Citizens to Play Big Role: Should F.C. Sell to Top Bidder?

Following on a lengthy closed-door session last week, the Falls Church City Council added a late item to its agenda this Monday night, the first step toward what could become a public referendum by November to sell its much-besieged water system.

In particular, the Council voted unanimously to authorize City Manager Wyatt Shields to issue a “Request for Expressions of Interest” to the public, a draft of which was presented to the Council. Once approved, it began being distributed through a posting on the City’s website and copies sent through the mail Tuesday.

Shields said the audience targeted to receive the request is both investor-owned and government-owned utility entities, and all are invited to address both the City’s water and its sewer utility systems.

The step followed on the recent years’ increasing constraints against the operations of the Falls Church water system, which began in the 1930s serving a wide area of Northern Virginia. The system now serves over 120,000 residential and commercial customers, including over 100,000 in Fairfax County.

A court decision two years denied Falls Church an ability to take a reasonable “return on investment” from the operation of its system, and recent moves by the Fairfax County Board of Supervisors now require all new hook-ups in the county to be with Fairfax Water and to regulate the price Falls Church can charge for water.

Facing the prospect of an inability to yield a profit in exchange for risk, to expand or to charge a price required to cover costs, the continued viability of Falls Church’s operation of the system has come under question.

Ironically, should Falls Church decide to sell its system (a move that would require a public referendum), it could place it in the hands of entities exempt from the constraints against Falls Church, who would be capable of taking a robust return on investment. A private investor-owned entity, for example, would be under the control of the State Corporation Commission concerning the rate of return it could charge and other matters. With the prospect of a new owner capable to operating at a profit, the sale price of the Falls Church system could be considerable.

In a background briefing to the News-Press earlier Monday, Shields said that the Council intends to provide opportunities for Falls Church citizens to become deeply involved in the decision-making process about how to move forward.

He did not rule out that the “status quo” could result, and he said he hopes that responses to the “request for expressions of interest” will include examples of how similar situations have been handled elsewhere in the U.S. as well as advice and interest by parties interested in acquiring the system.

He said that an early March 2 deadline for replies to the request was set in order to ensure adequate opportunity for public involvement in the ultimate decision, especially in the event there develops a consensus to sell. That would require timing that will enable a public referendum on this November’s ballot.

However, in remarks to the News-Press, Shields said the process should be “deliberative, taking time and in an orderly way, with a decision possible by summer.”
“We want a good foundation for the future of the City’s most valuable infrastructure asset,” he said.

The City’s water system covers a 33 square mile service area with 34,500 accounts and annual revenues of about $20 million. The City buys its water from the Washington Aqueduct that provides drinking water to Arlington and the District of Columbia, in addition to users of the Falls Church system. The Falls Church system delivers an average of 17 million gallons of water to its customers daily, with a maximum capacity of 38 million gallons daily.

In addition, the City’s sewer system, also up for consideration, is a gravity system extending over a 2.2 square mile area (inclusive of the City limits of Falls Church) with about 4,000 accounts. The City contracts with Fairfax and Arlington counties for sanitary sewer treatment.

At Monday’s Council meeting, Shields called the “request for expressions of interest” the onset of “an evaluation of the situation.”

A special City website has been created for this purpose with a link at the City’s main site, called “Water Future.”

In the request letter that Shields presented, it says the City is seeking to “gauge the level of interest within the investor-owned and government-owned utility market for acquisition of the City’s water supply and sewer system assets, or some other alternative.”

Mayor Nader Baroukh said Monday that he welcomed “the first opportunity for a public dialogue” on the future of the water system. Vice Mayor David Snyder said tonight’s move came strongly recommended from City legal counsel and staff and that the ultimate goal will be to ensure “the safety, reliability and financial soundness of the system.”

Council member Ira Kaylin said he strongly supported the move, given that the constraints on the system turned it into a “non-performing asset” from the standpoint of the City’s needs.
The vote was unanimous, with Council member Robin Gardner absent.

Among the investor-owned utilities that operate water systems in this region is “Virginia American Water,” which provides water services to Alexandria and part of Prince William County.
Shields told the News-Press that the City has “not lost a customer yet” to the Fairfax County Water System, despite the pressures against it.