Fairfax Water Proposes Merger With Falls Church
By GEORGE BROMLEY
Falls Church Times Staff
February 29, 2012
Fairfax Water has proposed that the City of Falls Church agree to merge its water system with Fairfax County’s. Submitted in response to the City’s recent request for expressions of interest (REI) in its water and sewer systems, the proposal suggests that a merger would result in significantly lower water costs, provide robust system backup, and offer tens of millions of dollars in savings for Falls Church’s capital improvements program. The City also would have a seat on Fairfax Water’s ten member Board.
Fairfax Water also lists three reasons why it would be inadvisable for the City to attempt to sell the system to the highest private bidder. Falls Church would forego the additional reliability gained through joining Fairfax and its customers would pay considerably more for water. The City also would likely face major regulatory hurdles, including approval of the sale by the Fairfax County Board of Supervisors.
Falls Church officials had little immediate reaction to the proposal. “We look forward to reviewing it along with the other responses that we receive, as the City Council evaluates preferred options for the future of the City’s water and sanitary sewer systems,” said city manager Wyatt Shields.
In the proposal’s text, Fairfax Water’s general manager Charles Murray states “In short, the benefits of merging our two systems would be extraordinary. Not only would your existing customers pay significantly less for their water but our joint water system – with two independent water treatment plants in Virginia and one in the District of Columbia – would be the most robust and reliable in the world.”
Falls Church issued the REI on February 14. Responses are due by Friday, March 2. Sale of the water system to a public or private utility would require citizen approval via referendum. However, a merger with Fairfax Water might only require a majority vote by the City Council.
Falls Church’s system services around 34,000 accounts and 140,000 customers. Most of its customers reside in Fairfax County. Fairfax Water services 234,000 accounts and 835,000 customers. It currently has six wholesale customers. The City has one.
The full text of Fairfax Water’s response to the REI is available here.
By George Bromley
February 29, 2012
Falls Church in the News
What Fairfax water craves is the reliabilty that FC water has always had. Anyone remember Hurricane Isabel when FC saved Fairfax Co.’s butt when their system was contaminated? Not sure how the price would be lower since the water source/cost from the Washington Aqueduct is unchanged. Trading the system for a seat on the water board doesn’t seem equitable.
A case could probably be made that a merged FC-Fairfax water system would be more efficient. But recent history on rates, legal challenges and politics suggests that FC would be putting its citizens at the mercy of Fairfax County government after a grueling and ugly legal battle. I also wonder whether a merged system would respond as quickly to line breaks and other service issues. I’m skeptical.
It will be interesting to see if we get other responses. Hope Fx did not poison pen us….
This seems to be a no-brainer for those of us living inside the City. There is no earthly reason we should be paying 60 percent more for water other than the fact that our system is too small to generate economies of scale. Joining with the county is the common sense solution. Wouldn’t it be nice to have one, just one, government service less costly?
TFC:
Not a poison pen, but more like a threatened spike to any possible deal. Looking at their response, it’s not subtle in the least.
FCT says that Fairfax Water said “The City also would likely face major regulatory hurdles, including approval of the sale by the Fairfax County Board of Supervisors.” In fact, it was even more of an in-yer-face comment. The doc says we would “likely face insurmountable regulatory hurdles.” They say the State Corporation Commission would find it “difficult” to approve a sale to a private owner and that the SCC couldn’t approve a merger without the “blessing” of Fairfax.
So they think we should merge with Fairfax because otherwise we’ll never get Fairfax approval to do anything else with the system. In other words, Fairfax will refuse to approve any private deal out of hand and has already made up its mind. Nice. Given this passive-aggressive attempt at strong-arming us, if this is seriously considered we need protections for City citizens written into any agreement that prevents us from being singled out for negative treatment later.
Devil dogs…as usual.
I think calling Fairfax by a Marine nickname would be a compliment for them….
Dave, if we’re talking about just money then selling the system for a large sum of money seems like a no-brainer over giving it to Fairfax Water with the hopes (or even guarantees) of getting lower water rates.
There are ways we could use that large sum of money to reduce our tax rate over the long term (see Ira Kaylin’s idea of putting it towards retirement plan costs as one example). For almost everyone, the tax savings would dwarf any savings people would see by having lower water rates.
As the Fairfax Water letter highlights, approval of the system’s sale will be conditioned upon regulators deeming the transaction to be in the public interest, which differs from the city’s interest. Accordingly, regulatory approval of a sale will effectively be dependent upon maintaining, or reducing, current rates. This condition denies a for-profit owner any economically viable use of the city’s system, which makes it worthless. So, selling the system for a large sum of money will not happen. It will be surprising if any for-profit entities express interest in purchasing the system based on proposed terms and conditions that are credible and realistically achievable.
So, the city really has only two choices:
– Maintain ownership of the system and continue charging customers higher rates as compared to the proposed Fairfax Water merger; or
– Merge and allow customers to benefit from the “single, unified rate for the entire system” proposed by Fairfax Water.
By soliciting the Expression of Interest, the city has implicitly acknowledged that the value proposition associated with its ownership of the system is no longer viable, and it will not be possible to put that genie back in the bottle. So, it’s now just a matter of time as to when the merger takes place. Maybe in a few months, maybe a few years.
Sorry John, my bad…indeed Devil Dog is far too complimentary…just devils will do.
Semper Fi
Andy, I don’t think I saw any language suggesting that there would be a “large sum of money” paid to the City in a merger. Just the benefits of redundancy, supposed lower prices for merged customers, and the lack of regulatory hurdles and threats to other options that might surface. That’s what I read.
Hasn’t there been some discussion over a possible Falls Church City annexation of the land on which Mary Ellen Henderson and George Mason reside in return for such a merger with FCWA?
Gordon, there was an article by Ira Kaylin where he suggested the City might be able to sell the service for a large sum of money. I have no idea if that’s realistic or not. Certainly Fairfax Water isn’t offering a large sum of money (or a small sum of money) – but it sounds like the question is whether or not another entity would be willing to buy the service. Of course, Fairfax County would suggest that it’s not realistic that another entity would be willing to pay any money for the service.
Charles, I’m not sure what benefit there would be from moving the land the schools are on from Fairfax County to the City. The City already owns the land and I don’t think we have to pay any property taxes to Fairfax County. Now, if the City could annex some of the commercially zoned parts of Seven Corners that would be pretty great – but I assume that will never happen.
Andy, I remember Councilman Kaylin’s article and ideas. My point was that Fairfax didn’t propose any cash, but on later thought, I don’t think that is a card they would want to show at this point. Like everyone, I’d like to be fully informed on the issue before being asked vote on its future.