Indianapolis to sell water systems to non-profit

Indianapolis has proposed to transfer the city’s privately-operated water and wastewater systems to the non-profit Citizens Energy Group. The sale moved a step forward last week, but the agreement still needs regulatory approval.

A proposal to transfer Indianapolis’ water and wastewater systems from commercial operators to a non-profit charitable trust moved a step forward last week, as the city and other groups involved in the plan reached an agreement on terms with an Indiana consumer-interest agency.

The plan involves terminating Indianapolis’ existing agreement with Veolia Water, which manages the city’s water systems, and transferring the systems to the non-profit public trust Citizens Energy Group.  It would also transfer control of the wastewater systems, currently operated by United Water, to Citizens.

The proposed transfer needs the approval of the Indiana Utility Regulatory Commission (IURC). The agreement reached last week between Citizens, the City of Indianapolis and the Indiana Office of Utility Consumer Counselor, which represents consumer interests in IURC cases, could help expedite the approval process, according to Citizens’ spokesperson Dan Considine.

Danielle McGrath, a spokesperson for the IURC, said the commission has no firm deadline for its decision. She said an attorneys’ conference on the agreement is scheduled for 21 April.

The plan was approved by the City-County Council of Indianapolis and Marion County, in July, and was submitted to the IURC in August.

Indianapolis Mayor Greg Ballard said in a statement last year that the transfer to Citizens would lower rates by 25 percent. He said the city could save money because Citizens already operates the city’s gas, steam and chilled water systems.

Chris Cotterill, Ballard’s chief of staff, said the transfer was not a sign of dissatisfaction with Veolia and United Water management.

“It’s not that the operations were bad and we wanted to fix them,” Cotterill said, adding that the city saw “a dramatic opportunity” to combine all five systems under one operator, thereby lowering billing, management, legal and technical costs.

He also said Citizens “looks a lot like a private entity,” but operated as a non-profit, which could further reduce costs.

The city expects the transfer to Citizens to generate $425 million to be used to improve roads, bridges, parks, streets and sidewalks, and to remove abandoned homes.

Considine said Citizens will have to make two upfront payments to the city of $170.6 million at closing of the agreement and $92 million on 1 October. The rest would be paid out of a $50 million general fund and out of bond revenues from the Payment in Lieu of Taxes (PILOT) bond programme.

The PILOT bonds mean that Citizens will have to repay bonds the city has already taken out against future wastewater and water systems revenue through 2039, according to Cotterill.

Last year, Indianapolis awarded a 50-year management contract for the city's parking systems to a team backed by Xerox-owned Affiliated Computer Services (ACS). In addition to a $35 million upfront payment from the ACS team, the contract also guaranteed the city $400 million of future parking revenues.

If the water and wastewater systems transfer is approved, Citizens will have to pay a $29 million termination fee to Veolia, and Cotterill said Citizens will also have to take on about $1.92 billion in debt from the two systems.

Cotterill said about half of that debt came from the city’s repurchase of the systems and wastewater systems about 10 years ago.