Six more questions

Since NUVO’s first article on the topic (“Troubled Water: Six Questions About the Indianapolis Water Company Deal,” June 4) and in light of growing opposition to the privatized management of the city waterworks, USFilter and the Dept. of Waterworks have circled the wagons. But their reactions to criticism have led to more questions. Here are another six:

Glenn Pratt is a civil engineer and a retired EPA official: "I’m not repainting my house or fixing my roof until I know that I’m not going to lose it to USFilter."

1. Why the intimidation? Glenn Pratt is a civil engineer and a retired EPA official who is spending his retirement working for clean water in Indianapolis. Over the years he has been a watchdog of industry and government regulators, and he’s currently focused on USFilter. One of his big concerns is a state permit that allows USFilter to dump tons of toxic chemicals into area reservoirs even under adverse conditions.

USFilter’s bonus pay from the city is heavily dependent on killing the algae which causes taste and odor problems. Fearing a big fish kill and concerned about the long-term effects of tons of copper on the reservoir floor, Pratt has challenged USFilter’s state permits, which he says are the weakest he’s ever seen. He states that proposed permits from the Indiana Dept. of Natural Resources (DNR) allow treatment of the reservoir even under low oxygen conditions “significantly increasing the potential for a fish kill.”

How did USFilter manage to get this feeble permit from state regulators? Pratt believes that USFilter’s lawyers badgered the DNR into making the permit so weak that there is “no way the company can ever be in violation.” Badgering doesn’t seem to stop there. While at a pre-hearing conference regarding the permits with retired Eli Lilly chemist Dick Van Frank, Pratt charges that USFilter’s lawyer, Marc Quigley, issued a stern warning. According to Pratt and Van Frank, Quigley said that if his “appeal or any other action in any way hindered USFilter from collecting any and all bonus payments, they (USFilter) would come after me to collect such losses.”

USFilter’s Vice-president of Marketing in Houston, Scott Edwards, denies that threat, but concedes that Quigley told Pratt “USFilter would pursue its attorney fees … pursuant to the Indiana frivolous lawsuit statute.” Pratt says that the attorney’s fees Edwards referred to are minor compared to the bonus payments, which amount to several million annually. USFilter’s Edwards says it’s “much ado about nothing” but a worried Pratt counters, “I’m not repainting my house or fixing my roof until I know that I’m not going to lose it to USFilter.”

2. Why a Code of Secrecy? Retired Water Company executive and founding Water Board member, Alan Kimbell, resigned from the Board of Waterworks June 17, 2003, after refusing to be silenced by a restrictive “Code of Conduct” adopted by the Board in his absence. Kimbell reminded the Board in his letter of resignation that “We are a public body; board members owe allegiance first to the public and, more specifically, to the ratepayers of the water utility.” Kimbell criticized the Code as “inconsistent with the First Amendment, and contrary to any legitimate concept of public service.” The “Code of Conduct” Kimbell objected to forbids board members from communicating with anyone who doesn’t have a “legitimate business reason to know” or “providing confidential information regarding the Department to any person whose interest conflicts with the Department’s…” It even counsels Board members to destroy “notes, telephone logs, diaries and other documents that are no longer useful or current.”

The Code was written by Sommer & Barnard lawyer James Strain, who testified at that same Water Board meeting, “We’re trying to run a business here and not a typical public agency.” When Board member John Mutz stated that he’d never seen anything like the Code in all his years of public service, Strain conceded that the Code was “unusual.” Strain went on to explain, “This is an unusual experiment…I’ve never seen this kind of an agency set up by a municipal organization anywhere.”

The uproar over the Code and Kimbell’s resignation resulted in extensive revisions to the document by the Waterworks Dept. The Board approved this heavily amended Code June 26, 2003.

Six days after Kimbell’s resignation, City-County Council President Phil Borst announced the creation of a committee to investigate problems at the waterworks. “There’s a perception that something’s wrong,” Borst said when he made the announcement at the June 23 Council meeting. A week later, an alliance of environmental, labor, neighborhood and seniors groups and the national consumer group Public Citizen was formed to aid the City Council’s investigation.

