Brian Williams Is The Only Politician Who Gets It On Utility Transfer

Democratic mayoral candidate Brian Williams is one of the last politicians I thought I would find myself applauding, but when it comes to the proposed transfer of the utilities to Citizens Energy, he is far and away the only politician in Indianapolis who gets it. He was the first to point up the inflated numbers Mayor Ballard repeatedly stated when selling the deal to the public. He was the first to point up that cash payments being made to the City of Indianapolis would result in higher water rates because Citizens Energy planned to borrow all of the money. He was the first to raise questions about additional borrowing by the City associated with the plan to pay for infrastructure improvements using PILOT revenues paid by the utility. He was the first to raise questions about the unspecified liabilities the City is agreeing to assume, which could reach into the billions in a worst case scenario. He was the first to disclose the exorbitant professional fees the City is shelling out to make this deal go through, which includes a $10,000 a month fee to the public relations firm that recently hired Mayor Greg Ballard's son. And he now has even more to say about the insanity of a deal that will have potentially longer-term negative consequences than any act a mayor of this city has taken in modern history.

Unlike the Mayor, City-County Councilors, the usual suspects from the civic community and the editors of the Star and IBJ, Williams made exhaustive public records request to the City seeking more information on the deal before publicly endorsing any particular plan. Those documents reveal some extremely troubling issues that have not been discussed in the plethora of staged dog-and-pony shows put on by Mayor Ballard's administration. In particular, the proposed transfer of the utilities relies on a study prepared by Citigroup, which is being paid $6.75 million to conduct this transaction, makes some highly questionable assumptions. A press release from Williams' campaign details the following, obviously-flawed assumptions being made by the Ballard administration and Citizens Energy:

• An immediate and sustained 15% decrease in operating costs
• An immediate and sustained 5% decrease in capital costs
• A household growth rate from 2010 to 2020 double that of from 2000 to 2010
• Residential water use as a proportion of total use 20% higher than the City's estimates

As I've previously discussed, I don't see how Citizens Energy will be able to achieve the cost savings it says it can achieve from the combined operation of the gas, water and sewer utilities. Mayor Ballard has proposed saddling the newly-combined utility with the inefficient and one-sided agreements with Veolia and United Water. This extra layer of management will pose the same problems the City struggled with over the last several years. Under this management team, water rates have increased 100% and sewer rates are climbing at even higher rates to comply with a federal consent decree for the CSO. The IURC has been highly critical of the Veolia agreement and admonished the Ballard administration to renegotiate it. Instead of doing that, the Ballard administration wants to pass the problem on to Citizens in hopes of gaining access to hundreds of millions of dollars to fund pork barrel projects ahead of next year's election.

"Citizens CEO Carey Lykins has suggested that any loss in work force would come through attrition, but an immediate 15% drop in operating costs cannot be achieved in such a manner. Lykins has suggested by combining the gas and water utilities capital costs can be lowered by increased bargaining power," Williams said. "However, because gas utilities require far fewer capital expenditures it is unclear how this modest increase in capital projects will create the substantial discount assumed," he continued. 

One of the questions I wanted to pose to Citizens Energy during their recent meeting with area bloggers was what growth assumptions were assumed between now and 2025. Unfortunately, we ran out of time before I could pose that question. Williams got some answers and they are dubious to say the least. The City and Citizens base this deal on the assumption that the number of households will grow at double the rate over the next 10 years that the number grew over the past decade. It also assumes 20% higher residential use as a proportion of total water consumption than the City's current estimates.

While Indianapolis experienced some population growth during the past decade after years of declining population, the prospect for sustaining that level of growth, let alone double that growth rate, is simply wishful thinking. People continue to move into the fast-growing suburban counties that ring Marion County, and large industrial customers continue to go out of business at an alarming rate. The fewer people and businesses that consume water and produce sewage, the larger the customers' bills must increase to meet the costs of operating these utilities. Water rates are already projected to climb another 100% and sewer rates are expected to increase another 300% during the coming years. Commenting on the residential use assumptions, Williams said, "This is an important figure as residential water rate are substantially higher than commercial and industrial rates." "If residential usage rises relative to commercial and industrial, the income per unit for the water provided increases thus lowering the need for increased rates."
 
Williams returns to the earlier point he made that the Ballard administration is relying on revenues from 30-year bonds funded by revenues generated from the transfer of the utilities to fund improvements with a relatively short life span. Citizens will issue 30-year bonds to fund the $263 million it will pay the City to pay for these infrastructure improvements. The City will issue another $140 million in 30-year bonds. Essentially, it's the equivalent of taking out a 30-year loan to purchase a new car. No banker in his right mind would make such a loan, and only a fool of a customer would obligate himself to repay a 30-year loan on a car that he won't even be driving in 10 years.
 
I think the Indianapolis community owes a great deal of gratitude to Williams for bringing these issues to light. At the end of the day, however, I don't think it will make any difference. There are no people sitting at the table deciding these matters who have the common sense or the will to do what's in the public interest. Williams likely won't win the Democratic nomination for mayor. Democratic leaders have already decided they want Melina Kennedy, who stumbled badly on the experience issue in her run for prosecutor four years ago, despite their public misgivings about this proposed transfer of the utilities. She can't even say anything publicly about this proposal because her law firm helped put the deal together for the Ballard administration and is being paid by taxpayers as much as $540 an hour to do the work. It really is sad that we simply don't have any honest and intelligent elected officials in this city to save us from jumping off this bridge. The City may survive this deal, but it might look a whole lot more like Detroit in a few years than the shining city on the hill our current elected officials blindly envision.