The proposed deal between Fort Wayne and Aqua Indiana represents an elegant solution to a complex and contentious problem. Every entity involved – Fort Wayne City Utilities and Aqua Indiana, as well as the customers of both utilities – gains something beneficial.
After more than a year of negotiations, Fort Wayne and Aqua officials are expected to sign a contract by the end of August that calls for the city to pay Aqua $50.1 million in addition to the $16.9 million the city already paid for the private utility’s north system.
In return, the city gets Aqua’s southwest water system and an end to litigation over the previously acquired northern system.
Some of the other benefits to the agreement include:
Aqua customers will get city water, which many customers prefer for quality and taste.
The new city customers will save $100 to $140 each year on water bills and $10 to $20 a month on water softening. Their water-using appliances are also likely to last longer.
Aqua gets compensation for the northern system and the southwest water service that is closer to the company’s estimated value of those assets. In 2007, the city paid $16.9 million for the north system, but company officials said it was worth about $40 million.
Aqua retains its sewer customers as well as picking up Fort Wayne as one of its largest sewer customers. Aqua expects to treat an average of 1.5 million gallons of sewage from Fort Wayne each day.
Aqua pledges to freeze sewer rates until the end of 2015, as well as to invest $25,000 annually in sewer infrastructure.
City Utilities gets help with sewage treatment, which will allow it to delay some sewer projects to save some money without hampering future development.
City Utilities gets 12,000 additional ratepayers for less than $3,000 a customer – a fair price when compared with other recent utility acquisitions.
Under the agreement, Aqua Indiana will bring any future sewer rate increase requests before the Fort Wayne City Council rather than take rate cases straight to the Indiana Utility Regulatory Commission, giving Fort Wayne residents a better opportunity to voice their opinions.
The 10 or 11 Aqua employees affected by the sale will be offered jobs with the city.
The agreement puts an end to lengthy litigation and saves both utilities, as well as ratepayers, from ongoing and ever-increasing legal expenses.
Some may question how city leaders, who just pleaded poverty and asked for the recently passed tax increases, can turn around and spend millions for the Aqua Indiana assets. But City Utilities is a separate entity, supported by ratepayers.
The folks coming in are bringing in a new source of revenue, said Kumar Menon, director of Fort Wayne City Utilities. We are going to use that revenue to pay for the bond to buy the utility. We also anticipate the additional customers will put downward pressure on rates in the future. Rates will have to go up eventually. But it’s possible rates won’t go up as much because those 12,600 customers are reducing the burden for everyone.
City and Aqua officials hope to complete the sale in early 2014. But before that can happen, they need approval from City Council, Aqua America’s board of directors and the IURC. If the agreement is approved, everyone walks away a winner.