IAWC vs Mooresville Town Council: Summary of Events

IAWC vs Mooresville Town Council:

Summary of Events

07-03-2012:

President Watkins stated that it has been brought to the Council' s attention that Indiana American Water Co. has raised their rates with the average increase to residential customers of 17%, business customers between 30- 35%, and high end industrial users will receive a 40% increase. He is asking the Council for a motion to investigate options to slow down or stop future large water increases. A motion was made by Councilman Langley and second by Councilman Mathis to investigate these options. Motion carried 5- 0.

08-07-2012:

Next was the public hearing for consideration of an ordinance establishing a municipally owned water utility. Council President stated this was not a question and answer, just public comments and for convenience and necessity people who signed up to speak will have five minutes to speak and any utility that signed up will have 30 minutes to give their presentation. There were three from Indiana American Water so they would have 30 minutes total.

Nancy Caldwell was first on the sign up sheet. She asked to speak after the utility company gave their presentation but that wasn' t in the rules so she declined to speak. Randy Haymaker, 1068 Delwood Drive in Mooresville was next. He served on the town council from 1973 to 1976. He works for a consumer-owned utility that serves parts of 48 Indiana and 10 Illinois counties. He said he knew of no other community this size in population and tax base that has better streets, sewers, police, fire, ambulance, library or park services. He listed several advantages to local ownership of the water utility. Some advantages include coordination of fire protection, support for economic development and growth and decreased costs through shared use of staff,heavy equipment and consumer billing with other departments such as street, sewer and clerk departments.

The entire comment is attached to the minutes.

David Burns living on Campus Court in Mooresville commented. He said he was curious as to how funds would be allocated from various sources into various areas. He waters his garden and still has to pay a sewer bill and at times have had sewer problems and arguments in the past and it was hard to work out whom and how something was going to get paid. Mr. Burns asked what the Town would do with all the extra money, would it go into a general fund and disbursements made from the general fund. He stated he was just curious how the money would be handled.

Allen DeBoy, president of Indiana American Water stated he had over 30 years of experience with water utilities. His first professional job was engineering support for General Water Works for Mooresville in the 1980' s. He is very familiar with the system.  Indiana American water bought United water in Mooresville in 2000. Indiana American is a subsidiary of the largest investor water company in the nation called American Water. Indiana American is the largest investor water company in Indiana. Indiana American thought they had an outstanding relationship with the Town Council and other political figures but something must have changed. Mr. DeBoy said they were shocked and stunned the town is taking this approach. His request for tonight was to sit down with the Town Council to discuss issues and concerns before the town goes down the path of eminent domain. Mr. DeBoy commented they have an excellent record of quality service currently at 92% rating. He was also proud of the company' s compliance record as they have had no notices of violation with environmental regulations and the fact they have also made investment back to the community. He said typically Indiana American costs for users are less than other utilities a consumer has to pay. He commented Indiana American is an integral part of the community. They are governed by the IURC and they 1043 establish the rates based on cost of service provided. The water company employees live here and work here. The water company is a significant taxpayer at a sum of$50,000 a year and that helps support the Town and School. Mr. DeBoy stated Indiana American water is not a willing seller and they have every intention of continuing serving and providing water to the customers in Mooresville. He hopes all understand that eminent domain has significant consequences; very time consuming, very costly and very divisive. Indiana American water will not let these proceedings get in the way of continuing to provide quality service.

Troy Bryant a lifelong resident of Mooresville and an employee of Indiana American Water. He has served this water system for 18 years since General Water Works owned I/the system in 1993. Recently his responsibilities have expanded. He said in his recent conversations with Councilman Langley indicated controlling water rates and controlling growth was discussed. The handouts of documents (attached to these minutes) show water rates history over eight years. During that time frame $4million were invested in mains, hydrants, valves, meters, plant improvements, and the current tank project. The improvements led to stronger fire flows, added reliability, and improvement of operating efficiencies. He said in spite of the investment they have been able to manage rate increases at a reasonable level. The charts on the table reflect this. They have had a level of commitment to the community through the Chamber of Commerce, Kiwanis, and Revitalization group and have sponsored elementary science fairs at schools, and will sponsor Tox-A-Way days and many other events in the community. IIe told the council to take time to talk to them and see if they can' t resolve the issues together and to not take a vote tonight.

