Water Industry News

Posted on Wed, Nov. 08, 2006

Lexington, KY voters reject take-over of American Water of KY

    Lexington voters have decided to leave their water utility in private hands.

    By a 20-point margin, people voted "no" in yesterday's water company condemnation referendum, which means the city won't be going back to court to try to acquire Kentucky American Water.

    The vote spelled a probable end for an issue that has gripped the city for five years, cost well over $1 million in tax dollars and an unknown amount of corporate money, and played a role in the last three city elections.

    "It means we can move on," Kentucky American President Nick Rowe said. "I'm happy for the employees who have worked so hard under the microscope for the last 58 months."

    With the issue out of the way, Rowe said, it was time to move on to other things. The company wants to talk with the city's new mayor, vice mayor and council members about "possibly doing something to help solve the sewer issues" in Lexington, he said.

    Former Mayor H. Foster Pettit, the chairman of Bluegrass FLOW (For Local Ownership of Water), acknowledged defeat, but said "I don't think the last chapter in this has been written."

    Pettit said there was a chance that a majority of the new Urban County Council elected yesterday would favor the city owning the water utility. But he said it was unlikely to act "in the face of this vote."

    Warren Rogers, a leading water company supporter, said the condemnation issue is dead "for our lifetime."

    "We told the community that this was a 60-40 issue," Rogers said. "FLOW didn't believe us. They were wrong."

    Pettit said he expected Kentucky American to soon ask the Kentucky Public Service Commission for a large rate increase. He said the company had avoided such a request while the condemnation campaign raged.

    Rowe said rate-increase requests are determined by the company's "investments in the community," not by political considerations. He said the company had made considerable investments.

    A "yes" vote yesterday would have directed the city to try to acquire the company "by the most effective and reasonable means, including by the exercise of the right of eminent domain."

    The city tried for two years to condemn the company, but the Urban County Council ended that effort last year. Because water company officials consistently said Kentucky American was not for sale by itself, another attempt probably would have meant more years of court filings, rulings and appeals.

    Talk of the city taking over the company started in September 2001, when RWE AG, a German utility giant, made an offer to buy American Water Works, the parent company of Kentucky American Water. (RWE now is in the process of spinning off American Water in an initial public offering, or IPO, of stock. That means the company will again be traded on the New York Stock Exchange, as it was before the condemnation issue arose. FLOW used the impending IPO in the recent campaign, saying no one knew who would own the company next year.)

    The condemnation effort picked up momentum on Feb. 10, 2002, when former Gov. Edward T. "Ned" Breathitt wrote an opinion piece in the Herald-Leader that said the looming change did not bode well for Kentucky American's role in the community. The city should decide "whether to buy Kentucky-American through negotiation or, if necessary, condemnation," he wrote.

    Kentucky American, in its long fight against condemnation, marked the days since that article appeared as "The Takeover of Kentucky American Water." Yesterday was Day No. 1,731.

    In April 2002, supporters of municipal control of the utility formed Bluegrass FLOW, with Breathitt as chairman. (Breathitt died in 2003 and was replaced by Pettit.)

    That fall of 2002, the condemnation issue helped put Mayor Teresa Isaac in office, and by the summer of 2003, the city filed suit in Fayette Circuit Court, seeking to acquire the company through eminent domain.

    In 2004, voters turned out 12th District Councilwoman Gloria Martin, one of the architects of the condemnation effort, and installed a council majority that set about undoing the legal court case. By the spring of 2005, after the city had spent more than $1.2 million on legal and consulting fees, the new council stopped the legal case.

    But the pro-condemnation side wasn't finished.

    A group called Let Us Vote Lexington proposed putting the question to the public, then surprised water company supporters by collecting the signatures of more than 23,000 registered voters.

    The vote was scheduled for last November, when it would have been the only item on the ballot. But the water company sued, and the Kentucky Supreme Court ruled that there could be no vote in 2005 because it wasn't a regular election year. That ruling probably ended the pro-condemnation side's best chance for a victory at the polls.


    250 of 250 Precincts Reporting
    Yes or No Votes
    Yes 30,920
    No 47,951

Vote puts likely end to water debate