Daily Archives: November 3, 2006

City Council, Illinois American Water

CEO: American Water to be an “aquirer”

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The Houston Chronicle reported yesterday that American Water CEO Donald Correll wants to see his company be an “aquirer.” American Water is the parent company of Illinois American Water, which serves Peoria. American Water’s parent company, RWE AG of Germany, will be spinning off the water works through an initial public offering next year — Correll hopes by the second quarter.

They’re certainly big enough to be an aquirer. American Water serves 18 million people and earned over $2 billion in 2005 according to the article. In contrast, the “biggest publicly traded U.S. water utility is Aqua America Inc., which has over 2.5 million customers and $496.8 million in 2005 revenue.”

[The] small pool of publicly traded U.S. water utilities makes Correll hesitant to talk about American Water’s acquisition strategy.

“We will be a consolidator,” he said. When pressed for more details, he said he feared the industry’s makeup makes it difficult not to “name names” when discussing possible deals.

[…] Looking ahead, Correll said the biggest long-term growth opportunity likely comes from partnerships with municipal systems.

Municipalities and other non-private entities control about 85 percent of the country’s water systems. Few have been willing to sell their systems, so such outsourcing deals offer the best opportunity, Correll said.

Once the IPO is complete and American Water is no longer “foreign-owned,” At-large Councilman Chuck Grayeb will have to drop the xenophobia from his perennial pro-buyout spiel. That’s a shame because, from a purely theatrical standpoint, that was the most dramatic part of his performance.

City Council, City of Peoria

I stand corrected… again

Dang. I tell ya, it would be a lot easier to write these things if I didn’t have to get my facts straight all the time. “The Rest of the Story” is back and had this comment on my last post:

The utility tax/franchise fee would only be placed on water only – no other utility. Currently, Illinois American pays nothing for use of the public right-of-way, however, damages it the most (ie. water leaks, etc.).

Since no one is suggesting a fee to be added to AmerenCILCO bills, I’m afraid I’ll have to retract Van Auken’s award for “most ill-timed revenue proposal” and give it back to the reigning champion, School District 150 (PBC funding). My apologies to Ms. Van Auken.

However, I stand by my previous statement regarding the likelihood of not-for-profits paying this utility tax/franchise fee. “The Rest of the Story” makes a good case:

Approximately 65% of the the properties pay 100% of the real estate tax. This approach would make the non profits particpate in the cost of providing needed services.

I wholeheartedly agree that it makes perfectly logical sense. I just don’t believe it’s going to happen. The three hospitals alone are going to have the council in a pressure cooker on this issue, not to mention all the other charities, churches, foundations, etc.

City Council, City of Peoria

Winner of “Most Ill-Timed Revenue Proposal”: Van Auken’s 5% Utility Tax Idea

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The Journal Star reported Thursday that Second District Councilwoman Barbara Van Auken has an alternative plan to a property tax increase:

Another option for raising revenue comes from Van Auken, who wants to replace the $6-a-month garbage fee with both a 5 percent utility tax and 5 percent franchise fee on water bills.

“My goal in this budget is to get adequate police and fire protection for the 2nd District and to replace the garbage tax with a source that is more fair and equitable,” Van Auken said. “I want to see where my colleagues are on it. The mayor and I have discussed it, and he has spoken favorably of the idea because it spreads the cost throughout the community – not just the residents who pay the garbage tax and not just the residential and commercial, as it is with the property tax.”

I appreciate “outside-the-box” thinking as much as the next guy, but honestly, I can’t think of a worse time to suggest this revenue-raising idea. Surely Van Auken is aware that electricity rates are going up 55% in January. Is proposing the city tack on another 5% a good idea right now?

I’m going to guess that the logic behind this is that, since it would apply to not-for-profits, businesses, and residents, the cost would be spread out more and thus, coupled with the 5% franchise fee on water bills, this whole plan would be cheaper for residents than the current $6 per month garbage fee. Maybe, but I’m not buying it until I see the numbers — with and without not-for-profits included.

Why without not-for-profits? Because we all know the chances of a tax on not-for-profits passing are about 10,000 to 1. Every health-care provider, every church, every fine arts organization, every college and university, and every charity — to name just a few of the institutions affected — will be out in force to put the kibosh on that idea. Of course, there will be exceptions, but I predict if this idea starts being pushed, the push-back will be enormous and the city will back down.

I’ve e-mailed Ms. Van Auken asking for clarification on her plan; when she writes back, I’ll post her response as a follow-up to this post.