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Industrial support for utility sale to cost $1.5 million

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The price to get big industrial firms to support the sale of the city’s water and sewer utilities to Citizens Energy Group: at least $1.5 million.

Documents the city and Citizens filed Friday with the Indiana Utility Regulatory Commission show that the city agreed to make the one-time payment to resolve concerns of the so-called Water/Sewer Industrial Group.

The group consists of Eli Lilly and Co., National Starch LLC, Rolls-Royce Corp. and Vertellus Agriculture & Nutrition Specialties.

A letter sent to the industrial group by city and Citizens officials noted the big wastewater customers were concerned with increases they pay in the form of an “excessive strength surcharge” that amounts to more than $11 million annually.

Besides the one-time, $1.5 million payment to industrials, which will come out of a $40 million escrow fund the city set up last year for the deal, Citizens agreed to work with industrials on a cost-of-service study to be presented in an upcoming rate case.

“I believe it is a reasonable resolution of the issues the industrial group raised regarding the proposed acquisitions and a fair outcome for the [Citizens Water Authority] and ratepayers, especially in light of the fact the payment it contemplates will be made by the city from the escrow account to be funded with cash the city receives as a result of the wastewater acquisition,” Citizens CEO Carey Lykins said in a prepared statement.

Citizens and the city on Friday filed testimony with the IURC supporting a proposed settlement announced earlier this month involving industrials, the Office of Utility Consumer Counselor and suburban communities served by the utilities.

Among terms of the settlement, Citizens agreed to document savings generated by the transfer.

The IURC is expected by the end of summer to OK the sale of the water and sewer utilities to Citizens—a deal worth $1.9 billion.

Citizens said it expects the sale will bring $60 million in annual savings, and combined water and wastewater rates 25 percent lower than currently projected.

The city plans to use $425 million in proceeds to make infrastructure improvements and to tear down abandoned houses.

The proposed deal is turning out to be a moneymaker for several local professional firms. For example, Indianapolis law firm Ice Miller LLP has billed more than $3.4 million for legal services to Citizens – the bulk of the $7.1 million in profession fees Citizens has incurred so far.

The city has incurred more than $9 million in transaction costs, including more than $2 million to local law firm Baker & Daniels LLP. Citigroup Global Markets will pocket at least $5 million.

Also, the city is paying current Indianapolis Water operator Veolia a contract breakup fee of $29 million.


 

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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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