Nick Kile, attorney from Barnes & Thornburg, and attorney for Indiana American Water spoke next. He said he was going to cover the last three pages of the handout. Mr. Kile indicated the process the council had used for tonight had denied them adequate opportunity to prepare for tonight. Document A. Indiana Code: The notice of time and place of hearing was not on their notice. He said this did not comply with the statute. He said once they received the notice he tried to figure out what was driving this. The first place he went was the Mooresville website to get copies of minutes and ordinances. In order to access the needed information he said he needed a user name and password.  I Then he decided to ask for a basic access to records request for ordinances, minutes, any feasibility study and that was sent the day after he received the notice. Then they received a letter from Chris Janak, Bose, McKinney& Evans attorney for Town of Mooresville, indicating the letter had been received. It has been thirteen days later and we still haven' t received the information. He said we don' t even have the ordinance that is to be for tonight. Then tonight I find out that after we are done speaking there will be a photo presentation by the town. We have not had time to prepare for tonight and this whole process has been very unfair. Mr. Kile said-he had extended an invitation through the town' s attorney to sit down, talk and see what is driving this proposal, he is extending that invitation to the council tonight. He told the council a hostile government takeover through eminent domain was going to be very contentious and very expensive and at the end of the day only Chris Janak and he will be happy because they were going to be paid a lot of money. He said this process will last longer than the council' s terms in office and will create deep divisions in the community. It will take staggering sums of money.

Next, Mr. Kile gave the City of Fort Wayne example. He said government takeovers were popular in the Roosevelt administration but were not common today. About ten years ago Fort Wayne started to pursue condemnation and takeover of the North system owned by Utility Center that serves 9, 000 customers. Utility Center is owned by a large publically traded national Corporation called Aqua America. Today that pursuit is not completed. It is still pending for the second time in the Indiana Supreme Court. It has been very divisive to the community. He had an article from 2006 that stated Fort Wayne had been through a trial and the legal fees alone had been 1. 2 million dollars and did not include consultant fees. Mr. Kile finished by saying this is relevant because Indiana American Water will do everything they can just like Utility Center to stop this government takeover.  "We need to sit down and talk".

Council President Watkins announced the public hearing portion was now concluded.

Councilman Langley gave a power point presentation. He started with Hoosier water bank in 1986. He learned water systems from the ground up, then managed Mooresville for a couple of years. He has worked for 17 years in private water utility. He thinks Indiana American has failed to communicate to the general public about rate increases which is the biggest part of the issue in his mind. American Water is the parent company serving 15 million people in 30 states and Canada. Indiana American Water serves 3600 people in Mooresville. This is not about profits but about what is best for the community. Local control of growth-it takes infrastructure and money. Investor owned utilities rely on developers to pay for infrastructure. For municipal owners this is more of a quality of life issue. Municipal owners can run water operations cheaper because no profit, don' t have to pay shareholders, don' t pay taxes, and no regulatory issues. Municipal owners can do things more economically, for example Mooresville Wastewater Treatment Plant expansion to double the size of the plant cost 15 million, but did not have to pay for 6 million of that due to an OCRA grant being awarded to the Town. Of that 15 million 1.25 million came from the TIF funds and the rest was financed through low interest SRF loan. Coordinating synergies; We already have employees, would have one labor force which is cheaper, billing consolidation; water and sewer would be billed together at the local level, crews would work together, and coordination of infrastructure. Currently the water has an engineer on projects and the town has another engineer and projects overlap each other. We would have one engineer and one contractor for water and street or sewer.

