Saturday, May 15, 2010

My Take on the Water/Sewage Utility Sale to Citizens Energy Group

On Friday, I had the opportunity to meet with three representatives from Citizens Energy Group at a meeting hosted by City-County Councilor Christine Scales (R-District 4). Attentive readers might recognize Scales name, as she was the only Republican who voted against the Capital Improvement Board bailout several months ago.

Those representing Citizens Energy Group were, as follows:
  • John Whitaker- Chief Compliance Officer
  • Aaron Johnson- Associate Counsel
  • Dan Considine- Public Information Officer
Others in attendance (links are provided if they have written about the sale since the meeting occured):
Gary Welsh of Advance Indiana
Pat Andrews of Had Enough Indy?
Paul Ogden of Ogden on Politics
Chris Spangle, Executive Director of the Libertarian Party of Indiana
Timothy Maguire, Chairman of the Marion County Libertarian Party
Chris Worden of Indy's Painfully Objective Political Analysis

Welsh provides an excellent history of the water and sewage utilities in Indianapolis, and explains why Citizens Energy Group didn't wind up owning it eight years ago. Pat Andrews explains what exactly is a payment in lieu of taxes (PILOT), and Ogden makes the simple point that we are selling the utilities to ourselves.

My problems with the deal are similar to Welsh's and Ogden's. Citizens Energy Group is an excellent steward of public utilities and has proven that over their 100+years of business. But Citizens is a public trust, and operates like a not-for-profit. They don't have $262 million in the bank, so bonds will be issued (some of the lawyers mentioned specifically Build America Bonds, and that program ends at the end of 2010). They will either have to gut the utilities (and there is a legal contract between United Water and Veolia with Citizens that they're contracts with the City of Indianapolis will carry over to Citizens), or increase rates. I remain unconvinced that the savings Citizens will find, while significant, will result in $262 million of savings. That means the cash payment Citizens gives to the city is a backdoor tax increase, because ratepayers will pay for new sidewalks with rate increases.

Many might see it as semantics, but I believe taxes work best when targeted. Property taxes allow the community to support it's necessities such as fire fighters, schools, and so on. Federal gasoline taxes allow the federal government to fund highway maintenance. Utility rate increases go back to fund those utilities (And hopefully make them more efficient).

So if we, as a city, think sidewalk construction should be given a chance to be funded, let's have that discussion. While some politicians are fearing an anti-tax crowd, multiple school referendums passed, as well as Wishard last year, that show that tax payers are willing to pay for services if a case is made to them. This is not an endorsement of these referendums, but the voters did approve many of them.

I have many other questions about this deal, and I learned via Pat Andrews that the city has finally put up a bunch of documents at an FTP site.
The username and password are both "public".
Many of the documents are ones that have been available for months, but I haven't had a chance to review the new ones yet. Check back for an update.

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