Monday, July 26, 2010

Council Meets Tonight -- Utility Deal Up

The City-County Council meets tonight, and the transfer of the water utility and the sale of the sewer utility are on deck. The agenda is posted here.

Among the proposals to be introduced that strike my eye is Proposals 215, authored by the Office of Finance & Management and sponsored by Councillor Hunter. This proposal would budget $9.9 million of County Option Income Tax to :

SECTION 2. A certified distribution in an amount not to exceed $9,900,000 is to be used for the following purposes:
(1) the provision and maintenance of modern, dependable, and efficient public safety communications systems within the district for the purpose of promoting the expeditious delivery of public services to the residents and taxpayers throughout the district in order to assure the public health, safety, morals and general welfare and
(2) the provision of computers for the efficient functioning of governmental offices for the benefit of the residents and taxpayers throughout the district.

This bears looking into further, to see just what is being purchased and what will lose COIT funding in the future.

The very last action item on tonight's agenda is the utilities deals, Proposal 197. This deal has the benefit, should all the promises actually be kept, of some major infrastructure remediation in Indianapolis. But, the deal itself has too many highly negative aspects to warrant the 'yes' vote of any Councillor.

Here is my short list of primary reasons to vote against the utility transfer and sale:

1) There is no dedication of funds to ensure that the money will actually be spent on infrastructure as promised. The Council itself stopped this from happening, preferring to leave spending decisions to future Councils. There has been no proposal, as far as I have seen, to even account for the spending of the proceeds. Can the prediction of funding for Superbowl expenses be too far off? More money for the ICVA, IDI, CIB, or IEDI? Maybe a boost in arts funding? How about cash for other pet projects that are in favor? Or a few bucks toward raises, new software packages, or contracts with PR firms? The only banned expenditure for the funds is to the benefit of sports teams, an amendment introduced by Councillor Lutz.

2) All of the cash will be the proceeds of bond sales. Meaning the sewer utility ratepayers will be paying not only the money to be used for infrastructure (again IF the promises are kept), but also at least that much again for interest and fees to Citibank and the like.

3) The ratepayers will pay on the bonds for 30 years, while the infrastructure repairs will last 10 to 15 years. Your children or grandchildren's pockets are being picked so that your street can be smooth and shiny for a short while. What will they do for street repairs? It seems to me that a key ingredient that is missing here is sustainability. When the money is gone, it is gone for good. The next generation will have higher bills and lower ability to pay for their own needs. This is NOT looking 50 years down the road and doing what is right. It is looking to the next election year and doing what is expedient.

4) Not to be overlooked is the impact of this deal on the local taxing units besides the City/County. By attempting to preserve the property tax-free status of the sewer utility, the City is blocking the other units (schools, library, health & hospitals, and townships) from receiving tens of millions of dollars in property taxes each year. The question I posed to City officials and blogged on in "The City Needs To Learn To Share", remains unanswered by those officials. Without that added information, I cannot begin to guess whether the other units are losing their share of $25 million annually, or losing their share of $125 million annually. In either case, it is substantial. One can only guess what the Legislature will do in future years to remedy this loophole in the Indiana Code, perhaps putting taxpayers on the hook in addition to the hook they definitely will be on as ratepayers.

5) There is no clawback ability in the case of mismanagement by Citizens Energy. Yes, first right of refusal is in place, should Citizens Energy attempt to sell the utilities in the future - which is very good. But, there is no ability to pull them back without the consent of Citizens, should the need arise.

6) Last but not least is something I haven't heard talked about. That is the fact that Citizens Energy is awaiting the decision of the Indiana Utility Regulatory Commission on the 35% water utility rate hike that is currently before them. Yes, the deal with the City stipulates that Citizens Energy cannot request a new rate hike for 2 years after the deal is completed; pushing further rate hikes beyond the next Mayoral race. But, the 35% increase is still alive and critical to Citizens Energy's calculations. Citizens Energy officials have been clear, they have a strike price in mind for how large an increase the IURC must allow this time, for the utilities deal to make financial sense to them. Should the rate increase be too small, Citizens Energy will not consummate the deal. Yet, the deal is in separate pieces. Maybe I missed it, which could well be given the length of the documents, but I don't see both utilities being tied together as one deal. If the IURC fails to meet Citizens Energy's strike price, could they buy the sewer utility only and decline to assume the nearly $1 billion in debt on the water utility transfer? The sewer utility is well run and has always been the cash cow in this deal. One can only guess and wonder - and wait - on this last point.

Well, that's my dirty half-dozen reasons why Proposal 197 should be voted down.

1 comment:

Anonymous said...

It's a hidden tax that will be used as a slush fund; contracts will be handed out and campaign contributions will flow back in and they will all have a big laugh at our expense.

Then at some point the Democrats will regain control and do the same thing, as the revolving door of corruption spins ever faster.