Answer to public utilities’ woes

Editor’s Note: Ed Kolodziej is president of Aqua Ohio.

Ohio’s cities, villages and towns are facing a growing crisis. The mounting costs of repairing aging infrastructure like roads, bridges, treatment plants, underground pipes and fire hydrants are threatening local budgets, and officials are desperate to maintain basic public services like police and fire departments.

Around our state, water and wastewater infrastructure is in disrepair, reliability is dropping, compliance with health and environmental regulations is at risk, and government-owned utilities across the state are behind the 8-ball. The American Society of Civil Engineers (ASCE) says Ohio communities need to spend $26.8 billion on water and wastewater systems in the next 20 years. The availability of grants and loans is limited and inadequate. There are no easy answers, and most have no idea where the resources will come from.

Thanks to recent action at the Ohio Statehouse, communities have a new tool to help unload the burdens of drinking water and wastewater utility operations. Selling their utility can eliminate debt, generate resources to address more immediate needs and even supply a revenue stream that can support other priorities. Local schools can even benefit when regulated utilities encumber real and personal property from tax-exempt, public ownership. As Municipal Fair Market Value (MFMV) legislation becomes effective this month, leaders will have a framework to help them consider whether or not to monetize government-owned utilities. With few resources available to address utility challenges and growing environmental compliance regulations – MFMV could be a needed lifeline.

Answers

Recently, its become more common for leaders to see the potential of unloading a crumbling utility, but some were bewildered by where to start and how to evaluate what’s best for their constituents. MFMV answers those questions. It provides a framework for communities to judge the value of their water or wastewater system. It also provides assurances that that the community is getting a fair price for assets. Finally, it provides peace of mind with regulatory oversight for rate changes, water quality and infrastructure investment.

By partnering with a regulated utility through a purchase agreement, an Ohio community can shed the burdens of utility operation and maintenance, immediately improve their financial position and potentially create a new source of revenue for their general fund. The regulated utility brings operational efficiencies and economies of scale along with sorely needed investment dollars to the table and therefore earns a return on those investments.

Community advocates in Columbus have recognized the potential benefits of MFMV as well. The legislation was endorsed by the Ohio Municipal League and the Ohio Chamber of Commerce, and legislators overwhelmingly passed House Bill 422. The fair market value approach has already begun to pay off for jurisdictions in 10 other states that have enacted similar laws. More and more communities are benefiting by unleashing the power of regulated utility investment.

I encourage elected leaders across the state, especially those with budget or environmental compliance challenges, to explore the new opportunities created by the new Municipal Fair Market Value rules.