IBJOpinion

EDITORIAL: City needs to keep momentum from utilities deal

IBJ Staff
July 31, 2010
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IBJ Editorial

All too often, political posturing gets in the way of progress—or possibilities. Critics line up to oppose a change in public policy not necessarily because it’s a bad idea, but because it originated on the “wrong” side of the political aisle.

We’re happy to see that partisanship didn’t sink Mayor Greg Ballard’s plan to sell Indianapolis’ water and sewer utilities to Citizens Energy Group. Sure, the 19-10 City-County Council vote July 26 largely followed party lines, but it passed nevertheless and now advances to the Indiana Utility Regulatory Commission for a final OK.

The deal, announced in March, calls for Citizens to assume $1.5 billion in utility debt and pay the city $425 million in cash in exchange for gaining control of the water and sewer systems. Citizens says it can save $43 million a year by integrating the city utilities with its own gas, steam and chilled-water operations.

Critics have decried the loss of public oversight, warning that water quality and utility rates could suffer. We aren’t buying it.

First, the city has controlled the water utility only since 2002, when then-Mayor Bart Peterson led the effort to acquire it from Merrillville-based NiSource. So it’s not unprecedented to cede municipal ownership.

Then there’s the fact that Citizens isn’t exactly an unknown entity. It has done a commendable job overseeing the city’s natural gas utility for more than 100 years. And it’s a public charitable trust—without shareholders to enrich—that still will have to gain IURC approval for any rate increases.

But the most compelling evidence is the commitment Citizens is making to continue investing in the utilities. In addition to handing over cash and taking on city debt, Citizens must make costly sewer upgrades, and CEO Carey Lykins has said the company also will complete a septic tank replacement program that’s under way.

And let’s not overlook that $425 million—money Ballard has said will be spent to fix sidewalks, improve roads and tear down abandoned homes, improving the city’s economic development prospects. Without the windfall, taxpayers likely would be footing that bill, or more likely, nothing would happen and our infrastructure would continue to crumble.

Council President Ryan Vaughn described the utility transfer as “the most significant step forward for the city since the passage of UniGov.” We won’t argue with that, but we implore city leaders to keep moving in the right direction.

The council vote was a victory, sure, but Ballard’s legacy depends on more than who’s providing the water we drink. Ultimately, the success or failure of the utilities deal is going to boil down to how the money is spent, the tangible difference it makes in our community—not who proposed it.

The so-called RebuildIndy infrastructure-improvement initiative has untold potential. Politics hasn’t gotten in the way so far. Let’s not start now.•

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

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  • Do you really believe this nonsense?
    First of all, just because the Democrats may have voted for partisan reasons does not mean that they did not make sound arguments. Unfortunately, I could not find one sound argument for supporting this proposal in this editorial.

    "Without the windfall, taxpayers likely would be footing that bill, or more likely, nothing would happen and our infrastructure would continue to crumble."

    Where do you think this money comes from? It comes from the ratepayers. The water and sewer ratepayers, most of whom are also taxpayers, have been burdened with repaying $425 million dollars that should otherwise be used to pay for existing financial obligations of $3.5 billion for the CSO and Septic elimination programs (worthwhile projects) and the money stolen from ratepayers during the variable rate bond fiasco. Savings, if any materialize, should accrue to the ratepayers in reduced rates or to fund needed maintenance. If you have not noticed, we are building $3.5 billion of new infrastructure and it will need to be maintained.

    This is not free money that just fell from the sky. Citizens did not just pull it out of their back pocket. We, the ratepayers, are not off the hook; we have to pay it back, not them.

    "But the most compelling evidence is the commitment Citizens is making to continue investing in the utilities. In addition to handing over cash and taking on city debt, Citizens must make costly sewer upgrades, and CEO Carey Lykins has said the company also will complete a septic tank replacement program thatÃ?¢ââ??‰â??¢s under way."

    Again, Citizen's is not assuming any debt or paying for any costly upgrades; it is the debt of the ratepayers and it is the ratepayers who are paying for the costly upgrades. Before the transfer and sale, the debt was the responsibility of the ratepayers and after the transfer (sale), the debt will remain the responsibility of the ratepayers!

    In summary, it is a tax increase; it will just be hidden within our future water and sewer bills. It appears that you are just repeating the City's propaganda, rendering this newspaper to the same worthless status as the local weekly rag.

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  1. PJ - Mall operators like Simon, and most developers/ land owners, establish individual legal entities for each property to avoid having a problem location sink the ship, or simply structure the note to exclude anything but the property acting as collateral. Usually both. The big banks that lend are big boys that know the risks and aren't mad at Simon for forking over the deed and walking away.

  2. Do any of the East side residence think that Macy, JC Penny's and the other national tenants would have letft the mall if they were making money?? I have read several post about how Simon neglected the property but it sounds like the Eastsiders stopped shopping at the mall even when it was full with all of the national retailers that you want to come back to the mall. I used to work at the Dick's at Washington Square and I know for a fact it's the worst performing Dick's in the Indianapolis market. You better start shopping there before it closes also.

  3. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  4. If you only knew....

  5. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

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