- 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.
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.