Category Archives: Illinois American Water

Council Roundup: Garbage tax will be collected monthly

But we won’t know for a couple of days whether monthly collection will start in May or September.  There’s some question whether Illinois American can change their billing process quickly enough to start collecting monthly in May.

The switch to a monthly fee was opposed by council members Sandberg, Van Auken, and Grayeb.  Grayeb has a deep-seated hatred for Illinois American Water Company, and he feels the company is profiting from collecting this fee for the city.  That’s why he voted against it.  Sandberg and Van Auken voted against it because it doesn’t address the root problem — as Sandberg put it, it’s “putting sugar on” a poor funding decision by the previous council; it hides a bogus tax.

It’s very clear… the garbage tax is here to stay…

I got all hopeful this week when I saw the city council agenda included an item on the garbage tax fee. Could it finally be that the council is going to do away with this not-so-hidden tax on Peoria residents?

Don’t be ridiculous. They’re just going to change the collection of it from $24 three times a year to $6 a month. Illinois American Water charges the city 80 cents per bill to collect this fee on behalf of the city, which is why the city was “only” collecting it three times a year. Now the water company has agreed to charge 20 cents per bill, allowing the city to collect the fee monthly at no additional cost.

There are a couple ways of looking at this. On the one hand, it will be nice having the fee spread out, I guess. On the other hand, it’s a little too nice — a little too hidden. This fee is outrageous in a city that collects as much in property taxes, HRA taxes, gas taxes, and miscellaneous fees as Peoria does. Not to mention the fact that even with all that income, they can’t fully staff all their fire stations.

It’s good for us all to have that three-time-per-year reminder of how outrageous it is so that we’ll keep the pressure on the council to get rid of it. The garbage tax fee was one of the reasons we ousted the old mayor and two council representatives last election. It’s a regressive tax, and it’s a double tax since garbage collection is supposed to be covered under our property taxes already. The “new” council should be looking for ways to get rid of the fee, not ways to make it more palatable for residents.

Wir wünschen unser Wasserwerk

Some communities who want to buy their water works are pressuring RWE shareholders to sell some of its water utilities to the communities they serve.  The mayor of Urbana, Illinois, Laurel Prussing, decided to go a step further — she’s there in person.  You have to admire the tenacity of communities like Urbana, Lexington (Ky.), and Monterey (Cal.), but so far RWE has continued to give them all the same answer:

An RWE spokesman said the company didn’t want to sell American Water piecemeal.

“We see American Water as one entity and that all of these qualities that it has makes it unique and makes it a good partner for the communities,” Bill McAndrews told The Associated Press.

I found it interesting that this company appears to have resistance efforts down to a science.  Just as they did in Illiniois when Peoria was trying to buy the water works, they did a survey of their customers and found that a good majority of them were happy with their water service:

[McAndrews] added the company, which was founded in 1886 and acquired by RWE in September 2001, had consistently drawn praise from its customers.

“They recently put out a questionnaire nationwide and the response was that 93 percent of their customers were satisfied,” McAndrews said. “Eighty-nine percent said they delivered what they promise and 83 percent said they can trust American Water.”

Of course, the mayors claim their water service is terrible.  In any event, it’s looking more and more like the only choice for Illinois communities (other than Peoria, which has a buy-back option in their contract), if they want to buy their water works, is to get legislation passed that will allow them to force a sale without going through the ICC.

Hope Mayor Prussing enjoys her trip to the old country.

Can Peoria afford IEPA compliance if we buy our water works?

The Journal Star had a story today about the problems Kingston Mines is having coming up with $400,000 to treat their water so it meets IEPA standards.  Suppose Peoria were to buy the water works from Illinois American Water.  In addition to the huge debt load from buying the water works, would Peoria be able to afford IEPA compliance in the long-term?

Kingston Mines has radium contamination. What if Peoria develops copper or lead contamination, and the only way to fix it is by replacing the infrastructure?  Can Peoria afford to fix that on top of the cost of purchasing the water company?  Peoria is an old city with a lot of old pipes.  I hope councilman Manning has figured in those kinds of contingencies when this issue comes up the next time.

RWE spinning off American Water as IPO by ’07

RWE issued a press release yesterday announcing they’ve decided not to sell American Water Works, the parent company of Illinois American Water Co., but pursue an initial public offering instead:

The Executive Board of RWE AG decided to pursue an initial public offering (IPO) in the U.S. for the shares of American Water as the most attractive option for RWE and the U.S.-based company, its employees and customers. This decision will return American Water to its status as a publicly-traded company. RWE had previously announced on November 4, 2005 its intention to divest American Water either through an IPO or by selling American Water to a group of financial investors.

