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City plans to put $80M from utility sale into new fund

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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.”

 

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  • More Debt
    Not only is the water company in debt big time but the pseeduo sale of the water company added another 475 million in debt which we will pay over the next 30 years.
  • smoke and mirrors
    Seems to prove that the GOP is using only smoke and mirrors. The repairs Ballard wants to take credit for are actually stimulus funds for infrastructure given by the Administration. Sell the utility assets, the tax payers are charged with the cost via rate hikes, Ballard passes the funds around from fund to fund to pat himself on the back but without doing anything, and above all, the people's money is not being spent wisely, just politically.
  • whose debt?
    To say that Citizens is assuming $900 million in city utility debt misses the fact that ratepayers have always been and will always be responsible for that debt.
    Only the collection agency has changed.
  • $80 Million Money Grab?
    Can't see why they want to raid a $80 million fund before the Water Company sale is complete.

    Oh yeah, this press release was issued just yesterday, placing more doubt on their motives:

    Fitch Affirms Indianapolis, IN's GOs at 'AAA'; Outlook Stable

    http://www.businesswire.com/news/home/20110808006913/en/Fitch-Affirms-Indianapolis-INs-GOs-AAA-Outlook
  • Road repairs
    No matter what is done with the $80 mil.part of the $425 mil.needs to be used to repair West Washington Street.It is in a sorrier state than most other streets in the city that are receiving repairs.Do we as a city want people coming from the airport to downtown to see what a sorry road leads into downtown?Get on the Ball Mayor Ballard and get this street fixed!!!
  • More Mismanagement by the Indiana Utility Regulatory Commission
    Utility Borrowing Up to $1 Billion To Buy Indianapolis Water, Sewer

    Citizens Energy Group, a nonprofit utility, will enter the market next week with up to $1 billion of new-money and refunding tax-exempt bonds to finance the purchase of Indianapolis' water and sewer systems.

    This is happening as S&P Cuts AAA Ratings on Thousands of Municipal Bonds yesterday after U.S. Downgrade.

    More downgrades are expected soon.

  • Politicians Ignore Water Company Crisis
    13 Investigates: Why so many water main breaks in Indianapolis?

    The water company is asking US to wait at least another week before we water our lawns.

    So whats the problem that requires water rationing every July & August?

    13 investigates has found the number of breaks isn't just high when compared to last year. It's also abnormally higher than one of our nation's biggest cities.

    Last year New York recorded just 444 water main breaks. Indianapolis had nearly 700.

    In 2009, New York had 360 breaks, while Indianapolis nearly doubled that number with 600.

    New York also reportedly spent a billion dollars replacing and maintaining its system since 2002 using a team of "leak detection units." Indianapolis does not have such a system.

    http://www.wthr.com/story/15176631/13-investigates-why-so-many-water-main-breaks-in-indianapolis


    So what is Mayor Ballard and Melina Kennedy going to do about this water company crisis that has a backlog of billions of dollars in unfunded water/sewer maintenance and infrastructure?

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