Indiana Town Considers Water Utility Sale

Lake Station, Indiana, is treading water.

“We have no money whatsoever in this city,” says Bill Carrol, who manages the Ace Hardware in town.

Lake Station’s operating budget is $2 million overdrawn. Because of the city’s debt, the state is forcing budget cuts. So, Lake Station is considering selling its drinking water utility to a private company, Indiana American Water.

Indiana faces up to an $8.5 billion funding gap for water and wastewater infrastructure over the next 20 years. Some communities, like Lake Station, are setting off those costs by selling their drinking water systems to private companies.

Bill Carroll says the city’s situation is so bad, it’s in danger of not being able to fund the police department. It has bad roads and bad water.

“We have no money to fix that, we have no money to fix, you know, our dump trucks, we have no money to fix anything. We don’t even have enough money to have Christmas decorations, you know, put on down Central Avenue,” says Carroll.

The current offer for Lake Station’s water utility is $20 million. Carroll says that’s a huge chunk of money for a town like Lake Station.

“And with that, I mean, pay off everything that we owe money to, so we could start brand new fresh. Fresh and clean,” Carroll says.

Given Lake Station’s budget problems, a lot of people see selling the water utility as a silver bullet. Indiana American Water would pay for future water infrastructure repairs and upgrades. And the company would assume the $800,000 mortgage the city is paying on the new water treatment plant it just built.

But there are serious downsides to consider. Lake Station would no longer have control over how much residents pay for water. And that substantial water utility revenue would go to a private company. Because of that, city councilman Rick Long says if he had to vote today, he’d vote against the sale. He’s worried about sustainability — about what happens after the windfall from the utility sale is gone.

“When that money, when we’ve spent it on all the needed projects, I wonder what we’ll do then. Because we won’t have that water income coming in to kind of lean on a little bit, to help us out,” he says.

By all accounts the city could have been more frugal. The new water treatment plant was expensive. So was the new city hall. But the finances might have worked, Long says, if not for the property tax caps approved statewide by voters in 2010.

“Part of it is maybe a little bit of overspending, but most of it is because we’ve been cut, because of our assessed value,” says Long. “We’re not building anything here, there’s no businesses coming here and building like they are in Hobart and Munster and Portage.”

Long says the city would be worse off than it already is without that water revenue – about $2 million a year.

The problem is, Lake Station isn’t allowed to spend that money on non-water related expenses – like subsidizing other departments that don’t bring in as much money. The state already penalized it for doing that, and the city’s paying fines for it.

But Mayor Chris Anderson says he doesn’t have any other choice.

“We’re faced with two options at this point,” says Anderson. “We either pay our bills, by somewhat paying from funds we’re not supposed to be paying from, or we pretty much have to shut down the city. I mean, not shut down the city, but…”

Because of that, Anderson thinks Lake Station should sell its drinking water.

“Selling the water will be, will allow us to provide efficient services, and then we’ll have a little nest egg there, that we’ve probably never had as a city, to be able to get the most bang for our buck,” Anderson says.

The Indiana Utility Regulatory Commission estimates private drinking water companies serve nearly 300,000 Hoosiers. Lake Station’s city council had a few public meetings on the utility sale since December, but it’s tabled the question while the city considers a counter to the $20 million offer.

A spokesperson from Indiana American Water says the company still needs to finish a formal engineering study. That will help them figure out whether they need to purchase the city’s water tower and the new water filtration plant.

This story was produced with Elizabeth Douglass and Inquire First, a non-profit, investigative news service.