Vice Mayor’s Statement Regarding Water System Sale
Via CITY OFFICE OF COMMUNICATIONS
May 14, 2012
During this evening’s Council meeting Falls Church Vice Mayor Dave Snyder commented on the proposed sale of the City’s water system.
“The City is taking the necessary steps to sell its public water distribution system after a long and concerted effort by Fairfax County to drive the City out of providing water service in the County. The sale is not driven by financial stress in the City. The City of Falls Church is financially sound, maintaining high bond ratings and high quality public services.”
“The City is taking responsible steps to divest its water utility assets with appropriate protections for our customers and utility employees embedded in the Agreement for Sale. The proceeds from the sale will be deployed to meet other core public needs. Those who are concerned about private ownership of water utility systems should encourage Fairfax Water to participate in the bidding process.”
Concerning water quality: “The City water system is a distribution system only. Whichever entity purchases and operates the City water system in the future will continue to receive treated drinking water from the Washington Aqueduct, operated by the United States Army Corps of Engineers. The Army Corps has a long track record of meeting or exceeding regulatory requirements for the water that we deliver to our customers.”
Rate structure: “Rates will be frozen for one year after the sale. If a private entity were to purchase and operate the water system, rates in the future would be regulated by the State Corporation Commission.”
Service level: “Water service is one of the most highly regulated industries in the United States. The State Corporation Commission regulates the level of service for private water providers in Virginia.”
Following the statement the Council voted, 5-0, to give preliminary approval for the sale, with Mayor Baroukh and Ms. Gardner absent. A second reading and vote is scheduled for next month. Final approval of the sale would be via a referendum.
By (see byline)
May 14, 2012
It will be very interesting to see if Fx Water enters a bid on the big day. I am mystified by the comment by Mr. Shields that Fx made an offer to merge and add a FC member to the board…..no money? What’s that about?
I think it is called “The First Step” in the evil plan to return the Independent Little City back into the “Grand County.”
“Come over to the dark side, Luke.”
The City may be financially sound on paper and with bond ratings, etc. But to me at least that soundness does not equate to the City being in good shape with the residential tax rate, does it? Will the sale of the water system help or not help the average resident with the tax rate they pay – - as projected next year and in the future? Or is it too early to tell?
I have not heard any specific info or references to sale proceeds that would reduce tax rates by *some* amount. All I hear are proceeds *might* be used (or part of proceeds) to fuel funding for pensions. This funding would potentially prevent or delay a future tax rate increase directly related to pension funding. I don’t think this means tax rates would not rise…only they might not have to add additional cents to the rate to fund pensions.
I’m sure Mr. LaCondre will have many ideas to present to Council…assuming there are decent bids and voters approve a sale.
Thanks TFC….so if this sale goes through… the City sells a very valuable asset and the “average Joe” taxpayer sees no benefit most notably in his/her residential tax rate – - that even with the proceeds from the sale, taxpayers can only hope to tread water” (no pun intended) on taxes? The City’s financial situation may not be stressed but the budgets of taxpayers will be.
So, where do the proceeds go exactly…..are we just sacrifice a major asset to offset increasing City expenses and because commericial development is flatlined….with the tax rate staying the same at best? Maybe this discussion is premature….a lot of questions like this need to be answered which maybe have been addressed through some venue but most likely in information that will be forthcoming.
Mel, the only idea I’ve heard takes the proceeds from the sale (if it happens) and applies them to the pensions which will either reduce the tax rate, keep the tax rate from going up, or allow Council to use tax money that would otherwise fund the pensions for something else. It sounds like so far nobody favors spending the proceeds on a one-time expenditure – but I suppose that could happen.
I don’t see how the water utility is a very valuable asset if we can’t generate any net revenue from it. I mean, the asset has value but it seems like the only way to capture the value is by selling it.
I think the issue of city expenses and commercial development are separate from the water utility issue. Even if city expenses were down and commercial development was up and our tax rate was lower we’d still benefit more by selling the utility and using the proceeds to reduce our taxes even more.
I think at this point it’s a little too early to worry too much about what we might do with proceeds from a sale. First, we have to find out if there are any good offers. Then, Council would need to authorize the sale. Then, we’d have to wait until November to vote on it. I suspect that between Council approval and November there will be many opportunities for concerned citizens to ask City Council and the City Manager what the plans are for the proceeds – and those plans can guide how people vote on the issue.
Thanks Andy – - a fair and logical analysis. Much more to come obviously. On the surface it appears the City’s back is so against the wall, despite on one hand on paper looking in good shape financially……on the other hand it really isn’t. It has reached a point where it may have to resort to selling a major asset just to keep afloat (sorry for all the puns)….smile- – whether or not that asset is yielding much return. I am neutral at this point and look forward to much more information.
One point I heard Mr. LaCondre mention was the type of investment, and potential return, that could fuel pensions. If I recall correctly, he noted that pension funds themselves have major restrictions on the type of investment. These tend to be low yield. The proceeds (or part) could be invested in higher yield instruments which would provide a greater potential ROI and this higher yield could be transferred into pension funding obligations. This would make our investment dollars go further.
@Andy, I do wonder if Council and others will be discussing specifics about the use of proceeds as part of our consideration when voting. That kinda makes the vote about two issues….selling and the plan for proceeds. Someone could be voting against the sale because they do not agree with the specific use for proceeds. Sounds like it makes things more complicated.
Mel, I think the comment about being financially sound is a way of telling potential purchasers, “hey, we don’t have to sell this thing to stay afloat so don’t give us a lowball offer.” I’m not an expert on this issue but I think other municipalities around the country have been in much worse situations than we’re in and have had to sell assets like this to literally stay solvent. While our tax rate is on the high end, I don’t think selling or not selling the water utility will impact whether or not the City can stay in business.
TFC, I assume City Council will get into specifics on how the proceeds may be spent prior to the referendum in November – I’ll be bugging them to if they don’t do it proactively – because I do think the plans for the funds would impact whether or not I support selling the utility.
Also, it probably takes a while for something like this to go through so I wouldn’t be surprised if 2013 City Council candidates (November election) will be running on how to use the money (if, in fact, there is money to use) – so that may be another opportunity for voters to dictate the final outcome of things.
Andy, my understanding is that the Commonwealth has underfunded the state’s retirement fund by some amount so the money from the water system is going to go toward ensuring we are able to meet our obligations toward our retirees without causing further property tax increases. At least, I hope that will be the case.