Today's Indianapolis Star announces that the administration of Indianapolis Mayor Greg Ballard is taking bids from private companies to partner with the city in operating the city's water and sewer systems. The Star reports:
What is not clear from the article is that the administration undoubtedly intends to offer a long-term lease or management contract will undoubtedly span decades. That long-term lease or management contract generates up-front cash that can be used for much needed infrastructure repairs. A long term lease would be necessary for a company to qualify for IRS tax credits which treats long-term lessees as "owners" of property making them eligible for tax breaks.
About two dozen companies, including Citizens Energy Group, have expressed interest in owning or operating the systems, which city leaders said could generate as much as $400 million to build roads and sidewalks and make other improvements while potentially protecting customers from large rate increases.
Citizens offered $1.6 billion to acquire the water and wastewater utilities, according to a letter the company sent to city officials last week. So far, it is the most detailed proposal made in response to a July request by city officials.
That request asked companies to propose ways they could generate savings by operating the utilities. The city in turn would charge the companies an upfront payment for the right to that business but in most cases would still own the utilities.
Aside from Citizens, proposals from companies such as Veolia, United Water and CH2M Hill were too preliminary to carry a specific financial offer.
Most of the proposals would generate savings in two ways:
Reducing operating costs such as billing, vehicle fleets and facilities by combining the water and wastewater utilities.
Building future improvement projects at a cheaper price.
By 2025, the city expects to spend more than $4 billion to make upgrades to the water and wastewater systems. Those improvements are expected to increase
water rates by 112 percent and wastewater rates by 427 percent during that time
Under those projections, today's average water bill of $28.07 would increase to $59.64, and the average sewer bill would go from $19.89 to $104.83 during the same period.
Robert Vane, Mayor Greg Ballard's deputy chief of staff, said the mayor's goal is to help reduce those future costs by either partnering with private companies or signing off on Citizens Energy's acquisition of the utilities. He said it was too early for Ballard to offer a specific goal for how much future increases could be reduced.
This is not privatization. Privatization envisions private companies operating in a competitive environment. If they don't do the job well, government can contract with another company to provide the service better. Handing companies long-term contracts to lease or manage assets is to give them a government-sanctioned monopoly over the provision of services. Getting out of such contracts are difficult at best. Additionally, elected officials, who have usually received substantial political contributions from these contractors, aren't inclined to offer strong oversight over the performance of the contract. Remember FSSA and the IBM contract? It was legislators who forced the Daniels' administration to take a closer look at the contract. Initially the Daniels' administration greatly resisted the oversight and was harshly critical of Republican legislators who raised the issue.
The Ballard administration bills the possible lease or management of city utilities as a sort of public-private partnership. The term "public-private partnership" should strike fear in the heart of every Marion County taxpayer. Too many times those partnerships are about putting money in the pockets of politically-connected companies and large law firms who then kick back money to elected officials in the form of political contributions. It is always the taxpayers who end up footing the bill. Lucas Oil Stadium and Conseco Fieldhouse are but two examples of public-private partnerships which have profited the private while costing the public more and more every year.
Can this administration be trusted to do these deals correctly and in the best interest of the taxpayers? Frankly, given the benefit of hindsight, I'm not sure any administration of the past three decades should have been trusted to do what is best for the taxpayers. Unfortunately Mayor Ballard is no different than his predecessor on this score, and may well be worse. Until Indianapolis can get a handle on the privatization and public-private partnerships schemes that look and smell like little more than Illinois-style pay-to-play politics, this idea needs to be shelved.