Friday, August 30, 2013
Brown Figures Out The Real Reason Ballard Wants To Stormwater Rates: To Sell The Stormwater Assets To Citizens Energy
Perhaps the most important part of the discussion during last night's Public Works Committee meeting came when Councilor Vernon Brown questioned DPW Director Lori Miser about whether it was the intention of the Ballard administration to sell the city's storm water assets to Citizens Energy. Miser claims there's no intent to do that, but she would not unequivocally say that would not occur. This is extremely important because I was a bit surprised to learn the storm water responsibilities still rested with the city after Citizens Energy acquired the sewer and water utilities in 2010, particularly since Indianapolis relies on a combined sewer system for storm water and sewage.
Miser initially claimed that there was no intent to sell the storm water asset because "this is pretty important piece of infrastructure for us to keep managing." Pressed by Brown, Miser conceded the City had originally planned to sell the storm water component to Citizens as a part of the 2010 sale, which sold off the equally important water and sewer utilities. "They weren't willing to pay the price that they were worth so we took that option off the table," Miser said. While the assets weren't included, the services were. Yes, the City has a service contract with Citizens to provide a number of services for the storm water program since virtually all of the employees who handled the storm water program became employees of Citizens following the sale. The storm water fees weren't collected prior to 2002. Miser claims that DPW never underestimated the cost of maintaining the storm water system and making flood control improvements; rather, she says the rates were only set at about a third of what it believed was necessary when the storm water fees were first established. When the rates were doubled in 2006, the rates were still too low according to Miser to meet infrastructure demands.
A bond consultant, Diana Hamilton, who stands to earn a hefty fee on any new bond work undertaken by DPW for the storm water infrastructure blamed the fact that when funding for the program was shifted from the property tax to storm water fees upon the establishment of the storm water district, the program had to assume about $50 million in outstanding debt that had been supported by a property tax levy. According to Hamilton, the bulk of the fees were used to service debt on old improvements, limiting how much could be spent on new projects. Yet she conceded that the old debt was nearly retired, which means more money will be freed up for future projects. DPW expects the gigantic rate increases proposed to increase its available revenues for future projects by 40%. DPW claims it can spend only about $8 million a year on new projects currently, which will dwindle to $3 million if the fee increases aren't approved. It's unclear why that's the case since Hamilton testified that the original bond debt that had squeezed out new projects is almost retired. The fee increases will supposedly allow for spending on new projects to increase to $18 million annually.
As fellow blogger Pat Andrews points out, the problem is that the City is too frequently relying on the issuance of bonds to undertake new projects rather than paying as you go. Bonding increases the cost of these projects close to 50% when you compound the interest over the full term of the bonds and throw in all of the professional fees and costs associated with a bond issue. The short-term gain from borrowing is what's driving the need to keep increasing the rates. It's bad enough that they're planning to increase rates anywhere from 50% to 100% for about 80% of the users, but they're also wanting to index the rate so it automatically increases in the future to offset inflation, which brings me back to the point of this original post. It should be patently clear for all to see that the end game here is to leverage the higher rates that are being proposed to entice Citizens Energy to purchase the asset for the price the city is seeking. That will create yet another pot of "found money" that Ballard will have to spend on pet projects touted by his pay-to-play pals who've been treating him and Winnie to all of those fancy meals and overseas junkets and fattening his campaign committee's wallet.
You'll see at the end of the video an exchange where Councilor Pam Hickman hits on the point that none of the Rebuild Indy money derived from the sale of the water and sewer utilities to Citizens was put towards the purpose of addressing the so-called $315 million backlog in unmet storm water needs. Gee, I wonder why? Miser claims it's because it's a separate utility with its own taxing district. So is the park district, but we're using Rebuild Indy funds to build a useless cricket park in Councilor Ben Hunter's district for which there was absolutely no use other than to purchase property some politically-connected person wanted to unload for a premium and have an excuse for passing out bucks to redevelop the land for the benefit of other politically-connected campaign contributors.