Two years after the city
purchased the former Indianapolis Water Co., its manager is no
longer bound by an agreement to keep roughly 200 non-union
employees on staff.
As a result, about 30 of them have accepted a buyout offer that
includes six-months pay and are in the process of leaving,
including nine members of the engineering department. There are
no plans to offer another package, according to Tim Hewitt,
president of the city-owned utility Veolia Water Indianapolis
But former water company executives wonder whether the utility
has lost valuable experience.
Mayor Bart Peterson, who led the charge to acquire the company's
assets, stands behind the utility's manager, California-based
Veolia Water North America.
He said the two-year agreement was included in the contract to
offer the employees some protection during the transition in
"It's not for [the city] to tell [Veolia] how many
employees to have," Peterson said. "If we were going
to do that, we shouldn't have contracted [operations] out in the
The city closed the deal April 30, 2002, by paying $515 million
to buy the utility from Merrillville-based NiSource Inc.
Peterson cited a decades-old law allowing the city first rights
to negotiate a "fair" value for the water company. The
city awarded a 20-year, $1.1 billion management contract to
Veolia, called USFilter Corp. at the time.
Former IWC President Joseph Broyles, who retired a year before
the city completed its transaction, doesn't like the changes. He
cited the pension plan no longer available to non-union
employees as an example, noting the company used to promote
union workers to non-union, supervisory roles. That way, they
already knew the system and could be called upon in case of an
emergency, he said.
"Who would be so foolish as to give up the protection of
the union and take a pay cut, losing the pension and benefits in
the current scheme, to become a supervisor?" Broyles asked.
"It's a strange situation."
Non-union employees who lost their pension in the ownership
change are suing the city and Veolia in an attempt to recover
$50 million they claim they will lose in benefits over the next
Meanwhile, union employees fighting to keep current benefits are
embroiled in a 4-month-old contract dispute with management. A
federal mediator will attempt to settle the squabble during
negotiations scheduled for May 4-6.
Opponents complain Veolia has driven away water company veterans
whose utility experience is irreplaceable. All of the 12
officers either left before the transaction was completed or are
gone now. The company in June hired Hewitt, who had been
president and CEO of the former Indiana Gas Co. He offered no
apologies for the company's management style.
"Nearly all of these employees worked for a regulated
utility," he said. "That era ended May 1, 2002. These
employees of the old, regulated utility are working for a
for-profit company. There has been a lot of change that has
surfaced because of that."
Veolia waited until late last year to begin offering the buyout
package so employees could have a chance to become acclimated to
Hewitt's management style. Otherwise, he said, "100 or
200" employees might have accepted the package. The utility
has 191 non-union employees.
Hewitt said the company will continue to search for ways to
become more efficient. Service won't suffer, he said, because
Veolia has to meet certain incentives to collect the entire
amount of its contract with the city.
But critics cite the lawsuits, the union contract dispute and
the buyout package to bolster their argument that employee
morale is suffering under the current regime.
Alan Kimbell, a former vice president who retired from the water
company in 1997, agreed with Broyles.
"I am really concerned about the capacity of who's left
there," he said. "There's a bench-strength
Kimbell served on the seven-member Indianapolis Board of
Waterworks until June, when he resigned under pressure because
he's a plaintiff in the non-union employees' class action
against the city and Veolia.
The waterworks board oversees water company operations for the
city. Beulah Coughenour, a former City-County councilor who
supported the purchase and who now chairs the board, said the
board would take action if its members didn't think Veolia was
performing up to expectations.
"I absolutely still think this is one of the best things we
did for Indianapolis ratepayers," she said. "If
someone else bought it, you would have no say. You can't fire
them if they buy it, but you can fire them if they run it."
At the time, the $1.1 billion contract was the largest of its
kind and was cited as a model for future public-private
partnerships. Indianapolis is one of only a few large
municipalities that contracts the operation of its water utility
to a private firm.
But problems surfaced quickly, first in the water company's
billing unit. The president of the water company, chosen by
Veolia, left amid the turmoil. The city is seeking $2 million
from NiSource in a lawsuit to recoup its investment to fix the
billing snafus it claims it inherited from the previous owner.
Another suit filed against the city on behalf of local taxpayers
claims its acquisition of the water company violates the Unigov
statute. The taxpayers argue management of the utility should
have been placed under the same public charitable trust that
operates Citizens Gas & Coke Utility. The city has moved to
dismiss that suit and the one brought by the non-union
Supporters of city ownership, however, cite a five-year rate
freeze, investments to control taste and odor problems, and
customer service improvements as positive developments a private
owner could not guarantee.
"I continue to believe it was a good deal for the people of
Indianapolis," Peterson said. "We got off to a little
[bit] of a rocky start, but had [the city] not bought it, we
would have seen massive rate increases."