News

Falls Church Sets Process in Motion to Sell Water System

Bid Minimum Set At $44 Million, Final Say is City Voters’

By a 6-1 vote Monday night, the Falls Church City Council authorized City Manager Wyatt Shields to issue an invitation for public water suppliers to bid on the purchase of the embattled Falls Church water system.

The “Invitation to Bid” was released yesterday through a press release to local media and mailings to all who’d responded to the City’s earlier “Request for Expressions of Interest” in the system.

The invitations stipulated that all bidders receive the same set of conditions for the purchase of the City’s publicly-owned water system that would include the grant of a 40-year easement for water system facilities on public property. The conditions include a guarantee of employment for current utility employees for one year at comparable pay and benefits, and a rate freeze for one year.

Notice of an optional pre-bid meeting was also provided, to be held Monday, April 23, at 10 a.m. in the Council chambers at the Falls Church City Hall.

The Council’s decision came after a series of long sessions behind closed doors by the City Council, which mulled the large numbers of “expressions of interest” it received. “We heard from everyone we hoped to,” Shields told the News-Press in a background briefing on Monday.

The decision to sell the system came as a shock to some observers, who noted the Council had a number of possible options short of an outright sale. However, the system became a “non-performing asset” to the City because of earlier court decisions ruling in favor of the City’s rival Fairfax County Water Authority to deny the City the right to be compensated for its risks in operating the wide-ranging system that includes over 100,000 customers in Fairfax County.

By selling the system, the City stands to achieve a financial gain, while the purchaser will be allowed to profit from its operation of the system. The City’s “Invitation to Bid” stipulates a minimum sale price of $44 million, and whatever deal is finally struck will require approval in a general referendum vote of City residents in November.

Shields explained to the Council Monday night that were a sale consummated, the City would have to settle obligations of about $30 million before it could put the remainder to the purpose of “ensuring the long-term stability of the City.”

The only “no” vote on the Council came from Vice Mayor David Snyder. He said the Council was being “rushed” to act by the City staff, and that the City should have set the minimum sale price far higher.

“Over the past several months the City Council has conducted an extensive evaluation of options with the goal of securing the best results for the City’s water customers and tax payers,” said Mayor Nader Baroukh in a statement issued by the City late Monday. “The City has a long history of careful management of the water system, a strong customer base, and a very talented work force. We look forward to the response from the private and public utility industry.” 

In the formal “Invitation to Bid,” bidders are told they will have 45 days to respond with sealed bids due at 9 a.m. EDT on Friday, May 25. An hour later on that day, all the bids will be opened in a public meeting in the same Council chambers, and any bidders present will have the opportunity to increase their bids in what will become an auction. This, the News-Press was told, is standard practice for a matter such as this.

Based on the outcome, the City will then decide if it wishes to accept the best offer, or not. If it does, then the matter will be placed on the November 6 general election ballot for all City voters to weigh in.

However, the matter might not go as smoothly as hoped. In February, the Fairfax Water Authority general manager Charles M. Murray contacted the City of Falls Church to call for “a merger of our two water systems on mutually agreeable terms,” strongly opposing the City’s option of selling the system, suggesting any such deal would have to pass muster with the Fairfax Board of Supervisors. The letter cites “at least three reasons why selling to a private buyer would be detrimental to your customers’ interests.”

Asked about this in the background briefing Monday, Shields told the News-Press, “We are prepared for all contingencies,” and that “we would love to have Fairfax Water participate” in the bid process. 

The “Invitation to Bid” applies only to the City’s Water Utility assets and necessary easement rights to City property. The City’s sewer assets are not being offered for sale.

According to the City statement, “recent legal and political hurdles have increased the financial risk to the City in providing water service for residents of Fairfax County. The City issued a Request for Expressions of Interest (REI) in February, seeking input from qualified utility entities that may have an interest in entering into an agreement for the purchase of the City’s utility assets.

“The City received a strong response from water industry leaders, including the nation’s preeminent investor-owned utilities, water service providers, and public water authorities located in Virginia. The City Council considered the input received from these expressions of interest as part of its overall evaluation of options for the future of its system. Favorable market conditions exist for a sale of the water system in an open, fair, and competitive manner, and the City has an interest in deploying the proceeds from such a sale to meet critical long-term needs of City taxpayers.” 

The City will host a Town Hall meeting April 21 at 10 a.m. in Council Chambers in City Hall (300 Park Ave.) to provide the public with information on the process ahead.