The IPO will result in a publicly-traded company that is focused on water and wastewater in the U.S. and dedicated to maintaining a high level of service and quality.

The sales process is expected to be initiated shortly through filings for approval with certain state public utility commissions. The IPO will require filing of a registration statement with the U.S. Securities and Exchange Commission (SEC). The transaction will also be subject to the approval of the RWE AG Supervisory Board. The target is to complete the transaction during 2007.

What does this mean for Peoria and its efforts to reacquire their portion of Illinois American Water? I haven’t heard anything from city officials, but I imagine their view will be similar to Lexington’s (KY), a city that is also trying to purchase their city’s water works. The Lexington Herald-Leader reports today:

Former Lexington Mayor Scotty Baesler, chairman of the city [water buyout] committee, said yesterday that RWE’s IPO announcement would not alter his committee’s work.

The city probably would have to try to buy Kentucky American from whoever ends up controlling American Water, Baesler said.

Dealing with a new company could help the city’s efforts because a new owner might be more willing to jettison Kentucky American, he said.

Not a bad strategy. The difference in Lexington, of course, is that a majority of residents are in favor of the city buying the water company. Here in Peoria, about 2/3 of residents are opposed to the city acquiring the water company.

I’m convinced the bottom-line issue in Peoria — the reason so many people are against the city owning the water company — is trust. Frankly, we’re still not convinced they can handle it. They can’t fully staff our fire stations. They throw money away on bike paths, the RiverPlex, and other pork park district boondoggles. They’ve already raised our water bills by adding a “garbage” tax to them.

It took a long time to develop that distrust, and it’s not going to go away overnight. The new council has made some good strides so far, so maybe they’ll be able to overcome our doubts by the time the next opportunity to buy the water company rolls around.

There are other reasons to question the wisdom of the city buying the water company, but trust is the largest hurdle for the council.

French may buy American Water Co. from Germans

Bloomberg reports that the French water company Veolia Environnement SA is “considering bidding for RWE AG’s water business in the U.S.,” which is American Water Co., of which Illinois American Water is a part.  This is the first company to consider purchasing American Water since RWE put it up for sale last November.

Veolia is a supplier of water to about 110 million people.  They have a presence on every continent.  In the U.S., they currently provide water for certain municipalities in Indiana, Georgia, Alabama, Oregon, Texas, Florida, and even right here in Illinois — in Edwardsville.

Reuters: RWE says IPO likely for American Water Co.

Just saw this news on Reuters:

German utility RWE AG . . . is more likely to have an initial public offering (IPO) for its American Water unit than sell it to financial investors, its chief financial officer said on Thursday.

Klaus Sturany said at an analysts’ conference that an IPO was “still the more likely case.”

RWE plans to make a decision in the first quarter of this year on how to proceed with American Water Works Company Inc. . . . .

American Water Co. is a subsidiary of RWE-AG of Germany and owns Illinois American Water Co. here in Peoria. Expect Grayeb to have something to say about this at next Tuesday’s council meeting.

Question for Grayeb: What do you have against Germany?

We get it, Chuck.  You really don’t like Germans and you don’t like our water company being owned by them.  You want the city to buy it back so it’s under local control.  You’ve made your point, now move on. 

As you know, Illinois American Water Company is owned by RWE-AG, a German company.  And at every council meeting, Grayeb has something snide to say about the Germans and how much they don’t care about central Illinois.  And I mean every meeting.  To hear Chuck talk, you’d think Hitler himself was running the company, poisoning our water in an attempt to exterminate Peorians.

Well, guess what, Mr. Grayeb?  The water utility isn’t the only company with corporate headquarters far away and thus (by your logic) little concerned for our needs here in the heartland.  Consider these (and shudder!): 

AmerenCILCO:  headquartered in St. Louis, Missouri
Insight Communications:  headquartered in New York, New York
SBC/AT&T:  headquartered in Bedminster, New Jersey

That’s right!  The city has a lot of work ahead of it to purchase these basic services and get them under local control again.  I realize these companies may not be interested in selling their respective systems to the city, but since when has that stopped you?