Local control of rates: A big company requests rate increases from IURC. Councilman Langley said what is driving the issue the most is the move toward consolidated rates or single tariff pricing. There are two groups of rates: Group 1 includes bigger cities and towns and Group 2 includes Mooresville, Winchester, and Wabash. Indiana American is interested in combining Group 1 ( a lot higher rates) with Group 2. In the most recent rate increase request that was settled on June 15, 2012 the testimony said Indiana American Water is proposing to move Warsaw and West Lafayette to Group 1 and the Group 2 rates closer to Group 1. Also in the testimony was the statement that Indiana American Water's goal is to combine 2 rate groups into 1 group and implement single tariff pricing.  Industrial customers-When Indiana American Water bought the water company in 2000 one particular valuable customer was using 3.5 million gallons of water a month and paying $4,000, now they are paying $9,000 a month and will increase to $ 12, 000 a month in 2013 or 2014. Councilman Langley is concerned about keeping big water users in town.

Councilman Langley said the Mooresville water system is very efficient. It is a groundwater system. Treatment expense is really low. It is on a good aquifer, there is room for expansion, and has low pumping cost, and is 100% metered. Water is pumped out of the ground, chlorinated, iron removed and sent on to the customer. Capital projects- In the last rate filing by Indiana American Water they identified projects over$ 500,000 and there were no projects listed for Mooresville. The water bill said a 1% increase for the whole state beginning June 15, 2012. Group 1 decreased by 3. 21%. Mooresville increased by 16.25% and no capital projects. Industrial users in Mooresville pay 39% more for water. There is a move toward single tariff pricing. Rates must increase again in Mooresville to fully implement. Industrial in Mooresville will see another big rate increase.

Council President Watkins asked how often rate increases can happen with the IURC. Someone answered there are 15 months between rate increases and Indiana American Water will file soon for another increase. The council will take the matter under advisement and put on the agenda for the Special meeting on Friday, August 10, 2012 at 3: 30 P. M. at the Mooresville Government Center.

08-10-2012: 3:30PM:

The Town Council met in special session on Friday, August 10, 2012 at 3: 30 P. M. at the Mooresville Government Center.

Tim Currens stated there had been some reports the scheduled meeting for today was about a public hearing to maintain low water rates but this is not the case. The Town Council had the public hearing on August 7, 2012. This is a regular Town Council meeting today and will follow the existing agenda. The Town Council intends to address certain issues and going forward will have other meetings concerning the issues. The Town did not release any information this was a Public Hearing. We apologize for any inconvenience.

A spokesman from Indiana American Water commented since there were no public comments today they had written material in regards to the Public Hearing. Council President Watkins told him to submit them to the clerk to be passed out for the next council meeting. The spokesman declined.

Town Council President Watkins stated they were changing the order of the agenda at council's request and would take care of consideration of water utility first and then health insurance. He commented that over the last few days he had an opportunity to speak to citizens of our town and he was pleased at the respectful way the citizens are contacting their leaders and asking very good questions and making good comments.

After the public hearing the council considered the two presentations and one item the town could do above and beyond is to arrange a meeting with Indiana American Water. A motion was made by Councilman Langley with a second by Councilwoman Perry to authorize Chris Janak to set a meeting with Indiana American Water to see if there can be a resolution. Motion carried 5- 0.

Council President Watkins as for unanimous consensus from the council to amend the agenda to pursue due diligence to obtain information required to do resolution# 4, an approval of a retainer for American Appraisals, Inc, also an engagement letter with Bowes, McKinney, and Evans and the introduction of an ordinance and/ or adoption of said ordinance. Mo council member opposed. All consented.

Attorney Chris Janak, Bowes, McKinney, and Evans, explained Resolution# 4.

Resolution 4, 2012 concerns interest in acquisition and to allow hiring of appraisers, engineers and accountants. The resolution requires one reading to adopt and start the process to see if it is feasible, reasonable, and in the best interest to purchase Indiana American facilities in Mooresville.

A motion was made by Councilwoman Perry with a second by Councilman Cook that Resolution 4, 2012, a Resolution concerning interest in the acquisition of property, be approved at this same meeting in which it is being introduced. Motion carried 5- 0.

Next: the approval of a retainer for American Appraisals, Inc. Chris Janak said this approval does two things; a. is this acceptable to the council and b. authorizes Council President to execute the agreement and make the required payment contained in the agreement. Motion was made by Councilman Mathis with a second by Councilman Cook to approve. Motion carried 5- 0.