Chris Williams, Executive Director of the Citizens Action Coalition, a member of this newly formed Citizens Water Coalition and a long time utility watchdog, sees an ominous parallel to the other recent utility upheavals and the USFilter situation. He noted that after the sale of IPALCO to AES of Arlington, Virginia, local customer service suffered and employee retirement funds were devastated. When telephone service was acquired by SBC, of San Antonio, Texas, “a complete meltdown of customer service and repair capabilities occurred here.” Williams went on to warn, “The analogy to the Water Company is striking. It scares the hell out of me and you’re not talking about a dial tone, or people losing electric power for two or three days…this is the water supply.” These guys [at USFilter] report to Paris, France, and they are replacing local water company veterans with outside managers who, according to employees, have never seen big city mains and valves like ours, and that’s when the flags go up.”

3. Where’s our $2 million? The haste with which the Water Company was purchased and the management outsourced, has come back to haunt the city. The city sold Utility Data Corporation (UDC) to USFilter for $4 million as part of the management agreement in April 2002. Since then the city has paid out $2 million to make UDC operable while USFilter has invested $1.5 million. Critics wonder why the city has to keep pouring money into a business it no longer owns. Dept. of Waterworks attorney, Kobi Wright, stated, that “the city agreed to invest approximately $2 million to fix the billing system as a condition to the sale of UDC to USFilter.” The city in turn is requesting reimbursement from NiSource for the $2 million, claiming that the “UDC Assets were not in good operating condition.”

4. What page can I look at? In a May 29, 2003, presentation to the Waterworks Board, USFilter’s local CEO Jim Keene boasted, “USFilter is an open book.” One aspect of USFilter’s book that is definitely closed to the public is the record of litigation against the company. The city has this record but refused to provide it to NUVO stating that the information “was submitted by USFilter as records containing trade secrets and may not be disclosed.” Waterworks Department Attorney Kobi Wright advised NUVO to ask USFilter for the records. USFilter Vice-president Scott Edwards emphatically denied the request saying, “So you can do a recitation of lawsuits against us?”

Does the public have a right to know what sort of corporation is supplying their drinking water? Clarke Kahlo of the Indiana Coalition of Open Government (ICOG) contends the public has a legitimate right to know about “litigation against any prospective vendor, especially a waterworks operator.” Kahlo also wonders whether USFilter can label any inconvenient news a “trade secret” and have it guarded by the city’s attorneys.

5. What costs are being cut? According to financial officer Jackie Groth, USFilter lost $7.8 million last year and is projecting a $6 million loss this year. It appears that if the company can’t cut costs, it’s in big trouble. Union President Robert Reed is worried that USFilter is finding corners to cut on maintenance saying “there’s not a whole lot of preventive maintenance or repair that I can see going on.”

6. Where’s their $50 million? USFilter executive David Ward assured employees they would be “pleasantly surprised” at the lump sum disbursement from their cancelled defined-benefit pension. Employees were indeed surprised, but not pleasantly when they got their statements in early July showing “accrued benefits” as of Dec. 31, 2002, the date the plan was terminated by USFilter.

A recent analysis of employee benefits by CPAs at Isenberg and Chivington found that reductions in the defined benefits pension to non-union employees at the waterworks would top $18 million. The Isenberg report rebutted the city’s survey from Katz Sapper and Miller that concluded that the employees are better off now than ever. Former Waterworks Board member Alan Kimbell observes that the city’s “report wanders all over the place and doesn’t deal with the issue…it’s a classic case of garbage in, garbage out.” Isenberg showed total benefit losses of over $50 million (holidays, pensions, health insurance, etc.) for the 20-year contract.

The lawsuit to have Citizen Gas and Coke Utility take over the operations of the Waterworks and the employee federal lawsuit against USFilter and the city are both pending. USFilter has recently appointed Tim Hewitt as its third President and Operations Manager for the Waterworks. Ironically, Hewitt was the proposed president for one of the losing water companies (American Water Works) when the management was bid out in early 2002. In a July 31 email to USF employees, outgoing president Jim Keene said of Hewitt, “Tim is the perfect person to take this company forward…the cream always rises to the top.”

Why did “the cream” eventually come from a company that didn’t even make the first cut? NUVO will explore these and other questions in the future.

Jack Miller is a free-lance writer and co-author of To Market, To Market: Reinventing Indianapolis. He is also the volunteer board president of Hoosier Environmental Council, one of the organizations supporting local public control of the Indianapolis Water Company.