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Akron Sewer Lease, Vote Maybe
Signs for Issue 8 are appearing all over Akron pleading the passerby to consider the future of our children. The City of Akron's plan to create a scholarship program funded with proceeds from a public infrastructure lease has merit but questions remain on the funding scheme. Will we citizens inherit a plan with sound funding or one that smells like the composting plant in the valley?
Creating a fund for scholarships for Akron residents is an idea that has could be a boon for the city's future. Establishing a realistic baseline for the anticipated sources of funds hasn't been made very clear as of yet. I would feel more confident about the legitimacy of the plan in it's entirety, not just the uses side, if more information on the financing can be revealed. So far the Mayor has painted in broad brush strokes when it comes to the financial structure of the lease plan. I think a finer level of detail other than the current "sewers are worth some money" sloganeering is needed here. I checked the Akron Scholarship Plan website for more information on the mechanics of the funding and what lease would entail. After a read through of the proposed charter amendment I had more questions. Some things that I would like to find out before casting a vote on Issue 8:
What is the Akron Community Fund? I know what it is being portrayed as in the charter language. It's an organization that the Finance Director will contract out the management of the Scholarship Program/Lease Revenue. Will this group actually manage City funds? Isn't the City legally bound to issue a request for bids for this type of service? The fact that the City is using an outside group to manage the program and the fund raises questions on the administrative costs associated with the plan. Will teh contract be for a fixed rate with a not to exceed amount? It should be. Remember less savings equals less scholarship money.
The City will transfer all net proceeds from the lease agreement to Akron Community Fund. Will the lease payment be received up front? Normally lease payments are made annually. Is the City opting to take the net present value of all of the lease payments up front? What rate of return is being considered?
The net proceeds are transferred after all outstanding debt (bonds, notes, loans) is paid off. What is the amount of those obligations? That will lower the net proceeds available for the program. I am guessing the City doesn't have much in the way of outstanding sewer bonds since they raised rates to pay for the CSO projects like Rack 40. Like other sewer systems they probably have some EPA loans and OWDA loans to pay off. That amount of debt is an important piece of the puzzle.
Speaking of capital improvements, I'm still not clear on how these are handled. There is language stating that the lessee must comply with laws and regulations set by the EPA and standards set by the Director of Public Service. There is also language stating that improvements must be approved separately by the City? So who pays for the improvements? Wouldn't the hefty price tag on improving CSO problems scare investors away? The temptation to cut operating costs by shirking environmental laws has to be a plausible risk in leasing to a private operator. What type of oversight will the City maintain over the lessee?
What happens if the city inks a deal that generates a substantially lower amount than the planned $200 million that is being indicated? What is the city fails to attract an interested party because the terms are not favorable to a prospective lessee? What if the trouble in the capital markets scares everyone away? The charter amendment caps rate increases at 3.9% per year based on the current rate adjustment plan in place. The lease deals I've read about have allowed the lessee to raise user fees as they see fit to make the investment worthwhile.
And lastly, will the new operator be willing to do something about the smell out at the City composting facility? Just thought I'd ask.
Creating a fund for scholarships for Akron residents is an idea that has could be a boon for the city's future. Establishing a realistic baseline for the anticipated sources of funds hasn't been made very clear as of yet. I would feel more confident about the legitimacy of the plan in it's entirety, not just the uses side, if more information on the financing can be revealed. So far the Mayor has painted in broad brush strokes when it comes to the financial structure of the lease plan. I think a finer level of detail other than the current "sewers are worth some money" sloganeering is needed here. I checked the Akron Scholarship Plan website for more information on the mechanics of the funding and what lease would entail. After a read through of the proposed charter amendment I had more questions. Some things that I would like to find out before casting a vote on Issue 8:What is the Akron Community Fund? I know what it is being portrayed as in the charter language. It's an organization that the Finance Director will contract out the management of the Scholarship Program/Lease Revenue. Will this group actually manage City funds? Isn't the City legally bound to issue a request for bids for this type of service? The fact that the City is using an outside group to manage the program and the fund raises questions on the administrative costs associated with the plan. Will teh contract be for a fixed rate with a not to exceed amount? It should be. Remember less savings equals less scholarship money.
The City will transfer all net proceeds from the lease agreement to Akron Community Fund. Will the lease payment be received up front? Normally lease payments are made annually. Is the City opting to take the net present value of all of the lease payments up front? What rate of return is being considered?
The net proceeds are transferred after all outstanding debt (bonds, notes, loans) is paid off. What is the amount of those obligations? That will lower the net proceeds available for the program. I am guessing the City doesn't have much in the way of outstanding sewer bonds since they raised rates to pay for the CSO projects like Rack 40. Like other sewer systems they probably have some EPA loans and OWDA loans to pay off. That amount of debt is an important piece of the puzzle.
Speaking of capital improvements, I'm still not clear on how these are handled. There is language stating that the lessee must comply with laws and regulations set by the EPA and standards set by the Director of Public Service. There is also language stating that improvements must be approved separately by the City? So who pays for the improvements? Wouldn't the hefty price tag on improving CSO problems scare investors away? The temptation to cut operating costs by shirking environmental laws has to be a plausible risk in leasing to a private operator. What type of oversight will the City maintain over the lessee?
What happens if the city inks a deal that generates a substantially lower amount than the planned $200 million that is being indicated? What is the city fails to attract an interested party because the terms are not favorable to a prospective lessee? What if the trouble in the capital markets scares everyone away? The charter amendment caps rate increases at 3.9% per year based on the current rate adjustment plan in place. The lease deals I've read about have allowed the lessee to raise user fees as they see fit to make the investment worthwhile.
And lastly, will the new operator be willing to do something about the smell out at the City composting facility? Just thought I'd ask.
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