F.C. Council Set to OK Preliminary Ordinance on Selling Water System

Vote Monday Will Set Stage for Considering Bids Later This Month

This Monday night, the Falls Church City Council is expected to give preliminary approval to an ordinance authorizing the sale of the City’s besieged water system. It will be merely a formality, however, pending the outcome of a bidding process for the system slated to take place on May 25.

After the May 25 event, when initial bids will be opened and bidders allowed to raise their offers at that point, the Council will decide whether or not to pursue a sale, and will fill in the blank in the preliminary ordinance with the name of the entity it will have chosen to sell to. The Council could chose not to sell at all depending on how the bidding goes.

A minimum bid of $44 million for the 120,000-customer water system was a pre-condition for the numerous companies that have already responded, according to City officials. At a pre-bid meeting late last month, 18 individuals representing six water and public investor owned utility companies attended.

Depending on the outcome of the May 25 meeting, the Council will vote to approve a sale pending approval by City voters at a referendum in November.

This Monday’s vote will require a simple majority to pass, but the vote on the so-called “second reading” in June will require a “super-majority” of 75 percent of the Council, or six of its seven members.

At its work session last Monday, the Council determined that getting even six of its members in a room at the same time in June may be problematic, however, with existing plans for vacations and post-graduation trips overseas complicating matters.

The Council, however, needs to finally determine if it wants to sell the system in time, technically, to get the matter on the ballot for the fall, and also in advance of a significant turnover of the Council when two new members will be sworn in July 2.

Fairfax County users of the Falls Church system have already begun a campaign to oppose the sale of the system, saying it will drive up user costs. Some have already been seen circulating materials at the weekly Falls Church Farmers Market. Fairfax County and Fairfax Water Authority officials have already made it clear they would oppose the sale of the system through legal action, if necessary.

But Falls Church City Manager Wyatt Shields told the News-Press that Falls Church feels it is on firm ground, within its rights, to sell the system.

The Falls Church City Council began exploring its options for unloading the system, which the City has operated since the 1930s, after votes taken by the Fairfax County Board of Supervisors last Dec. 6 asserted the county’s right to set the water rates charged by the Falls Church system for county users.

That followed the January 2010 Fairfax Circuit Court ruling singling out Falls Church among water suppliers in the state as being unable to cover the costs of its risk with a return on investment.

The two developments, by the county supervisors and the court, has made it untenable for Falls Church to operate the system in a cost-effective manner, and sentiment was virtually unanimous on the F.C. City Council that some process of changing its arrangement with its water system should occur.

Moreover, according to Shields’ report to the council, “New legal and political hurdles have been erected that substantially increase the financial risk to the city in providing water services for residents of Fairfax County.

Despite some discussion at its work session this week, the Council will not be stipulating prospective uses of funds that may derive from the sale of the system in the current process. It has been proposed, for example, that any funds from a sale should go to securing the long-term viability of the City’s pension fund obligations, after approximately $24 million in principle and interest is paid off to existing debt incurred by the City for the system. One way or another, Shields reported, the proceeds from any sale “would be used to secure the long-term financial condition of the city through prudent management.”

He noted, “Investing the proceeds in the city pension funds will provide the highest return on investment, reduce the required City contribution to those pension funds, and thereby free up significant financial resources to meet the challenges faced by rising Virginia Retirement Fund pension costs and City school capital needs. This course of action would also mitigate expected future tax increases for City tax payers.”

The lengthy, with dense legalese, draft ordinance to be considered Monday is 136 lines long, broken into 13 sections. In addition to the sale of the system, it grants a 40 year easement for assets located on City property, and the City’s sewer system is not included in this prospective sale.