Mayor Elorza again seeks to monetize Providence’s water supply

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PROVIDENCE, R.I. (WPRI) – Providence Mayor Jorge Elorza said Tuesday he expects legislation to be introduced to the General Assembly this week that would clear the way for the city to monetize its water supply through a sale or lease agreement with a public or private entity.

The bill would give local water systems the authority “to enter into transactions with other municipal water supply systems, regional water quality management district commissions, and public or private operators of water supply systems or water quality management systems to facilitate the coordination of their operations.”

Known as the Municipal Water Supply Systems Transactions Act, the bill would also prohibit the R.I. Public Utilities Commission or the Division of Public Utilities and Carriers from having “any jurisdiction, authority, or other power to approve, reject, review, or in any way affect any transaction.”

“Right now we’re limited because of regulation through the PUC,” Elorza told reporters following his annual budget address. “So technically, what the bill does is it frees us from some of that regulation from the PUC. But even still, we’re committed to making sure whatever shape this takes on the back end, there’s always some public oversight.”

The first-term Democrat has been saying for more than a year he wants to monetize the water supply in an effort to strengthen Providence’s pension fund, which had only $348 million in assets available to cover $1.35 billion in promised retirement benefits as of June 30, 2017. A report co-authored by the administration and City Council released last week called the city’s increasing annual pension payments a “recipe for disaster.”

“As goes Providence, so goes the state,” Elorza said. “And if we want a vibrant and optimistic future for our state, we need to do something about it. And we’re not asking for a bailout from the state. We own the system. We have the plan. All we need is authorization from the state.”

The Elorza administration supported a bill last year that would have created a regional water board with the power to purchase or lease water systems, but House Speaker Nicholas Mattiello announced his opposition to the proposal before it ever received a hearing from a House panel.

Reached Tuesday, a spokesperson for Mattiello said the speaker “has not seen the proposed legislation, but if it is submitted by the city of Providence, he said it will go through the normal legislative hearing process.”

Providence Water sells water directly to approximately 75,000 retail customers throughout the state and provides water to eight other wholesale customers. A consultant hired by the city last year estimated that the assets owned and operated by the Providence Water Supply Board are likely worth $404.2 million.

The city’s plan to monetize the water supply has faced criticism from lawmakers who say it will inevitably lead to an increase in water rates, but the legislation stipulates that the percentage rate increase in the five years after the transaction may not exceed the percentage rate increase in the five years before the transaction.

The bill also states that the PUC would not have any say over rate increases in the first five years following the transaction.

Elorza said he’s confident a sale or lease agreement will lead to savings for the city, in part by not hiring new workers to replace ones who retire.

“The way that you find savings in the system is through attrition over the long term,” he said. “So if we have maybe a 40 or 50-year lease agreement, through attrition, you can find some real savings. So there are ways we can do this in a way that is fair to our workers, but also frees us of some of the limitations and can bring in really significant revenue to the city.”

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Dan McGowan (dmcgowan@wpri.com) covers politics, education and the city of Providence for WPRI.com. Follow him on Facebook and Twitter: @danmcgowan

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