IBJOpinion

EDITORIAL: City water utility in over its head

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IBJ Editorial

As missteps by the city’s water utility threaten to drown local ratepayers with dramatically higher bills, Mayor Greg Ballard’s administration is exploring a complete overhaul of the system. The mayor’s initiative—even though it’s not driven entirely by the water utility’s woes—can’t produce results soon enough.

The city’s purchase of Indianapolis Water Co. in 2002 has clearly backfired due to lack of execution.

A consultant’s report filed along with the Department of Waterworks’ pending request for a whopping 35-percent rate hike says the department was never adequately staffed to responsibly oversee the utility after it was purchased from Merrillville-based NiSource.

When important decisions must be made, the city staff too often defers to consultants, its own volunteer board and Veolia Water, the French firm that was hired to manage the utility, according to the report prepared by a Colorado utility consulting firm hired by the city to assess the utility.

The damning report is part of the case before the Indiana Utility Regulatory Commission, which must decide whether to grant the utility’s hefty rate increase. The higher rates would pay for $111 million in capital improvements to the city’s water utility infrastructure.

If the rate hike is granted, it will be the second one this year. The IURC earlier approved a 12.3-percent hike to cover more than $25 million in annual debt servicing costs caused by the utility’s overreliance on variable-rate bonds.

The Department of Waterworks already has taken some steps to get its house in order. In March, it hired the former head of enforcement at the Indiana Department of Environmental Management to run the department. Since then, some key positions, including chief financial officer, have changed hands, and there’s a greater emphasis on long-term financial planning.

More drastic changes are in the works.

In an effort to raise cash that could be used to pay for all manner of city infrastructure needs, including a sewer system in need of $2 billion in upgrades, the city is exploring selling the city’s water and sewer utilities outright.

The city’s Infrastructure Advisory Commission is considering proposals from 23 firms that cover a range of options. Among them is a pitch from Citizens Energy, which supplies natural gas here, to pay $1.5 billion for the water and sewer utilities.

The city must carefully consider which of the proposals will maximize the cash that can be generated to fund the city’s considerable infrastructure needs. But equal weight must be given to which proposal would result in responsible stewardship of the city’s water resources.

It’s unlikely the steep rate hike now being considered by the IURC would have been necessary had the utility’s daily operation and long-term capital requirements been handled with sufficient city oversight.•

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To comment on this editorial, write to ibjedit@ibj.com.

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  1. to mention the rest of Molly's experience- she served as Communications Director for the Indianapolis Department of Public Works and also did communications for the state. She's incredibly qualified for this role and has a real love for Indianapolis and Indiana. Best of luck to her!

  2. Shall we not demand the same scrutiny for law schools, med schools, heaven forbid, business schools, etc.? How many law school grads are servers? How many business start ups fail and how many business grads get low paying jobs because there are so few high paying positions available? Why does our legislature continue to demean public schools and give taxpayer dollars to charters and private schools, ($171 million last year), rather than investing in our community schools? We are on a course of disaster regarding our public school attitudes unless we change our thinking in a short time.

  3. I agree with the other reader's comment about the chunky tomato soup. I found myself wanting a breadstick to dip into it. It tasted more like a marinara sauce; I couldn't eat it as a soup. In general, I liked the place... but doubt that I'll frequent it once the novelty wears off.

  4. The Indiana toll road used to have some of the cleanest bathrooms you could find on the road. After the lease they went downhill quickly. While not the grossest you'll see, they hover a bit below average. Am not sure if this is indicative of the entire deal or merely a portion of it. But the goals of anyone taking over the lease will always be at odds. The fewer repairs they make, the more money they earn since they have a virtual monopoly on travel from Cleveland to Chicago. So they only comply to satisfy the rules. It's hard to hand public works over to private enterprise. The incentives are misaligned. In true competition, you'd have multiple roads, each build by different companies motivated to make theirs more attractive. Working to attract customers is very different than working to maximize profit on people who have no choice but to choose your road. Of course, we all know two roads would be even more ridiculous.

  5. The State is in a perfect position. The consortium overpaid for leasing the toll road. Good for the State. The money they paid is being used across the State to upgrade roads and bridges and employ people at at time most of the country is scrambling to fund basic repairs. Good for the State. Indiana taxpayers are no longer subsidizing the toll roads to the tune of millions a year as we had for the last 20 years because the legislature did not have the guts to raise tolls. Good for the State. If the consortium fails, they either find another operator, acceptable to the State, to buy them out or the road gets turned back over to the State and we keep the Billions. Good for the State. Pat Bauer is no longer the Majority or Minority Leader of the House. Good for the State. Anyway you look at this, the State received billions of dollars for an assett the taxpayers were subsidizing, the State does not have to pay to maintain the road for 70 years. I am having trouble seeing the downside.

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