Public Policy Forum Blog

Water utility deal moves forward in Indy

Interesting news out of Indianapolis, where Mayor Greg Ballard has announced plans to move forward with a sale of the city's water and sewer utilities. The deal reportedly would net the city an upfront payment of $425 million, which it would use to address significant infrastructure needs. The new owner - a public charitable trust called the Citizens Energy Group - also would assume about $1.5 billion of debt from the two utilities.

Here in Milwaukee, the prospect of leasing the city's water utility was first raised by the city comptroller in 2008 as a potential strategy to help offset dwindling state aids and maintain existing services (see the Forum's August 2009 report for more information on the city's long-term fiscal predicament). A proposal to explore the idea was shot down by the common council, however, after significant opposition arose from environmentalists, city labor unions and others.

Indianapolis' proposed deal differs from the concept discussed in Milwaukee in several key aspects. Perhaps most important, the potential buyer is a non-profit entity that was created by civic leaders to provide gas, steam and chilled water to citizens without a profit motive. Citizens Energy Group's assets are owned by Marion County residents - suggesting important public oversight capability - though it is administered by a board of directors that is not accountable to voters.

The concept floated in Milwaukee, on the other hand, likely would have involved a private, for-profit entity. That entity would have entered into a long-term lease agreement to operate the water utility, as opposed to assuming ownership.

In addition, one of the key benefits cited by proponents of the deal in Indianapolis is the opportunity to consolidate water and sewer operations, which they say will reduce operating costs and save money on large-scale construction projects. Here in Milwaukee, sewer operations are governed by the Metropolitan Milwaukee Sewerage District, which privatized the bulk of its operations in the 1990's.

Whether the proposed deal in Indianapolis encourages Milwaukee officials to take another look at a potential lease of its water utility certainly is dubious given the strong reaction evoked by the comptroller's recent trial balloon.

Providing more food for thought, however, is the most recent The People Speak poll, conducted by the Forum in partnership with UWM's Center for Urban Initiatives and Research and The Business Journal Serving Greater Milwaukee. The poll found that 40% of respondents in the four-county metro area agreed with the notion of leasing the water utility as a means of helping address the city's budget problems, while 51% disagreed. In a much smaller sample size of City of Milwaukee residents, the margins were 39% for and 56% against.

Certainly, there's no groundswell of support for the concept at this time, but it's also not attracting the type of overwhelming opposition that might justify refusal even to explore the idea, particularly when other potential revenue enhancements or service cuts are put on the table for comparison.

Author: 
Rob Henken