BusinessTN

American Water Co. senior vice president Dan Kelleher spent a day in November in Lexington, Ky., doing something most high-caliber executives never have to do: knocking on doors, asking for votes. It was part of a street-level campaign to protect subsidiary Kentucky-American Water from an eminent domain referendum. The campaign capped a five-year struggle to defeat advocates for public ownership of Lexington’s waterworks, a grassroots movement energized by the impending sale of American Water.

By mid-summer, German utilities conglomerate RWE expects to spin off the country’s largest water company as a publicly traded entity, a move that has fuel-injected a decades-long debate. American Water, a $2.2 billion company owning 1,800 waterworks, has spent years playing public relations whack-a-mole with a handful of its biggest municipal customers. And it’s had one hand on the mallet since Chattanooga Mayor Ron Littlefield announced a year ago he and Hamilton County Mayor Claude Ramsey were reviewing options to acquire Tennessee-American Water, which has owned Chattanooga’s waterworks since 1863.

Refusing to sell its subsidiaries piecemeal, American Water rebuffed Littlefield’s preliminary attempts at negotiation. The mayor has said he’s waiting for the IPO to gauge his next move.

Littlefield’s measured approach is markedly different from that of former Mayor Jon Kinsey, whose quixotic push in 1999 to assume the waterworks by eminent domain failed in the face of faltering city council support and public concern over the cost of a takeover. Kinsey couldn’t convince Chattanoogans that their slightly higher water rate relative to public utility rates in Memphis or Knoxville was worth a prolonged court battle. Tennessee-American, meanwhile, spent $5 million promoting its history of customer satisfaction and civic involvement.

But the framework of the debate has changed. Since American Water’s 2003 purchase by RWE and its centralization of administrative services, it has become harder for Tennessee-American to sell itself as local. (While Tennessee-American employs 109 Chattanoogans, for example, its customer service and billing have moved out of state—with very effective results, Kelleher argues.)

Maj Fiil, of Washington, D.C.-based Food and Water Watch, says corporate scandals in the United States, where over 80% of waterworks are municipally owned, have bred unease with private control of basic resources.

Veteran city councilman Jack Benson says he thinks the current council shares that concern: “We’re eventually going to have to take [the waterworks] over to remove the public from possible exploitation.”

Harnessing such visceral mistrust may be crucial to a successful takeover campaign in Chattanooga, where it will take support at both street-level and gut-level to survive a costly process.