FORT WAYNE – Fort Wayne officials on Wednesday took another step toward completing the city’s purchase of Aqua Indiana’s southwest water system.
Board of Public Works members voted to approve the $67 million purchase agreement for the private utility in the southwest part of the city and the $63 million loan to pay for it and recommend both to the City Council. The council introduced both measures Tuesday and will debate them after a public hearing May 6.
The $67 million deal includes $16.9 million the city already paid Aqua for the purchase of its north water and sewer system in 2008 – a price that has been in dispute for a decade.
The agreement settles that case and transfers the southwest system to City Utilities. It also sets up agreements to provide job opportunities for displaced Aqua workers, and control sewer rates on the sewer utility Aqua will continue to own and operate; meter reading services so Aqua can bill its sewer customers; and a deal for Aqua’s sewer system to treat up to 1.5 million gallons of City Utilities sewage a day.
Len Poehler, deputy director of City Utilities, told board members he was pleased to present the deal after 10 years of litigation, discussions and negotiations.
The $63 million loan will cover the remaining $50 million of the purchase, plus an estimated $8 million to connect the two systems so City Utilities water flows to Aqua customers, and $5 million for financing costs.
Poehler said officials expect the loan will be for 20 years at an interest rate of about 4 percent.
If approved by the City Council, the purchase must also be OK’d by the Indiana Utility Regulatory Commission, a process expected to take four to six months, meaning the deal will likely close in the fourth quarter.
Poehler said customers will begin switching to City Utilities water within days after the closing, but all Aqua customers will immediately move to City Utilities billing and pay City Utilities rates, which are expected to save the average household $100 to $140 a year.
Officials have promised that the purchase would not be paid for by existing City Utilities customers and said they might charge the new customers a surcharge to ensure that does not happen. Poehler said Wednesday it does not appear a surcharge will be necessary, as the revenue from 12,500 new customers will cover the cost at current rates.
City documents show officials estimate the new customers will pay about $5 million a year in water bills but serving them will only cost $4.1 million in higher operating costs and debt payments. Poehler said that if the bond market changes in the next few months, a surcharge could become necessary.
He said transitioning customers to city water will take place in three phases, with the last customers expected to switch by summer 2015. But he said even those customers will pay the lower, city rates as soon as the deal closes.
This agreement is good for City Utilities, good for Aqua and most importantly, good for all our customers, Poehler said.
Board members Bob Kennedy and Mike Avilla voted in favor of both measures; member Kumar Menon was absent.
The board also voted to move forward with a project to repair concrete streets in the neighborhoods of Haverhill, Plantation of Aboite, Aboite Lake Estates and North Shores, as well as a project to replace sidewalks on Northland Boulevard and Polo Run. Both projects are expected to be bid in the next few weeks.