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Waterworks board wants outside review of mayor's utility plan

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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.

 

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  • 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.

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      1. 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.

      2. If you only knew....

      3. 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.

      4. The facts contained in your post make your position so much more credible than those based on sheer emotion. Thanks for enlightening us.

      5. Please consider a couple of economic realities: First, retail is more consolidated now than it was when malls like this were built. There used to be many department stores. Now, in essence, there is one--Macy's. Right off, you've eliminated the need for multiple anchor stores in malls. And in-line retailers have consolidated or folded or have stopped building new stores because so much of their business is now online. The Limited, for example, Next, malls are closing all over the country, even some of the former gems are now derelict.Times change. And finally, as the income level of any particular area declines, so do the retail offerings. Sad, but true.

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