With millions of dollars and long-term futures at stake, the City Utilities vs. Aqua Indiana fight was bound to be fierce. And the price the city will pay to buy the southwest Allen County water system is just one of the many factors involved in the gamesmanship between the Henry administration and Aqua Indianas owners.
The battle already involves all three branches of government – executive, legislative and judicial. Politics are involved at several different levels, and it shouldnt escape notice that a city takeover of Aqua Indiana would build goodwill for Democratic Mayor Tom Henry in heavily Republican Aboite Township – an area represented on the City Council by Republican mayoral hopeful Mitch Harper.
In preparing for a City Council vote, the Henry administration hired former Democratic City Councilman Tim Pape, an attorney, to help with strategy. Aqua Indiana has former councilman and attorney Mark GiaQuinta in its corner.
Just about the only thing city residents and Aqua Indiana customers can be sure of is that both sides are jockeying to get the best price, and much of what they are hearing is aimed toward gaining an edge in negotiating.
Almost as certain, the city will end up getting Aqua Indiana – sooner or later.
Aqua Indiana says its water utility is worth $60 million if its worth a dime, and the company hints there is no way the city can buy it without raising rates for all water customers. Thats already gotten the attention of Councilman Glynn Hines, who represents some of the citys poorest neighborhoods in the southeast part of the city and wants more or a less a guarantee that rate hikes wont happen.
The city says no way is Aqua Indiana worth $60 million – the city can buy the company for much less without raising the rates of existing City Utilities customers while lowering the rates of the current Aqua Indiana customers.
Residents should remember that in 2007 Aqua Indiana insisted it just couldnt make it without a 100 percent rate increase, though the company nobly reduced its request to 75 percent the following year after the city bought Aqua Indianas northern utility. That 75 percent hike took effect in 2009, and the next year the company said it simply had to have 17 percent more. State regulators said 7 percent was enough.
City Utilities has its own credibility problem. When officials went to City Council in 2011 for a $30 million bond to install an ultraviolet water treatment process, they assured the council it would not result in a water rate increase. In December 2011, the Board of Public Works adopted a 2012 City Utilities budget with no increase. Just weeks later, the same officials said, well, the ultraviolet system didnt cause a rate increase, but we have had to defer other maintenance because of it, and that means we need higher rates – 40 percent over three years. It doesnt help the citys case that customers are seeing the effects of that hike in bills they began receiving this month.
Aqua Indiana claims that the $16.9 million the city paid for its northern utility in 2008 was woefully low – without giving the right amount – and has been in court since then. The case has already gone to the Indiana Supreme Court – twice – just on procedural issues. The utility suggests it will have an appraisal soon showing a much higher value – five years after the sale.
All the while, the meter for attorneys on both sides is spinning, racking up costs that tap the budgets of both utilities.
With no end in sight for a legal fight now entering its sixth year, how long would a battle over the southwest utility range?
While both sides argue about those and other issues regarding Aqua Indianas service – water pressure and fighting fires; high rates and water quality; what happens to Aqua Indianas sewer utility – some more conservative residents question why the city should be able to declare eminent domain and seize the water companys assets and customers. Many of them, it should be noted, are not currently Aqua Indiana customers.
But that free-market argument ignores the fact that as a regulated utility, Aqua Indiana has no competitors. Indiana law has long included established procedures for a city to take over a water utility. Even Russ Jehl, probably the most conservative City Council member, suggested its time to say good riddance to Aqua Indiana.
In fact, the City Council will probably not block a city takeover, and the debate will ultimately come down to procedure and price. Unfortunately, it is difficult to find an honest broker able to give informed and accurate financial information who doesnt have a stake in the fight.
Indeed, its hard for a typical citizen to determine what to think, even when information comes from more objective sources. After the Indiana Utility Regulatory Commission ordered a consultants study of Aqua Indiana, both the city and the company said the report supported its side. Courts have upheld the citys takeover of the northern utility, and the state Court of Appeals ruled the citys Board of Public Works had the authority under state law to set the price – but Aqua Indiana says that decision was wrong. Even if the Indiana Supreme Court upholds it – a ruling could come at any time following last falls oral arguments – the company could next go to the federal courts.
Clearly, everyones best interests would best be served if City Utilities and Aqua Indiana strike up a global deal – resolving what happens with the southwest water utility, agreeing on the price for the northern utility, addressing the economies of scale shift that will affect the companys sewer utility.
Dont be surprised if such a deal means the city will pay more than it wants but not as much as the company wants. It may involve the citys giving Aqua Indiana a continuing revenue stream, possibly by giving it some sewer business.
Even though Aqua Indiana said last week that a deal is close, the city demurred.
Still, its a good sign that last weeks presentations by the two sides before City Council were called off.
Its hard to negotiate in good faith after each side bashes the other in public, which was nearly certain to happen. And besides, we could all use a break from the saber rattling.