A motion was made by Councilman Langley with a second by Councilwoman Perry to approve the engagement letter and contract for Chris Janak of Bowes, McKinney, and Evans. Motion carried 5- 0.

Chris Janak informed the council that Ordinance 12, 2012 indicates the council' s interest in pursuing the acquisition of Indiana American Water in Mooresville and the Town won' t compete if the go forward with this acquisition. There are two options; introduce this ordinance and pass at a later date, or introduce and pass today. A motion was made by Councilwoman Perry that Ordinance 12, 2012, an Ordinance of the Town Council of the Town of Mooresville, Indiana declaring that public convenience and necessity require the Town of Mooresville to establish a municipally owned utility and thereafter construct or acquire utility assets and facilities be approved at this same meeting in which it is introduced. Mark Mathis seconded the motion. Motion carried 5-0.

A motion was made by Councilwoman Perry to approve Ordinance 12, 2012. Councilman Cook made a second to the motion. Motion carried 5- 0. Council President Watkins announced this was the extent of conversation today in regards to this matter. He announced the phone line especially for council messages as being 831- 0697 and will be ready on August 15, 2012. He also announced an e- mail for comments; mooresvilletowncouncil@gmail.com. Council took a two minute break at this time.

08-10-2012: Ordinance 12-2012:

AN ORDINANCE OF THE TOWN COUNCIL OF THE

TOWN OF MOORESVILLE, INDIANA, DECLARING THAT A PUBLIC

CONVENIENCE AND NECESSITY REQUIRE THE TOWN OF MOORESVILLE TO

EXPAND ITS MUNICIPALLY OWNED UTILITY AND THEREAFTER ACQUIRE

UTILITY PROPERTY

WHEREAS, the Town of Mooresville ("Town") is a political subdivision and municipality organized and operating under the laws of the State of Indiana; and

WHEREAS, it is the intent of the Town Council ("Council") of Mooresville to protect and advance the health, safety, welfare, and wellbeing of its citizens, utility users, and the community; and

WHEREAS, local governments such as the Town are often uniquely situated to account and provide for the best interests of the community, citizens, and users through the provision of utility services; and

WHEREAS, the Town already has a municipal utility that provides certain services.

WHEREAS, pursuant to Ind. Code § 8- 1. 5- 2 and other applicable statutes, the Town may own, acquire, and thereafter operate existing utilities; and

WHEREAS, the Council deems it desirable and in the best interest of the Town to exercise its legal authority to acquire, and thereafter own and operate existing water facilities for the purpose of providing water service within the Town's municipal limits and its extraterritorial authority; and

WHEREAS, a certificate of public convenience and necessity is not required as a condition precedent to the owning, leasing, acquisition, construction, or operation of a utility by the Town, even if there is a public utility engaged in similar service; and

WHEREAS, the Council is not required to hold a public hearing for the acquisition of existing utility facilities, but in an effort to receive input from the public and any affected public utility, the Town has provided notice of and held a hearing at which each public utility furnishing water utility service in and around the Town was given an opportunity to be heard in person or by counsel on the proposed action; and

WHEREAS, the utility was given additional procedure by appearing and being heard in person and by counsel at said hearing; and

WHEREAS, under Indiana law, any public utility operating within the Town is deemed to have consented to the future acquisition of its property including its property located within the Town' s extraterritorial authority; and

WHEREAS, the public necessity exists and a public convenience will be advanced by the expansion of the Town' s existing utility, and that such public necessity will be advanced by thereafter acquiring, owning and operating existing water utility assets and facilities.

NOW, THEREFORE, BE IT ORDAINED by the Town Council of the Town of Mooresville, Indiana, as follows:

1.       The above recitals are incorporated herein by this reference as though fully set forth herein below.

2.       The Council hereby declares that public convenience and necessity require, and the public interest will be served by, the expansion of its municipal utility to include the establishment of a municipal water utility and the acquisition of water utility assets and facilities in and around the Town.

