Friday, March 26, 2010

Williams Points Up Serious Flaws In Proposed Sale Of Water/Sewer Systems

Every Indianapolis City-County Councilor should be taking a close look at a critique of the proposed sale of Indianapolis' water and wastewater systems to Citizens Gas recently released by Democratic mayoral hopeful Brian Williams. This deal hatched by the Ballard administration is full of pitfalls that could wind up costing taxpayers dearly in the long run. I'll highlight some of the major points Williams makes. You can follow the link to read his entire statement.

  • The agreement contains no assurances the city will receive clean, safe and reliable water.
  • The city reserves no first right of refusal to repurchase the utilities in the event Citizens Gas decides to sell them in the future.
  • An indemnification clause in the agreement obligates to pre-closing combined sewer overflow liabilities. According to Williams, this could leave the City responsible for billions of dollars in potential future liabilities.
  • The City will not receive $425 million upon the sale as advertised by the Ballard administration. In actuality, the figure is a moving target until the actual closing. The City will receive $170.6 million at closing. Another $92 million will not be paid until October, 2011. That only adds up to $262.6 million. That amount could be reduced, though, if borrowing costs increase due to a downgrade of a provider of surety bonds backing water company revenue bonds. If Citizens decides it doesn't want the water company headquarters, the cash paid to the City will be reduced by its value. Another $15 million could be taken out of the cash payment to the City based on a "cost-sharing" agreement.
  • The $425 million cash will only be realized if the City borrows another $163 million. Citizens has agreed to pledge revenues to pay of that debt.
  • Citizens gets to take $127 million sitting in a city fund for future wastewater construction projects. The cash paid at closing is not being adjusted to account for all of the debt payments the City will make between now and closing, a provision typically found in these types of agreements
  • The bottom line is that the City is getting $43 million cash after giving up both the water company and wastewater systems, while stilll assuming large potential liabilities for which it will have no revenue source to cover.
  • Essentially, the City is trading Citizens over $600 million in future utility revenues for $163 million today to spend on pork barrel projects prior to the 2011 municipal election.

9 comments:

Downtown Indy said...

How is it the City spends so damn much on high priced law firms and they are never able to nail down more favorable contractual terms?

artfuggins said...

Williams has been in enough business deals with troubled Tim Durham that he probably could spot the tricks in a business deal.

Advance Indiana said...

As I understand it, Williams and his investor friends lost money on their investments with Durham and sued him for it.

Glenn said...

Has there been a response from the Mayor's office? Has Melina responded since she was employed by the Peterson administration, who were the ones who brought the water company?

Advance Indiana said...

Ballard is led around blindly. You can't confuse him with the facts. He knows what Bob Grand and Joe Loftus told him, and that's all he wants to hear. I long ago gave up on trying to convince him of anything. He's convinced people like me are the bad guys and don't know what we're talking about. As long as Ballard is getting all of his free junkets, steak dinners and front row tickets to all of the sporting events, he's satisfied with what his masters are feeding him.

Advance Indiana said...

I should add that it is unbelievable how much hatred Ballard has for the very people who elected him. A turncoat of the worst order, he will get his pay back in the 2011 election when he gets bounced out on his ass.

Glenn said...

Based on my research, Anne Nobles, who is Melina Kennedy’s campaign chair, sits on the Board of Directors of Citizens Gas. Based on detailed analysis of the proposed sale of the water company, Baker and Daniels is doing the legal work. Kennedy and Nick Weber, who is Ballard’s former Deputy Mayor work for Baker and Daniels. In other words, this deal is good for Baker and Daniels, not for the city of Indianapolis. No wonder Melina has not made any statements to the public. It would cost her a job and the mayor’s office.

Wilson46201 said...

Aren't IndyErnie and Greg Ballard still tight?

Bob said...

Question:

Is the water company customer base significantly different than the city of Indianapolis?

In other words, if there is a liability, does it matter? Aren't we going to pay for it in taxes or in water rates?

The lack of a first right of refusal is a problem.