Thursday, October 28, 2010

City Agrees to Pay Veolia Water $29 Million To Walk Away From Contract (w/update)

Well, it turns out the Ballard adminstration was lying to everyone about Citizen's Energy continuing on with the Veolia Water contract after the city water and sewer utilities were "sold" to Citizen's. Today the Indianapolis Business Journal reports that the City will pay Veolia a $29 million fee to break the contract. (Of course, Veolia is a client of Barnes & Thornburg.)

The Indianapolis Business Journal reports:
Veolia will no longer have a role in operating Indianapolis Water after the city sells the utility to Citizens Energy Group—but the company will walk away with $29 million in the form of a contract-termination fee.

The contract-termination agreement announced Thursday, which must be approved by the Indiana Utility Regulatory Commission, came as somewhat of surprise. Citizens has been in talks with water system operator Veolia since at least July, when City-County Council members approved the sale.
“It’s a little tough to argue with the city’s choice here, given the very unique position Citizens holds,” Clarke said. “We’re very proud of what we’ve done” managing Indianapolis Water.

Veolia has managed the city water utility since 2002 under a contract that was to have expired in 2022. Mayor Greg Ballard proposed selling the water and sewer operations as a way to generate cash for city infrastructure improvements.
To see the rest of the article, click here:

Bottom line is that the City undoubtedly knew this breakup was in the works, yet intentionally kept that information from the Council and the public during the debate over "selling" the city's water and sewer utilities to Citizen's Energy. Now we taxpayers have to pay $29 million to break the contract with Veolia. Of course, Veolia is a Barnes & Thornburg client.

The City, of course, tries to explain it away by saying that this is an okay deal because we're taking the money out of a different pot. Where does that money though originate? The taxpayers.

Gary Welsh reviews the IBJ article and says it better than I ever could:
This is just another example of the Ballard administration lying to the public to get a deal through the city council by withholding relevant information from the public while the debate is taking place. We saw this with the bailout legislation for the CIB last year when the public was repeatedly assured the new revenues being raised from higher hotel taxes, state revenue sharing and a state loan would not be used to provide any payments to billionaire Herb Simon's Indiana Pacers in order to secure City-County Council approval. Later, we learned the city had planned all along to divert excess property tax revenues from a downtown TIF district to make possible a $33.5 million give-away to the Pacers. Now we learn that the city planned all along to
pay a huge termination fee to Veolia it said was not advisable in order to secure approval of its controversial utility transfer deal from the City-County Council.

It cannot be doubted that both Citizens and the Ballard administration knew this was to be the outcome. The Ballard administration expects us to be happy with the termination fee because it says it won't lead to higher utility rates. Higher utility rates were already a foregone conclusion because the Ballard administration insisted Citizens pay it $460 million as part of the deal, the cash payments for which Citizens simply plans to borrow the money and pass on the costs to ratepayers in the form of higher rates. Chris Cotterill, Ballard's chief of staff, defends the move because he says the $29 million fee is being paid out of an escrow account the administration had set up last year to cover "unanticipated costs". Isn't it funny how there are always these surprise pots of money sitting out there that magically appear when the money needs to be found?
Yet more campaign fodder for the Democrats and yet another issue to alienate fiscally conservative Republicans from supporting Ballard for another term.

Update: A few people for proof that Barnes & Thornburg represents Veolia. B&T doesn't lobby for Veolia. Rather B&T represents Veolia in litigation. See the attorneys who filed this answer to a class action lawsuit filed in 2008. They are identified on page 20 of the answer, the last page. Once again, the City has manuevered to funnel millions to a B&T client.


Had Enough Indy? said...

I would not be surprised to hear that the Republican caucus knew about this all along. I know they told the Ballard administration that they didn't care if property taxes were given to the Pacers (the MDC-CIB agreement), just so long as the Council could avoid voting on it.

Every day, there is some other disservice to the taxpayers and residents of Indianapolis - committed by the Ballard administration - with a wink and a nod from Vaughn and his cohorts.

Guest said...

Veolia has done a horrible job and needs to go no matter what that costs.

theindianapolisan said...

I fantasize about a city where the commons aren't run into the ground for profit and government is concerned about flesh and blood people, not fictional persons.

I hope Citizens hangs on and keeps running as a not-for-profit public trust.

And they can't do any worse than Veolia--the water here tastes awful.