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City lands $13.8M more than expected from water deal

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The city of Indianapolis has received $13.8 million more than originally expected from a bond issue secured by the pending sale of its water and sewer utilities to Citizens Energy Group.

The bond proceeds of $153.8 million compare with $140 million originally anticipated as one of the chunks of money from selling the utilities. The money will be spent on street, bridge and sidewalk projects, under the city’s “RebuildIndy” program.

That would bring total proceeds from selling the utilities—before subtracting fees and other costs related to the sale—to $504.4 million, from $490.6 anticipated when the City-County Council approved the sale last month.

“We now have a half-a-billion-dollar deal,” said Chris Cotterill, Mayor Greg Ballard’s chief of staff.

Indianapolis’ AAA bond rating from all three rating agencies—Moody’s Investor Services, Fitch Ratings and Standard & Poor’s—resulted in the larger-than-expected bond proceeds, city officials said.

“The city’s strong credit rating leads to greater opportunities,” said Deron Kintner, executive director of the Indianapolis Bond Bank.

Indianapolis is one of three cities of comparable size or larger with such high ratings from all three ratings agencies, city officials said.

The bond is secured by more than $650 million in so-called payments in lieu of taxes, or so-called PILOTs, that Citizens will make through 2039.

The sale of the utilities faces one more hurdle: approval of the Indiana Utility Regulatory Commission, which has yet to deliberate on the request.

“For some reason if the [Citizens] deal does not go through, those same PILOT payments will be made by the Sanitary District as it currently does,” said Kintner.

After paying expenses of the $1.9 billion sale of the utilities to Citizens, the city expects to receive, excluding the additional amount raised in the bond issue, between $434.7 million and $459.7 million.

One variable will be whether escrow the city set aside for Citizens to cover lingering legal and contract claims is tapped over the next two years.

Meanwhile, Citizens has revised upward its anticipated “synergy” savings of tucking the water and sewer utilities in with its gas, steam and chilled water divisions.

Citizens had estimated annual savings of about $43 million. “A more thorough analysis now indicates that combining the five utilities may yield annual savings of up to $60 million after a three-year integration period,” said Dan Considine, spokesman for Citizens Energy.

Citizens is also assuming more than $900 million in Department of Waterworks debt.

Mayor Ballard said the deal frees up millions of dollars for necessary capital projects in the years ahead without tax increases.

Opponents of the deal have called it a hidden tax increase, saying Citizens ratepayers ultimately are footing its purchase of the two utilities from the city.

Work on more than $50 million in construction projects from bond proceeds is to begin by the end of the year.

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  • Privatization
    Mayor Ballard will go down in the history books as the man who sold Indianapolis' utilities away for a song.

    It should never have been done. But the republicans want to PRIVATIZE everything so that a profit can be made.

    Terrible, terrible terrible mistake for a little cash now and HUGE increases in rates in less than 5 years. ,
  • SEC Calls It Churning, Politicians Call It Business As Usual
    So they just refinanced for the THIRD time existing debt and you portray it as found money?

    Each time these are refinanced, the transaction costs for investment banking and politically connected law firms and other "consultants" are in the tens of millions not including penalties. Yet no added value was actially created except running up the taxpayer bill.

  • Someone has a camera
    Yes, in parts of the Indianapolis sewer infrastructure, sewage does flow uphill.
  • How exactly does sewage from Indianapolis flow into Geist? Does water run uphill?


    Guessing more likely the high ecoli is from the farms in the area coupled with old failed, and abandoned septic syastems in the area.
    • Deal
      Willing to give the deal a chance, but won't the City (DPW, in particular) still be responsible for sewer infrastructure???
    • Give the deal a chance
      We have tried before to steer monies to the infrastructure. Our politicians have failed us. Give this deal with Citizens a chance. Everybody is not going to happy. But we are getting this out of political hands.
      • Infrastructure
        The bond proceeds should be used to fix the sewer infrastructure to stop the illegal flow of raw sewage into water supplies that are designated for drinking and recreational use, including but not limited to Geist Reservoir (which has e coli levels 7 times higher than what is considered "acceptable").
      • IURC and OUCC Need To Step In
        The bond proceeds should be reinvested in water and sewer infrastructure to offset the EPA unfunded mandate for billions of dollars of upgrades which will increase water/sewer bills 400+% according to city projections.

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      1. Apologies for the wall of text. I promise I had this nicely formatted in paragraphs in Notepad before pasting here.

      2. I believe that is incorrect Sir, the people's tax-dollars are NOT paying for the companies investment. Without the tax-break the company would be paying an ADDITIONAL $11.1 million in taxes ON TOP of their $22.5 Million investment (Building + IT), for a total of $33.6M or a 50% tax rate. Also, the article does not specify what the total taxes were BEFORE the break. Usually such a corporate tax-break is a 'discount' not a 100% wavier of tax obligations. For sake of example lets say the original taxes added up to $30M over 10 years. $12.5M, New Building $10.0M, IT infrastructure $30.0M, Total Taxes (Example Number) == $52.5M ININ's Cost - $1.8M /10 years, Tax Break (Building) - $0.75M /10 years, Tax Break (IT Infrastructure) - $8.6M /2 years, Tax Breaks (against Hiring Commitment: 430 new jobs /2 years) == 11.5M Possible tax breaks. ININ TOTAL COST: $41M Even if you assume a 100% break, change the '30.0M' to '11.5M' and you can see the Company will be paying a minimum of $22.5, out-of-pocket for their capital-investment - NOT the tax-payers. Also note, much of this money is being spent locally in Indiana and it is creating 430 jobs in your city. I admit I'm a little unclear which tax-breaks are allocated to exactly which expenses. Clearly this is all oversimplified but I think we have both made our points! :) Sorry for the long post.

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