3.       The Town hereby establishes a municipally owned water utility with all the rights and authorities attendant thereto.

4.       The Town further hereby exercises its power to acquire and thereafter own, operate, and control existing water assets and facilities for the purpose of providing water service both inside and outside the Town's municipal limits. By passing this Ordinance, the Town is exercising its power to provide water service in and around the Town.

5.       All prior provisions of ordinances or actions of the Town that may be inconsistent with any provision of this Ordinance are hereby superseded.

6.       The terms, paragraphs, sentences, words, and actions of this Ordinance are separable, and if any portion of this Ordinance or its acts is found to be unconstitutional, invalid, or unenforceable, any such determination shall not affect the remaining terms or portions of the Ordinance and related actions of the Town and Council.

7.       This Ordinance is effective immediately upon its adoption.

Adopted by the Town Council of the Town of Mooresville, Indiana, on this 10^th day of August, 2012.

08-21-2012: Editorial in the Mooresville Times:

In Response to the Mooresville Water System Editorial by the Mooresville- Decatur Times:

This letter is intended to address the concerns raised in a recent editorial of the Mooresville- Decatur Times in regards to the Mooresville Town Council seeking to control rising water rates and ensuring a strong economic development environment continues to exist that creates jobs.

For those that attended recent Council meetings, you heard the Town Council voice its concern regarding a plan by Indiana American Water Company to continue the implementation of a “consolidated rate structure" that will dramatically increase water rates in Mooresville. One of Mooresville' s largest employers has just learned that its annual water bill will jump by an estimated $ 33, 000, and will likely face more such increases before the plan of" consolidated rates" is fully implemented through future rate increases. In addition to controlling future water rates for its citizens, the Town Council is very concerned about losing its current and future business base as a result of Indiana American Water Company's consolidated rate strategy.

The Town Council understands how this consolidated rate strategy can help other communities such as Richmond, Kokomo, Terre Haute, and Muncie keep rates from escalating due to current and future investment needs in those cities. However, for Mooresville this strategy does not make sense. Indiana American Water Company has not identified a need for significant capital investments in the Mooresville water system. Yet, they are asking for Mooresville customers to open their wallets and pay higher rates. The Town Council believes that water rates paid in Mooresville should stay in Mooresville.

The editorial incorrectly stated that the Water Company was not allowed to speak at the August 7th Public Hearing on the matter. In fact, Indiana American was provided advance notice of the Public Hearing and allowed to speak, which they took full opportunity, with three different speakers.

The editorial also raised a concern with the cost associated with this action and how the Town would pay for a potential purchase of the utility and associated legal costs. Again, for those who attended the recent Council meetings, you heard the Town's attorney discuss the process and how the Council must follow procedural steps which allows for on- going evaluation of the transaction. If at any time the Council decides it is not in the best interests of the citizens of Mooresville to continue, it can stop the process.

At the August 10`h Town Council meeting, those attending heard the Council specifically authorize and instruct its attorney to schedule a meeting with Indiana American Water Company officials for the purpose of further dialogue in hopes that the issues may be resolved in the best interest of Mooresville water customers.

Some have questioned the Town Council's involvement in the activities of this private business. Unlike the vast majorities of business throughout our community, where citizens have a choice for the goods and services it purchases, Indiana American Water Company enjoys a natural monopoly for water service. Customers do not have a choice where they receive this essential service. The Town Council is following a legal course of action to protect its citizens against actions by Indiana American Water Company. Not only are these rate increases unfair, but they will likely put Mooresville at an economic development disadvantage as the Town works to grow business and improve the quality of life for its citizens.

Mooresville Town Council— Dated: 8/ 21/ 12

02-19-2013:

The Mooresville Town Council met in Executive Session at the Mooresville Government Center on Monday, November 19, at 6: 30 P. M. for the purpose of discussion of strategy with respect to Initiation of litigation or litigation that is either pending or has been threatened specifically in writing( IC,- 14 . 5- 6. 1 ( b)). Town Council members present were Virginia Perry, George Watkins, Tony Langley, Jeff Cook and Mark Mathis.

