Wednesday, July 28, 2010

The Star's Slanted View of the City Utilities Deal

Right before I left town on Sunday I read the Indianapolis Star's staff editorial supporting the sale of the city's water and sewer utilities to Citizen's Energy. Then when I arrived back today, I read a column by the Star's Matthew Tully also supporting the deal which passed the Council on Monday

Let me say from the outset that I favor the transfer of the utilities to Citizen's Energy. I believe that Citizen's Energy can operate the utilities more efficiently than the City.

While I expect proponents and opponents to selectively argue the facts in advocating their position, I expect a more objective approach to the facts from those who write for newspapers, including those whose views end up on the editorial page.

The Star's editorial and Tully's column were both noteworthy in the facts they chose to ignore. While both are correct that infrastructure improvements are solely needed, they failed to address the folly of using 30 year loans to pay for improvements, like road resurfacing, that have a life-span of 10 years or less. That would be like taking out a 30 year loan to buy a car. The loan and what you're buying with the loan should last approximately the same length of time, or less. Otherwise you are digging yourself into a financial hole filled with debt.

Rather than make an intellectually sound argument justifying 30 year loans to pay for 10 year improvements, the Stars' editors and Tully simply ignored that problem with the deal.

Tully went a step further, praising, through former IUPUI political science professor and now dean Bill Blomquist, that the $1.5 billion in utility debt the city owes will be wiped out through the sale.


The City does not exist as some unaffiliated entity. The City is people, people like you and me. We, the people, also also own Citizen's Energy which is taking over the debt. There is no savings to the public. It's just a $1.5 billion IOU moved from the taxpayer's front to the back pocket.

There are solid arguments for transferring the sewer and water utilities to Citizen's Energy to run and maintain. It is the "sale" and the 30 year loans to pay 10 year improvements where the logic in the "sale" as opposed to a straight transfer, breaks down.

While I expect Democrats and Republicans to ignore problems with the sale and borrowing associated with the deal, I expect those who regularly opine for our daily newspapers to directly address those problems and tell me the benefits outweigh those problems. Instead the Star's editors took an advocate's approach, simply ignoring the problems while praising the benefits. The Star's readers deserved a more honest editorial approach than what the Star offered on this issue.


Unigov said...

The fix is in. It doesn't matter what the facts the FACT that Vectren's residential prices for natural gas are LOWER than Citizens Gas, according to the IURC.

How could a FOR profit utility beat a non-profit's prices ? Because CG is badly run.

Doesn't matter, the fix is in.

Jon said...

The Star et. al. still refer to this as a sale rather than a transfer, the Star still ignores the fact that the only money in this deal will be increased debt via bonds and Paul is correct in that the debt isn't gone it just moved elsewhere, the same as the dome and Market Square. The winners in this deal are the lawyers and big law firms who brokered the deal and will get the bond money for this deal and as usual all we get is the bill.

Marycatherine Barton said...

I have very well learned not to trust either of thes34 three advocates of the transfer, Blomquist, Tully, and Rynerson. Like Unigov writes, the fix is in.

Thanks for trying so hard to enlighten the public, Paul. And, of course, I also agree with Jon's comment.

Had Enough Indy? said...

These Star pieces struck me the same way, Paul.

I have to correct you on one point though -- the movement of water company debt from the City to Citizens Energy continues to take money from the same pocket; a ratepayer simply continues make the check out to the water company and somebody new cashes it. Of course, the sewer bill will rise substantially to pay for the cash transfer from Citizens to the City and to pay the PILOT.

Citizen Kane said...

And the IBJ editorials are no better (see link below), I've already responded to their lamebrain editorial, so I can imagine the nonsense that Tully wrote.