 See Proposta della Giunta Comunale del 7 marzo 1997, p. 2.

49 See Proposta della Giunta Comunale del 7 marzo 1997, p. 2.

50 See Proposta della Giunta Comunale del 7 marzo 1997, p. 2.

51 See Proposta della Giunta Comunale del 7 marzo 1997, p. 2.

52 Source: http://www.storiadimilano.it/cron/dal1991al2000.htm.

53 The two Municipality-owned PLC were AEM (electricity and gas) and AMSA. The first choice would have favored the exploitation of technical synergies (know-how in the excavation and in the pipes setting). The second choice would have favored the existing synergies between the garbage treatment and the sludge treatment.

54 Source. Estratto del verbale della seduta del Consiglio Comunale del 04/10/99.

55 Venegoni, 2000: p. 63.

56 Delibera del Consiglio Comunale del 13 ottobre 2000, p. 2.

57 Source. Il Sole 24 Ore del 29/7/2000 “Dalle mense alla gestione delle acque, outsourcing al comune di Milano”.

58 Source. Il Sole 24 Ore del 16/02/2002 “Aem, la multiutility alla ricerca dell’acqua” di Nosari A. e del 26/8/2000 “In breve”.

59 Source. Il Sole 24 Ore del 4/2/2000 “Aem trascina le utilità” di Oddo G.

60 See Comune di Milano, “Rapporto sulle politiche e sugli interventi rilevanti in corso nel settore servizio idrico integrato” del 26 gennaio 2001.

61 Rispettivamente 450, 60 e 30, per un totale di 540 trasferimenti.

62 See Intervista con V. Molinaro del 23 settembre 2004.

63 “La via milanese alle privatizzazioni”, Gabriele Albertini in un’intervista a F. Tamburini. Il Sole24Ore del 4/3/2003.

64 See Verbale della seduta del Consiglio Comunale del 12/12/2002, p. 16.

65 See Verbale della seduta del Consiglio Comunale del 12/12/2002, p. 15.

66 See interview with Beatrice Dolfi and Roberto Recchia.

67 Source: ANSA, “Metropolitanan Milanese in Piazza Affari entro 2006; il Presidente Burchi, sarà decisiva volontà del Comune”, 28th July 2004; ANSA, “Borsa: Albertini, ipotesi valida per Metropolitana Milanese; fiduciosi su responso Consiglio Stato per vendita quota AEM”, 29th July 2004.

68 See interview with Bruno Rognoni. The hidden losses are those representing potential breakdowns (deriving from the pressure exerted by the water on the pipes).

69 Regione Lombardia. L.R. 20 ottobre 1998, n. 21. Organizzazione del servizio idrico integrato e individuazione degli ambiti territoriali ottimali in attuazione della legge 5 gennaio 1994, n. 36 "Disposizioni in materia di risorse idriche" (http://www.minambiente.it/Sito/cvri/docs/lr_20_10_98_n21.pdf).

70 Regione Lombardia. Art. 45.5, Legge Regionale n. 26 del 12 dicembre 2003. Disciplina dei servizi locali di interesse economico generale. Norme in materia di gestione dei rifiuti, di energia, di utilizzo del sottosuolo e di risorse idriche (http://www.arpalombardia.it/contrattidifiume/olona/area_down/norm_rif/LR_26_2003.pdf).

71 Interview with Basilio Rizzo, Miracolo a Milano and Claudio Portugalli, Rete Lilliput Milano.

72 Interview with Basilio Rizzo, Miracolo a Milano and Claudio Portugalli, Rete Lilliput Milano.

73 Source: Interview with Beatrice Dolfi and Roberto Recchia, Segreteria tecnica, ATO Città di Milano, 24th September 2004.

74 Provincia di Milano, Direzione Centrale Ambinete, Settore Acque Superficiali e Servizi Idrici. Piano Stralcio ai sensi dell’art. 141, comma 4, della L. 388/2000 – Adeguamento agli obblighi comunitari in materia di fognatura, collettamento e depurazione. Rapporto Finale, Relazione Generale. July 2001, p. 5:12.

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Coordinator: PSIRU, Business School, University of Greenwich, Park Row, London SE10 9LS, U.K.