I wonder if anyone is sending Grayeb’s xenophobic diatribes to Friedrichshafen, Peoria’s “sister city” in Germany.  Maybe if Germans are such horrible people, we should sever the city’s official relationship with them.  And maybe we should pass an oridance outlawing the eating of German food and force the Hofbrau House out of the city.

Suggestion for Grayeb: tone down the rhetoric.  You’re not winning the hearts and minds of Peorians with your current “foreigners-are-evil” tactics.

Council Roundup: Water buyout defeated again

Last night, the city council voted down a proposal to pay $37,500 in consultant fees toward an effort to get RWE AG to sell off Peoria’s portion of Illinois American Water Company.

There was so much spin put on this issue at the meeting, I started getting dizzy. The item itself seemed pretty straightforward to me:

Communication from the City Manager Requesting Authorization to Enter into a CONTRACT with CLARK-DIETZ, in an Amount Not to Exceed $50,000.00, for the CITY OF PEORIA to EXPLORE the COOPERATIVE PURCHASE of the WATER SYSTEM from ILLINOIS AMERICAN WATER COMPANY with the CITIES of PEKIN, URBANA, and CHAMPAIGN, and the UNIVERSITY OF ILLINOIS.

Sounds like they want to explore purchasing the water company, doesn’t it? But to hear the discussion last night, it appeared everyone agreed that this wasn’t going to work. Nevertheless, one argument after another popped up to go ahead and spend the money anyway:

  • It will show we’re good neighbors and help us build bridges to other Illinois cities
  • It will “get us on the radar screen” of the guy at RWE who makes the decisions on how to sell the company — perhaps he’ll have a change of heart
  • It will force RWE to disclose to a potential buyer that Peoria has an option to repurchase its portion of the water company every five years, and that may change the amount RWE is able to sell the company for
  • It’s not that much money — some council members drove to the council meeting in vehicles that cost more than $37,500

Boy, those are compelling. When you’re going to be spending over eight billion dollars for a company, I’m sure Peoria’s 1.5% share ($122 million on the private market) is going to be a huge consideration. Ironically, knowledge of Peoria’s buyout option could actually sweeten the deal, once the buyer learns that selling the water company to Peoria means they get an extra $100 million than they would get in the private sector.

But my favorite is the last one — “aw, shucks, 37 grand ain’t all that much money. Heck, let’s just put it in a Valentine’s Day card and mail it to Champaign-Urbana as our way of saying, ‘gee, you guys are swell!'” As long as the city’s feeling so friendly, can you send me $400 to help me pay my Ameren bill? I’ll be happy to send you a letter telling you RWE isn’t interested in selling the water company in pieces. You’ll get your rejection and save $37,100! It’s a win-win!

Wiser council members prevailed. The vote was 8-2 against spending the money.

About that water buyout plan….

Even if I were in favor of the city buying the water company, which I’m not, I would still think this was a fool’s errand:

The City Council will vote Tuesday on whether to spend up to $50,000 to hire Clark-Dietz, a Champaign-based engineering firm, to represent all of the entities in discussions with Illinois American . . . Though [the franchise agreement’s] buyout option will resurface in 2008, some Peoria officials believe there may be a chance to buy back the waterworks before then and perhaps for less than the $220 million pricetag set by appraisers.

Note to city council: do a Google News search on “RWE American” and see what articles come up. You’ll find that cities in Kentucky, West Virginia, Tennessee and elsewhere have all looked into the possibility of buying a piece of RWE’s American Water Company. All have been rebuffed by RWE.

Lexington, Kentucky, has a familiar story. Back in December, their city council “approved setting aside $50,000 for the city’s water committee to do its work in examining the possible purchase of Kentucky American Water from RWE AG . . . Last week, the water committee decided to hire Coady Diemar Partners, an investment bank that provides strategic financial advice and corporate finance services, to guide the committee through the process.”

And for that money, they got this response from RWE: “The record is clear, that neither RWE nor American Water have expressed any interest in selling Kentucky American Water.”

Now, wasn’t that worth $50,000?

Not to be outdone, Peoria is also poised to spend $50,000 — perhaps up to $113,000 — to be told essentially the same thing.

I just don’t understand the council. Can’t they get it through their heads? RWE is not going to sell American Water Company in pieces. I think RWE has made that abundantly clear from the beginning. What part of their stance doesn’t the city understand?

I guess after dozens of years of ignoring Peoria residents on this issue, they’ve just become deaf to water-buyout opposition.