Monday, April 12, 2010

Economy Provides North Canton Opportunity to Undo Inequities of Aqua Ohio Water Agreement

Prepared Comments Made to
April 12, 2010

The City of North Canton has negotiated many agreements in the course of conducting the public’s business but, unfortunately, many of those agreements have resulted in financial loss for the taxpayers of North Canton. Some of these agreements that have lead to financial loss are the agreement to lease Arrowhead Golf course to Kevin Larizza and the option agreement to purchase twenty plus acres of swamp land on the east side of town from the Crowder family.

The Cooperative Economic Development Agreement (CEDA) agreement for the Sanctuary is another negotiated agreement that has resulted in financial loss for the City of North Canton. In that agreement, no one in the city bothered to negotiate any concessions on behalf of the City. There were three signers to the agreement, Plain Township, City of North Canton, and McKinley Development Company. In the CEDA, Plain received assurances that North Canton would not pursue further annexations for a period of three years. McKinley Development received a less cumbersome annexation process.

But what did North Canton negotiate for itself in its 2003 CEDA agreement? Nothing!

North Canton could have negotiated the water distribution rights to the Sanctuary if city
leaders had negotiated a CEDA that benefited all parties to the agreement but the city did not do so.

The present water agreement with Aqua Ohio allowing Aqua to serve the Sanctuary is another agreement that has cost the city dearly. Rushed through city council in 2005 on an emergency, the water agreement has led to the sale of water at below cost for five years, resulting in millions of dollars in revenue losses.

Luckily, for the City of North Canton, the unforeseen downturn in the economy has a silver lining for North Canton. The build out of the Sanctuary of nearly 206 homes as well as other planned development has not happened and is not likely to happen in the foreseeable future.

Aqua does not want to be committed to a required minimum purchase of 500,000 gallons per day which increases to 600,000 gallons per day beginning May 1, 2010. Paying for water, even when North Canton has discounted the water price at less than North Canton’s production costs, is an expense to Aqua when it does not take delivery of the water. Aqua does not want to continue in this fashion.

North Canton may not be accountable to its citizens for financial losses resulting from water sales but Aqua Ohio is accountable to its shareholders for operational expenses and the bottom line.

Any renegotiated water agreement with Aqua needs to be handled with due diligence and a study lest this city find itself again on the losing end of another agreement.

Aqua Ohio is Ohio’s largest investor owned water utility. Their parent company, Aqua America, Inc., is the nation’s largest U. S. based publicly traded water company. Neither company is responsible for the millions in debt owed by North Canton’s water fund. The rate payers and citizens of North Canton are responsible for these bonds on the water treatment plant.

The citizens of North Canton should not be enriching public corporations as has been the case with the current water agreement with Aqua Ohio.

Regarding the draft of the new water agreement, I have the following remarks:

One: Water rates charged to Aqua should be handled as any other BULK WATER user and subject to rate increases as any other water customer the city serves. Restricting rate increases to Aqua will add inequities to the city’s water rate structure as other water user’s rates are increased at a higher rate over time and create greater problems in the future.

Two: The water rate charged to Aqua should take effect as soon as the contract is ratified. Given that the Arcadis Water Utility Rate Study has documented that the city is selling water to Aqua below the city’s production cost, it is not financially prudent to agree not to raise Aqua water rates in the first year of the new water agreement.

Three: The ten-year term for the new agreement is not prudent and exposes the city to a great deal of uncertainty and financial risks. There is no benefit to the city for a long term agreement. A two or three year term would be much better and allow the city to weather an unforeseen financial downturn arising from water sales.

Four: Reserving 2.0 million gallons per day (mgd) for possible sale to Aqua is an unfair provision in the agreement. In effect, Aqua is asking that North Canton provide the basis for Aqua’s future growth of water sales at the expense of the citizens of North Canton.

Five: Monthly billing, late payments, and penalties for late payments should be brought in line with North Canton’s policies that are presently in effect for all water users.

I ask city leaders to look closely at all aspects of any agreement and understand the agreement you ratify. North Canton must negotiate agreements in the future with a keener mind. The city cannot weather too many more financial boondoggles and giveaways.

You must negotiate agreements like it is your money. The city does not have the funds to pour down the drain as has been the case in the past.

North Canton must do better.

Thank you,
Chuck Osborne
Resident, City of North Canton