Lots left to unpack on regional water deal

3/15/2018

Wendy Gramza, President & CEO of the Toledo Regional Chamber of Commerce, left, leads the applause after leaders from Toledo and the suburban communities that buy its water signed a memorandum of understanding to form the Toledo Area Water Authority.

The Blade/Dave Zapotosky
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Toledo officials are finding out that setting up a regional water system might turn out to be a hard sell, after all.

Mayor Wade Kapszukiewicz and others thought the Toledo Area Water Authority — TAWA, for short — was on a fast track to passage because he had campaigned on regionalizing water when he ran in 2017.

Read last week’s column from Tom Troy

Most likely, Toledo voters hadn’t really focused on the regional water agreement.

Well, we’re starting to focus on it now, and the details so far are looking fishy.

Just so everyone’s clear, what’s being proposed here is that the water intake in Lake Erie, the Collins Park Water Treatment Plant, and the various pump stations and pipes that Toledo has owned and operated for decades would be sold as a package to a newly created entity called the Toledo Area Water Authority.

Toledo’s neighbors and customers, who don’t like paying retail prices for water while Toledoans get away with paying wholesale, are threatening to quit buying water from Toledo if Toledo refuses to accept a regional pact.

The question no one really knows for sure is whether there are adequate sources of water for Sylvania, Lucas County, Maumee, Bedford, etc., other than Toledo, or whether it’s a bluff.

A starting question for Toledo has to do with the price of the transfer.

According to Toledo’s 2018 budget, the water system’s replacement cost is about $1.3 billion.

The price proposed by the memorandum of understanding (MOU) is a maximum of $360 million, paid out over 30 years, at “net present value,” with a 3 percent discount.

Democratic governor candidate Dennis Kucinich sat down and cranked out a 44-point critique of the memorandum of understanding, and determined that the net present value of $12 million a year for 30 years with the discount comes out to $189,408,135.

So less than $200 million at 2018 values for a plant that’s worth $1.3 billion? Some on council don’t like those numbers.

On its surface, the MOU signed Jan. 31 by the eight suburban representatives and Mayor Kapszukiewicz promises tangible benefits immediately to TAWA’s suburban partners.

For the suburban partners, the benefits are clear as Lake Erie water in January — they get to run the water plant, which is now owned and run entirely by Toledo. And rates, which sat present are higher on non-Toledo users than Toledo users, will be equalized over eight years.

What’s in it for Toledo? Regionalization means that Toledoans will see their rates equalized upward. Raised. That’s not a benefit.

It’s true that rates will go up for all users whether a TAWA is created or not, because the cost of maintaining water systems is projected to skyrocket. A legitimate concern is that if Toledo’s suburban neighbors quit buying from Toledo, Toledo rates could triple in as little as a decade, according to Mayor Kapszukiewicz. Some tough anti-TAWA talkers in Toledo think that’s an intimidation tactic.

There are specific sweeteners in the MOU for the city of Toledo — a commitment from from TAWA to replace Toledo’s lead water pipes and subsidies for low-income residents. Of course, as rate payers, Toledoans would have to pay about half the cost of those benefits.

Toledoans (of which I am one) shouldn’t confuse selling the water system with selling something like a car or a house that they’ll never use again.

Selling the Toledo water treatment plant to TAWA is a way of selling it to ourselves, along with member adjoining communities in Lucas, Wood, and Monroe counties. A governing board would be formed, with two of the seven members to be appointed by Toledo.

Which brings us back to the price.

Whatever TAWA agrees to pay for Toledo’s water treatment plant is going to be financed by the customers of the TAWA, about half of whom live in Toledo. So we’d be paying to buy the water plant from ourselves. The money, by the way, could be used to lower Toledoans’ water rates, but could not be used for any nonutility purpose, such as operating parks or paying for police and fire.

EDITORIAL: Move up water vote to August

According to Councilman Nick Komives, council won’t vote until September whether to put the TAWA question on the Nov. 6 ballot. That’s assuming council agrees to go along with this deal at all.

That leaves city voters a little over seven months to decide whether to take it or leave it.

Toledo will give up the pride and benefits of operating the region’s water plant. Unions will have that much less interest in financing the campaigns of Toledo city council members and mayors. And there may well be a benefit in inaugurating a new era of regional comity. We’ve got lots to unpack here.

Contact Tom Troy at tomtroy@theblade.com, 419-724-6058, or on Twitter @TomFTroy.