Citizens Water, a subsidiary of Citizens Energy Group, made the first deposit for its acquisition of the city's water and wastewater systems into city coffers, officials announced Friday.
The total infusion of an estimated $425 million will be complete by the year's end, city officials said. In addition, Citizens will absorb more than $1.5 billion in city debt.
The funds gained from the utility sale are slated to underwrite Indy's Rebuild Indy effort, which targets infrastructure improvements and the removal of abandoned homes.
The deal also releases the city from its management of the Deep Rock Tunnel Connector project. Citizens will assume control of the long-term pollution control plan mandated by the U.S. Environmental Protection Agency to address a legacy of Clean Water Act violations linked to combined sewer overflow into the White River and its tributaries.
Officials estimated that $1.7 billion remains of the $3.5 billion cost to complete the tunnel project and the Septic Tank Elimination Program.
In addition to finishing the tunnel project, Citizens is also charged with completing the STEP, which is supposed to remove about 7,000 problematic tanks across the city through 2013.
Customers can expect monthly water meter readings and combined billing for gas, water and sewer services within the next year and a half, Citizens announced in a press release Friday. See the new Citizens Water website for details.
The mayor touts the deal as a cost-effective solution to address overburdened infrastructure and environmental repair expenses.
In 2008, the city faced a $5 billion backlog of sanitary, transportation and infrastructure-related projects, according to a recent presentation by Director of Public Works David Sherman.
The water company, managed for the city by Veolia, faced nearly a $1 billion debt in 2008, Sherman said. At the same time overrun costs for Department of Public Works projects were estimated at $360 million and DPW faced $26 million in outstanding contracts, he added.
Examples Sherman offered to illustrate the state of decrepitude included DPW employees welding salt spreaders to trucks because some vehicles were too rusty to support conventional attachments. He also cited "neglected alleys, crumbling or missing sidewalks" plus the well-documented and long-term sewage releases into waters of the state (the major surface water bodies protected by the Clean Water Act), plus drainage issues in which rainwater flooding incidents would overrun street corners and residential areas such as Sten Court.
While officials acknowledge plans must still be hatched to maintain infrastructure demands that will remain after the Citizens money expires, especially in light of the budget-limiting effects of property tax caps, this deal allows the city to address several backlogged problems and buys more time to imagine future solutions.
"Just think about if we wouldn't have done it," Sherman said.
Mayor Ballard built on that theme in a recent Q&A with NUVO:
"We're making up for a lot of time right now," Ballard said.
When he fields questions about the future funding hole, Ballard said he replies, "So you mean you don't want us to do it now?"
"And no one ever says 'no' to that question because it's been neglected for so long," he said.
"But if we can find a mechanism to do this, continue this in the future? I don't know..." he added. "...I'm not sure that future politicians in 30 to 40 years will be able to figure that out because I understand short-term budgetary pressures and political pressures... But I'm suggesting to you that we're getting a large window for people to try to figure that out. "We'll try to figure that out, but I suggest to you that it's going to be some successor after me."
Citizen's cash infusion to Rebuild Indy will enable the creation of between 1,000 and 10,000 new infrastructure and urban improvement jobs as a result of the new spending capacity, the mayor's Chief of Staff Chris Cotterill told NUVO in 2010.
Critics of the deal worry that by transferring the water and wastewater utilities to Citizens, the city is releasing valuable oversight capacity of a vital resource and opening consumers up to the potential of billing increases.
The city and Citizens contend, that given the efficiencies to be gained by consolidating utility services, their agreement will save ratepayers.
Water bills were projected to rise to $63 a month by 2025 under the city's agreement with Veolia, while Citizens estimated water bills at $39 by 2025, Citizens Vice President Yvonne Perkins told NUVO in a July 2010 interview.
Democratic Candidate for Mayor Melina Kennedy, in a speech earlier this summer, reiterated reservations about the transfer. But, given that it is a done deal, she proposed reconsidering the direction of the cash the city received.
Directing all the utility transfer funding to infrastructure projects is short sighted, she said. Instead, to further her central goal of making Indianapolis a "Quality of Life Capital," Kennedy supported using $150 million of the estimated $450 million to endow a 2021 Vision fund to support early education, crime prevention and job training efforts within the city. She would like to supplement that initial investment by inspiring local philanthropic organizations to contribute, which she said, would allow greater funding capacity to support the fund's three main areas of interest.
In a recent interview with NUVO Chris Bowen, the Libertarian candidate for mayor, emphasized his concern that — even with the utility transfer — property tax caps will lock the city budget at spending levels that will not keep up with infrastructure as the city moves forward, in addition to shortages for other essential city services.
Though tax increases are not popular with Libertarians, and Bowen does not support them either, he said that the city must explore new funding sources, including revised fee schedules, to keep up with its responsibilities. [Editor's note: Check back at NUVO.net's news section for a complete Q&A with Bowen to be posted within the next week.]
Citizens, a public charitable trust founded in 1887 by Col. Eli Lilly and Benjamin Harrison, already operates natural gas, steam and chilled water services. It will continue to be regulated by the Indiana Utility Regulatory Commission and the U.S. EPA.
Citizens also has a for-profit arm that supplies and markets natural gas. This entity, called Citizens Resources, provides the trust with a funding stream. News on this component of the Citizens group is mixed.
Since 2000, Citizens has invested at least $50 million in local community redevelopment projects. On the flip side, its ProLiance venture, co-owned with Vectren, received a $ 3 million fine from the Federal Energy Regulatory Commission for profiting from natural gas market manipulation practices.