City Looking For New Partners To Operate Water And Wastewater Systems

The City of Indianapolis this past week issued a Request for Expression of Interest to "solicit the broadest array of approaches and ideas that will allow the City to produce finished drinking water, process wastewater and provide related infrastructure services in the most efficient and cost effective manner and to help the City satisfy the USEPA and Court mandated capital improvements in a manner that mitigates the affect on ratepayers." This comes on the heels of a blistering IURC order approving an emergency water rate hike that gave a scathing assessment of the City's current privatization agreement with the French-owned Veolia.

According to the RFEI, the City expects to incur over $4 billion over the next 15 years to upgrade its waterworks and wastewater systems. In order to cover these costs, rates for water and wastewater services are projected to rise 112% and 427%, respectively, over the next 15 years. The RFEI contemplates creating a combined waterworks and wastewater system through a governmental or non-profit structure to realize significant savings in the growing capital and operating budgets of the two separately-run systems. A 5% savings, for example, could yield $175 million in savings. United Water currently operates the wastewater system, while Veolia is paid more than $40 million a year to operate the water company. The wastewater system currently has outstanding long-term bond debt of $461 million; the water company is carrying $843 million in long-term bond debt.

The City has identified three goals it expects to achieve with any strategic partner:

• A long-term role in the operation of the City's wastewater and waterworks systems;
• An integral role in the management of the wastewater and waterworks capital improvements, including an opportunity to share in gains made on scheduling and targeted construction costs for specific project components; and
• An acknowledged role for the broad array of local talent including those that are minority, women and veteran-owned companies.

When the City contemplated the purchase of the water company in 2002, many wise observers suggested that the water company should be owned by a public benefit trust like Citizens Coke & Gas instead of the City of Indianapolis, if the community desired to prevent an outside foreign interest from acquiring the utility. That option would not have permitted all of the skimming and kickbacks that attended the more than half-billion dollar purchase orchestrated by the corrupt administration of Bart Peterson so it was ditched in favor of a city purchase at approximately double the purchase price of the water company's actual value. Although Peterson promised the purchase would ensure low water rates for the City's residents and job protection at the same benefit levels for the water company's employees, both commitments were broken. The City, instead, turned over the management of the water company to Veolia, which was represented by high-powered lobbyists with close ties to Peterson. Water rates are skyrocketing to pay for bungled borrowing schemes and Veolia's overly-generous operating agreement, and the water company employees saw a significant change in their pay and benefits to their detriment.

Hopefully, the City can salvage the financial morass with which the Peterson administration saddled the Ballard administration to limit the long-term damage as much as possible. Doing what the City should have done from day one could be the best solution to this problem.