Water Works Deal:

Biggest scam ever or necessary progress?

People that COAST respects have encouraged us to re-think our opposition to the plan to turn the Cincinnati Water Works over to a regional governmental body, controlled by the City. Widely respected corporate executive and attorney Lynn Marmer chaired a panel that drew the plan. Dave Rager, who currently heads the Water Works and is a champion of the plan, is well respected for providing high-quality water at competitive rates. Here, COAST tries to present a more detailed review of the issues presented by the proposal to make the system regional. You may read for yourself the Executive Summary of the report here and the entire Report here.

Major issues presented by proposal:

1. Why would we change now? Currently the Water Works provides some of the best-quality water in the Nation for bargain rates. Why would we change anything? This is an excellent question. Proponents claim that the loss of manufacturing businesses in the region, which use large quantities of water, and the loss of residents, means less utilization and resulting increase in expense for the remaining customers. Because of statutory limitations on geographic growth and uncompetitive City purchasing rules, over time it will not be possible to maintain our quality and competitive rate structure. So, the current good thing may not last and we must change to become competitive. Here, proponents make an excellent point.


2. Why would we pay $475 million for something we already own? The primary objection COAST has to the Water Works proposal is it calls for City Council to sell the plants, pumps, pipes and other capital assets for $475 to the new entity. This is a $475 million windfall for the City of Cincinnati. The new entity will then include the capital payback in its new rate structure. Proponents point out, however, that the ratepayers of the new, expanded system will be a larger group than City ratepayers, or even current ratepayers. Why should the new ratepayers benefit from this asset currently owned by a smaller universe of ratepayers? The logic certainly is fair, but as COAST sees things current ratepayers bought the system once; they should not have to pay for the same asset twice.


3. What about Proponents’ claims rates will still be lower? Because of savings to be had from the efficiencies noted in paragraph 1, above, proponents claim rates will still be lower than they otherwise would be even with the $475 million buy-out of the capital assets. Yes, but COAST is skeptical. The capital pay down will cost close to 15% of current rates. That’s a lot of savings to be attained just to keep rates constant. Moreover, the plan is do-able with zero paid to the City if Council wanted, meaning rates could be even lower.


4. Couldn’t that $475 million windfall be put to good uses? As with so much with government, only half the evil comes from higher taxes (rates). The other half comes from the mis-spending by politicians and bureaucrats. Right now, Council has indicated its support for a wasteful $200 trolley system that will run an annual operating deficit of $5 million – over the objections of a majority of City voters. If Council had $475 million in new dollars, would they spend them on important community priorities like safety, stabilizing the retirement fund, and economic development, or squander them on foolish projects that leave no legacy but debt and operating expenses? COAST posits that the proof is in the puddin’. When Council received $65 million in proceeds from the demutualization of Anthem, it squandered the monies on forgettable projects and now has nothing to show for the unprecedented flood of cash. If Council was forced through the governing documents of the new authority to spend the monies on certain limited uses, is the $475 million price redeemable? COAST is skeptical, but will see how the debate emerges.


5. Why new taxing and eminent domain powers? The proposal calls for the new regional water authority to have the power to place tax levies on the ballot, and eminent domain authority. Councilmember Chris Monzel has declared he opposes the plan for these two reason alone. Moreover, as with the $475 million capital charge, these new powers are entirely optional. The plan can go forward without either. Eminent domain is a tough issue, as utilities need this power to fulfill its statutory duty to provide service to all customers, but why would a water authority need to tax when it can raise funds from water rates? COAST believes planners should eliminate the entirely unnecessary taxing powers.

Many of COAST’s WeDemandAVote.Com partners are adamantly opposed to the Water Works plan. These include the NAACP, Cincinnati Progressive Action, and the Green Party of Southwest Ohio. For example, Josh Krekler from the Green Party wrote this excellent analysis. COAST respects its WeDemand partners and values their opinions. If City Council wants COAST buy-in to the Water Works plan (and we appreciate the dialogue), it will need to substantively address the concerns above and include COAST’s WeDemand partners in the dialogue to make this plan workable.