02-19-2013:

Next, Councilman Langley had Scott Miller and John Seiver from Umbaugh give an update of the water utility if Town of Mooresville takes over the water company using the current rate structure.

Report:

TOWN OF MOORESVILLE, INDIANA
INDIANA AMERICAN WATER OPERATING UNIT
CALCULATION OF ESTIMATED ANNUAL REVENUES
	(Old Rates)	(New Rates)			(Rates if all of Mooresville becomes single tier)
Revenues:	Revenue at Prior Rates (1)	Pro Forma at Current Rates (2)	Difference	Change	Pro Forma at Tier 1 Rates (3)	Difference	Change
Residential Revenues:	$  1,095,115.00	$  1,314,138.00	$      219,023.00	20%	$  1,458,693.00	$      144,555.00	11%
Commercial/ Public Authority Revenues	$      364,980.00	$      463,525.00	$        98,545.00	27%	$      523,783.00	$        60,258.00	13%
Industrial Revenues	$        76,561.00	$      108,717.00	$        32,156.00	42%	$      131,548.00	$        22,831.00	21%
Fire Protection Revenues	$      168,588.00	$      182,075.00	$        13,487.00	8%	$      182,075.00	$                       -	0%
Other Revenues	$        32,855.00	$        32,855.00	$                       -	0%	$        32,855.00	$                       -	0%
Total Operating Revenues	$  1,738,099.00	$  2,101,310.00	$      363,211.00	21%	$  2,328,954.00	$      227,644.00	11%
CALCULATION OF ESTIMATED ANNUAL EXPENSES
Operation and Maintenance Expenses	Indiana-American Pro Forma (1)	Adjustments	Municipally Owned Pro Forma
Labor	$      235,485.00		$      235,485.00
Purchase Power	$        59,230.00		$        59,230.00
Chemicals	$        34,639.00		$        34,639.00
Support Services	$      248,958.00	$      124,479.00	$      124,479.00
Group Insurance	$        77,012.00		$        77,012.00
Pensions	$        34,259.00		$        34,259.00
Regulatory Expense	$          7,152.00	$          7,152.00	$                       -
Other Insurance	$        16,968.00		$        16,968.00
Customer Accounting	$        47,476.00		$        47,476.00
Rents	$        16,018.00		$        16,018.00
General Office Expense	$        27,806.00		$        27,806.00
Miscellaneous	$        72,643.00		$        72,643.00
Maintenance Expense	$        50,901.00		$        50,901.00
	$      928,547.00	$      131,631.00	$      796,916.00	** Official Paperwork submitted to council says $814,916; but math says otherwise
ESTIMATED PROJECT COSTS AND FUNDING
	3.5% Net Interest Cost	4.5% Net Interest Cost	5.5% Net Interest Cost
Project Costs:
Offered Utility Purchase Price	$   7,300,000.00	$   7,300,000.00	$   7,300,000.00	** Substitued new offer
Allowance for Legal Councel, Financial Advisor, Other Transaction Costs and Project Contingency (25%)	$  1,825,000.00	$  1,825,000.00	$  1,825,000.00
Estimated Project Costs	$  9,125,000.00	$  9,125,000.00	$  9,125,000.00
Project Funding:
Proposed Waterworks Revenue Bond Issue	$  9,125,000.00	$  9,125,000.00	$  9,125,000.00
Approximate Annual Debt Service at Assumed Net Interest Cost (Assumed bond issue for 20 years level debt service)	$      644,000.00	$      704,000.00	$      766,000.00	** Assumed that if offer went up 12% then debt service also went up
ESTIMATED ANNUAL REVENUES AND REVENUE RE UIREMENTS
Estimated Annual Revenues (1)	$  2,101,310.00	$  2,101,310.00	$  2,101,310.00
Less Estimated Annual Expense (2)	$      900,097.00	$      900,097.00	$      900,097.00	** No idea where this number came from??
Less Debt Service	$      644,000.00	$      704,000.00	$      766,000.00
Total	$      557,213.00	$      497,213.00	$      435,213.00