Girard seeks solvency in a most ironic way
It's difficult to overlook the irony.
The city of Girard is contemplating the sale of its water delivery and sewage treatment systems to the Ohio Consumers Water Co. in an attempt to dig itself out of fiscal emergency.
The irony is that much of the city's financial difficulty dates to 1995 when it rushed into a deal to buy Girard Lakes -- from Ohio Consumers Water Co.
The company pitched the sale to city officials in late November 1994, and by June 1995, the $5 million deal was done. The purchase price was about half that, but interest over the years doubles the cost.
City officials had great plans for Girard to become its own supplier of raw water. Unfortunately, they never adequately researched whether the plan was economically feasible.
Between 1995 and 2001, Girard went from being a city with record income tax receipts that was looking for ways to spend its money to a city in fiscal emergency looking for ways to make payroll.
Now it is seeking a two-year increase in the income tax, from 2 percent to 2.5 percent, and it is discussing a new deal with Ohio Consumers Water.
The city would turn its 5,400 residential water customers and 600 commercial customers over to Ohio Consumers Water.
The company would get the city's water delivery system, for which the city now buys water from Niles, Youngstown and McDonald. Girard Mayor James J. Melfi notes that some of the lines are very old, implying that the city would be shifting future liabilities to the company -- which would be a reversal of when the city took a deteriorating dam off the company's hands.
The company would also get the city's sewage treatment plant and would take on 16 city employees who work in the water and sewer departments.
Weighing the deal
Does the city know that selling its assets to Ohio Consumers Water in 2002 for $8 million is any better a deal than was buying Girard Lakes from the company seven years ago. We suspect not.
Councilwoman Kathleen O'Connell Sauline, who chairs council's finance committee, suggests that a nationwide search for other possible buyers be conducted, which is not a bad idea.
The city should also determine what the likely long-term cost to city water and sewer customers will be. Can the company provide services and make a profit while holding rates at or below those of the city? If the city's budget is balanced in a deal that eventually results in increased utility rates, the pocketbook effect is no different than an unvoted tax increase.
Selling its assets could be a good deal for Girard, but the city dare not rush into a sale the way it did when it bought the lakes.