Indianapolis officials want to use $80 million from the sale of the city's water and sewer utilities to create a new fund to help the city maintain its prized AAA bond rating.
Mayor Greg Ballard had pledged to use all money from the sale to not-for-profit Citizens Energy Group—roughly $425 million—for projects such as demolishing abandoned houses and rebuilding roads, sidewalks, bridges and other infrastructure.
City officials maintain that pledge to improve city infrastructure still stands because the $80 million fund is temporary.
“It’s like a bumper sticker saying to the ratings agencies, ‘Look how prudent we are,’” said Chris Cotterill, Ballard’s chief of staff.
A proposal set to be considered Wednesday evening by the City-County Council's Rules and Public Policy Committee includes the provision to transfer $80 million from the Sanitary District Sanitation General fund to the new "Fiscal Stability" fund.
The sanitary fund will no longer be necessary because Citizens, and not the city, will be responsible for maintaining wastewater operations. State regulators last month approved the $1.9 billion sale, which is expected to be finalized in the next few weeks.
City officials say the city is not in danger of losing its AAA rating and maintain that the creation of the new fund is a pre-emptive move to show the ratings agencies that the city is serious about keeping the rating.
Fitch Ratings in August 2009 stripped Indianapolis of the AAA bond rating for about a year over concerns that property-tax caps would further squeeze the city’s already tight finances. Two other agencies—Standard & Poor’s and Moody’s—left their ratings unchanged.
Melina Kennedy, who is challenging Ballard as the Democratic mayoral candidate, said the $80 million transfer amounts to nothing more than a ploy to stabilize the city’s budget to avoid a credit rating downgrade.
“This is 100 percent contrary to his pledge last year that he would not use the funds to prop up his budget,” she said.
Ballard will present his 2012 budget, which again is expected to be about $1.1 billion, to City-County Council members at 7 p.m. Monday.
The significance of the decision to create a new fund, Kennedy said, is that $80 million is not available for infrastructure, education, crime-fighting or job-creation efforts.
Unlike Ballard, Kennedy said she would use some of the $425 million to fund early-education, crime-prevention and job-creation programs.
The city already has spent about $140 million on infrastructure improvements and ultimately will invest the entire $425 million in road and sidewalk repairs, said Ryan Vaughn, the council’s Republican president.
“We just can’t do enough construction projects this year or next year to spend the entire $425 million,” he said. “What this does is set aside this money in a clear way to show the ratings agencies that we have the money.”
As part of the $1.9 billion deal with Citizens, the not-for-profit is assuming $900 million in city debt. Removing the entire liability from city books will take a few years but ultimately will improve the city’s standing with the ratings agencies, Vaughn said.
The city then plans to begin transferring the $80 million safeguard into the Rebuild Indy fund—which Ballard created to fund infrastructure improvements.
Democrat councilor Joanne Sanders, a member of the Rules and Public Policy Committee, remains skeptical about the need for the fund, however.
“What’s the Fiscal Stability fund?” she asked. “It sounds to me like it’s to shore up the budget.”