An Only in Rhode Island Riddle: What is the Return on Investment on an Asset You Don’t Own?

A few weeks ago, the Projo‘s Daniel Barbarisi reported that the city of Providence was considering raising revenue by selling its water system…

The city is considering selling the Providence Water Supply Board and the network of reservoirs and treatment plants it controls in order to pay down the huge debt in the city’s pension system.
City Council members hope that they can rake in a one-time payment of $400 million to $600 million for the water system, which includes the Scituate Reservoir. They plan to form a special committee to obtain an appraisal of the system, and hope that they can line up a private buyer by the end of the fiscal year in June.
The problem with this plan, according to Steve Laffey writing in Sunday’s Projo, is that Providence doesn’t actually own the assets it would like to sell…
The water system does not belong to Providence. It belongs to the ratepayers of the water system because they paid for it…
Utility experts have testified in front of the [Public Utilities Commission] (Woonsocket Water Docket No. 3800 on May 21, 2007) that it is the ratepayers who should get any sale proceeds from a utility asset. Walter Edge, a consultant for Providence Water, when asked about the possible sale of Woonsocket’s water system, answered, “I believe those proceeds should go to the ratepayers.” When another utility expert, Andrea Crane, was asked the same question on the same day, she answered, “My view would be that was purely a ratepayer asset and therefore the revenues, to the extent there are any, should accrue to the benefit of the ratepayers…So I think ultimately the ratepayers should receive the benefit. This is not a situation where you have an investor who has put up his own funding and taken a risk with those funds and therefore may under certain circumstances be entitled to a share of the excess profits.”
To borrow an old George Will line, should we at least award some creativity points to our politicians who graduate from stealing from quasi-public boards to outright stealing the boards in their entirety?

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Joe Mahn
Joe Mahn
13 years ago

The problems we face in Rhode Island as taxpayer citizens are many and varied.
The Providence City Council (and by association in this case Mayor David Cicilline) are obviously part of the problem not the solution.
JM

OldTimeLefty
13 years ago

Joe,
Some say they are. Some say they’re not. Please supply an argument.
OldTimeLefty

chuckR
chuckR
13 years ago

The pension plan shortfall is Providence’s problem. How about state legislation that provides for a return of proceeds to the ratepayers and a simultaneous tax bill to fund the pensions? Same thing could apply to pension shortfalls in other ratepayer’s cities. Hello, Cranston.
If it were my choice, I would no more let this money pass through the hands of Providence’s ‘leaders’ than I would let a 3 year old have a whole box of chocolates. Neither can be trusted. OTL, there’s no argument needed about the people Providence elects. All you need to do is consider the pension funding shortfall and the continual budget problems, the latter despite the fact that 50% of Providence’s school budget is provided by the rest of the state. Providence has had sketchy finances ever since I was a resident starting 1973. Same old, same old, and no noticeable progress by the current crew either.

Monique
Editor
13 years ago

“and no noticeable progress by the current crew either.”
There’s an understatement. Mayor Cicilline has been remarkably irresponsible with the city budget. The School Committee HE APPOINTED negotiates school contracts completely removed from achievement, affordability or the good of the chi-hill-ldren. And he nods and smiles at that while he carries on his phony fiscal war with the firefighters – unfair and phony and pointless because the total of firefighters’ salaries is less than one tenth the amount spent on school salaries.
“A few weeks ago, the Projo’s Daniel Barbarisi reported that the city of Providence was considering raising revenue by selling its water system”
That alone. Think about it, Mr. Mayor. You’re proposing to sell fixed assets (which may or may not belong to the city – but whatever) to plug an operating deficit. Doesn’t this send up major red flags about the way the city’s finances are being conducted?

Mike Cappeli
Mike Cappeli
13 years ago

Hey Musty Old Lefty,
DO you need it spelled out for you? I mean, really, are you that clueless that you can’t just see what is going on. Do you know that Providnece is in a heap of trouble or do you not know that? If you don’t – you need to get a clue. And just who do you think is responsible – the city council of Warwick? It’s idiots like you that need this crap explained to them that probably vote for the morons that perpetuatre the mess. You have no idea what is going on, so just shut your yap and stop trying to make yourself relevant. You’re not!

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