IBJNews

Waterworks board wants outside review of mayor's utility plan

Back to TopCommentsE-mailPrintBookmark and Share

What had been steady sailing for Mayor Greg Ballard toward approval of his $1.9 billion plan to sell Indianapolis Water and the city’s wastewater utility may be slowed by an outside review being sought by the city’s waterworks board.

The Department of Waterworks this month asked the Indiana Utility Regulatory Commission for approval to spend $50,000 to hire accounting firm BKD LLP and prominent law firm Bose McKinney & Evans to pore over the terms of the deal.

The commission on April 20 declined the request, citing a lack of documentation. But the waterworks board is filing an amended request to persuade regulators to sign off on the review.

Barely a paper clip can be purchased by Indianapolis Water without IURC permission because the Department of Waterworks is seeking a 35-percent rate increase for the utility to pay for urgent capital improvements.

How long it will take the board to get the IURC to OK the hiring of BKD and Bose McKinney nobody knows. Meanwhile, City-County Councillor Mike Speedy on April 19 filed Ballard’s utility deal with the council for consideration.

Could the waterworks board’s outside review of the deal now delay it?

Possibly, said Chris Cotterill, Ballard’s chief of staff, adding: “I don’t think that’s the board’s intention.”

 “We’re in a bit of a tough spot,” nevertheless, he said.

That’s because, on one hand, the mayor doesn’t want anyone to think the administration is trying to cram the deal through without allowing ample opportunity to study it, said Cotterill. He noted the mayor has conducted about 25 public meetings in an effort to fully explain the deal and answer questions since proposing the plan on March 10.

On the other hand, the administration said it merely asked the waterworks board, and the Department of Public Works, to review the deal to see if it was worthy of referring to the City-County Council. The DPW has already signed off.

Cotterill also said the City-County Council is hiring its own advisers to analyze the terms before voting.  If the council approves the deal, it would need IURC approval to begin transferring city water and sewer assets to Indianapolis-based Citizens Energy Group.

Cotterill said he understands the desire of the waterworks board to thoroughly vet the deal. In the past, the board has been criticized for a lack of oversight, particularly in supervising French-owned Veolia Water, which operates Indianapolis Water under a contract with the city.

Matthew Klein, executive director of the Department of Waterworks, who left Bose McKinney last year to accept the position, said the waterworks board in recent years “was criticized by the commission for sort of getting into things without much forethought.”

Klein said the board, which would no longer exist after the sale, “wants to do the right thing and ensure they’re getting enough advice.”

The waterworks board wants Bose McKinney to determine whether the transfer of assets, as defined in a memorandum of understanding the mayor struck with Citizens, “is legal.”

The review is also to determine if the proposed transfer process “is fair and reasonable.”

BKD would examine the cost-savings estimates under Citizens’ ownership, its rate-mitigation plan and “would review the valuation of the asset transfer to determine if it is reasonable.”

The board apparently wanted the review conducted in short order; the proposed contracts with the two firms would expire May 31.

The IURC, however, said the request to hire the firms “lacks sufficient support and justification for entering into either of the two transactions.”

The April 20 order by the commission also states that the waterworks board “fails to demonstrate the level of professionalism and experience which would be represented by parties contemplated in the validation of such transactions.”

One attorney involved in the water company rate case said the waterworks board in the last day or two had filed the professional background of BKD and Bose McKinney employees with the commission in an attempt to gain OK to hire them.

 “We intend to file another notice [request],” said Klein.

Mayor Greg Ballard proposed the utility deal last month as a way to mitigate future rate hikes, to remove more than $1.5 billion in city debt and to generate more than $425 million in cash and bond proceeds to the city. The city plans to put the money toward more than $4 billion in infrastructure improvements such as roads, bridges and sidewalks.

The mayor and Citizens have estimated the synergies/efficiencies that would result from Citizens' controlling numerous utilities and consolidating back office functions would help reduce rates by 25 percent from what they would be by 2025 versus other options the city had been considering for the water and sewer utilities.

Indianapolis Water plans $111 million in capital projects in the next few years, of which about $23 million would go toward unfunded federal mandates, including new water-disinfection systems.

In 2002, the city, under then-Mayor Bart Peterson, bought Indianapolis Water from Merrillville-based NiSource. Critics say a number of necessary capital improvements were delayed by the city for years to keep rates pallatable, prompting the need for the 35-percent rate hike.

If approved by the IURC, the average residential water rate would rise $8 a month, to $31.

Ballard’s team said it received proposals from 24 firms interested in the city’s water/sewer utilities. Among the finalists was an offer by Veolia, which proposed that the city sell the water system to a not-for-profit entity that would be created. Veolia would continue to operate the system.

But the city said Veolia’s proposal would have generated only an estimated $7 million a year in savings, versus about $40 million a year estimated under Citizens’ plan.

The mayor’s team also said the city would still be issuing debt under the Veolia concept.

As a public charitable trust, Citizens Energy can issue its own debt on a tax-exempt basis, much as the city does.

 

ADVERTISEMENT

  • What is wrong with people?
    So we go from 8 dollars to 31?? Why aren't the people saying, enough is enough!!
  • IndyConnect
    JD is right about IndyConnect's imbalanced spending on highways vs other transit. To compound it, IndyConnect and IndyGo will try to sell transit taxes BEFORE any improvements to IndyGo, which will be like selling failure.
    People buy success, not failure. IndyConnect plan is doomed.
  • Citizens Energy
    How did those two companies become the picks to review the proposal? Why was DOW allowed to choose them? If they want the proposals looked at wouldn't it be more transparent to ask the IURC to choose the company. Something is fishy here.
  • Not so fast
    Public transit won't get any money until the road construction people have been paid off. Consider Indy Connect, which gives $8bn to road/highway construction and less than $2bn to transit.
    • scrutiny needed
      This proposal can't be scrutinized enough. Hooray for the waterworks board.
      Unrelated point: Should the deal go through, the city should use significant proceeds to bolster IndyGo, which certainly meets the definition of "basic infrastructure" that the mayor says he will address.
      • Citizen's Energy
        Could the money from the deal be funneled through Citizen's to the CIB for the Pacers,etc. Where's this nonprofit Citizen's get billions of dollars? The deal is suspect.
      • Thank God
        Thank God someone is scrutinizing this thing. The mayor's office, and indeed most of the city government, has gone unchecked far too long.

      Post a comment to this story

      COMMENTS POLICY
      We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
       
      You are legally responsible for what you post and your anonymity is not guaranteed.
       
      Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
       
      No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
       
      We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
       

      Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

      Sponsored by
      ADVERTISEMENT

      facebook - twitter on Facebook & Twitter

      Follow on TwitterFollow IBJ on Facebook:
      Follow on TwitterFollow IBJ's Tweets on these topics:
       
      thisissue1-092914.jpg 092914

      Subscribe to IBJ
      1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

      2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

      3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

      4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

      5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

      ADVERTISEMENT