COULD NORTH CANTON USE ITS "WATER ASSET" TO GO A LONG WAY IN SOLVING ITS MORE IMMEDIATE BUDGET NEEDS PROBLEM?

UPDATE 03/25/2010 AT 9:00 AM

Hello Martin,

I have a number of rebuttals to your latest update. I am not sure who your “Very Knowledgeable Source” is but let me just say this about the assertions that source has made:

 

First, Are you trying to tell me that Arcadis had a hand in the original Aqua Ohio water agreement and then years later they are now rendering an opinion that it was a very bad deal for the City of North Canton and needs to be renegotiated?

 

...

 

If that statement is true, DO YOU THINK ARCADIS WOULD ADMIT THAT THEY GUIDED THE CITY IN FORMULATING THE ORIGINAL AQUA OHIO WATER AGREEMENT? I do not think they would admit that nor do I think anyone from Arcadis had any hand in the original Aqua water agreement. If you wanted to prove or disprove that statement, the individual to contact at Arcadis is water engineer Bob McNutt.

 

Second, I also do not believe that the Aqua water agreement had anything to do with getting the Akron Canton Airport as a customer. There is no reasoning for that statement and  never heard of any connection between those events.

 

Third, The council member involved in the current negotiations is the same council member who had a hand in the original Aqua water agreement and is the same council member who has defended that agreement for years.

 

Fourth, In my comments to council in the summer of 2006, I noted that the North Canton water superintendent was not consulted. That statement has never been challenged since the presentation to council nearly four years ago.

 

Fifth, If you will look at the Arcadis Water Study, they clearly state that the city sold water at a rate of $1.52 per thousand gallons while at the same time production costs (variable costs only) amounted to $2.20 per thousand gallons (see page six of the water study). THAT IS A NET LOSS OF $0.68 PER THOUSAND GALLONS. And Arcadis spells that out in black and white.

 

I also might suggest that you look to page four of the report where Arcadis breaks down production costs per “Expense Subcategory.” Budgeted 2009 water production costs per thousand gallons was $7.28 per thousand gallons. Projected water production costs for 2010 is $5.74 per thousand gallons up twenty-four cents from 2008 actual production costs of $5.55 per thousand gallons.

 

I hope you add this to your update on that post.

 

Thanks,

 

Chuck Osborne

 

 

UPDATE:  March 24, 2010 04:45

From a very knowledgeable source:

Water funds are enterprise funds. By law they may be only spent with the enterprise.  Water profit, for example, cannot be redirected to the safety services.

Here is another factoid:  the original contract was the work product of a group consisting of our engineer, water supt, administrator ( Mike Miller) and the very same rep from Arcadis.  It is my understanding that Miller accepted some recommendations and rejected others based upon his experience in Canton: hence the contract as it exists.

In addition, the contract gave the city a strategic customer: the airport.

And I point out that the current report explicitly states that depending on the accounting method "the city recognized a net operating profit of approximately $110,000 in 2009."

Better process now: yes because the negotiations include the law department, finance director and a member of council.

Other potential water sources for Aqua: Canton.

ORIGINAL POST

North Canton is facing upwards of $1 million in revenue shortfalls within the next year.  And, the deficiency could result in about 15 layoffs from the city's workforce.

If the layoffs occur, it would be nearly impossible for North Canton to provide "current" service levels to the citizens of the Dogwood City.

So what is the solution to what ails North Canton?

It could be that the doggedness of "pain in the _ss" (to many of North Canton's councilpersons and city administration members) activist Chuck Osborne will help North Canton find a way out of its dilemma.

Chuck has found, what he says is a $13 to $15 million give-a-way that North Canton officials have made to Aqua Ohio, Inc. (a company that competes with North Canton for retail customers).   Osborne says the give-a-way dates back to the Tom Rice administration.

Even if one accepts Osborne's numbers and rationale, it doesn't solve North Canton's current financial crisis.  North Canton desperately needs to find about $1million in short order and needs to have North Cantonians to pass two tax issues in the May primary (a 1-mill, 5 year levy for street repairs; a 1.5-mill levy for two years for emergency services).

To understand and see the validity of Osborne's overall point (not necessarily the $13 to $15 million figures), look at the table (from a NC hired consultant/expert at $18,500 - Arcadis) below:

North Canton is supposed to be "business" friendly.  But would a business believe it?

Businesses pay nearly 10 times what Aqua does while using about 1/3rd the volume.  Okay, one might get a "bulk" rate.  However, how does one explain that the big time "bulk" users - the combo "outside" North Canton user group (which would seem to more nearly match Aqua in terms of category) uses twice as much North Canton water as Aqua yet pays more that 12 times.  Doesn't seem like a whole lot of rationality to yours truly.

Let's take look at an Acadis quote in its report to North Canton (January 15, 2010).

Kind of startling, no?

Whatever is past stays in the past.  Now North Canton is about to turn a new page.

The City is negotiating with Aqua and is proposing to increase the price to Aqua at $3.60 per thousand gallons  less a cost of production of $2.20 per thousand gallons, leaving North Canton with a mere $1.40 per thousand gallons "profit."

However, with Outside City Business Accounts the City's "profit" is $7.52 per thousand gallons.

Alas, alas; this matter is not that simple.  There is a "market-force" factor that is at play, which the SCPR does not believe Osborne and Arcadis have reckoned with.
What is the maximum Aqua is willing to pay North Canton (who competes with Aqua at the retail level) before abandoning North Canton for an alternative?

One the the critical factors in negotiating with Aqua is for North Canton to know the "real" price at which Aqua would likely turn away from North Canton as a source for its water.

It appears that the only viable option is for Aqua to develop its own well-fields.  And this is a very expensive proposition.  How expensive?  North Canton does not know and it needs to find out before it negotiates any new agreement.  Once North Canton knows, then it can negotiate from power (remember:  "knowledge is power; ignorance is - merely - bliss").

How can North Canton find out a realistic approximation of Aqua's maximum price?

An answer?  Ask its consultant/expert Arcadis to supplement its study by going one more step.  North Canton needs Acadis to construct a model of what it would likely cost Aqua to develop its own well fields.

The SCPR believes it would be well worth the extra cost of paying for a supplemental study/report.

Will North Canton do it?

Probably not.

Why not?

One, because Chuck Osborne is he one pushing Council and the administration to get more money from Aqua for City water.

Wow!  That's a crazy suggestion.

It may be.  But the SCPR is convinced that some, if not most, Council members are so annoyed with Osborne and his agitation of North Canton officials over the years of his activism over many, many issues that they have a hard time accepting anything coming from him as something to seriously consider.

Osborne is suggesting a pause and reflection.  It is he SCPR's idea to have hard data developed.  However, that will take some more time.

Secondly, one City official told the SCPR that North Canton does not want to appear to be "gouging" Aqua.

That sounds kind of strange to The Report.  How many of us have been gouged by the likes of Aqua when a company thinks they have us over a barrel?

Gouging is perhaps the wrong word to use.  It is an emotionally charged word.  Market force should be the operative phrase.

Get Acadis to do the supplemental study/report and then North Canton has more or less objective data with which to do "rational" negotiating.

North Canton taxpayers get protected in the process.  This needs to be the prime concern of North Canton Council and Held administration officials.

The SCPR salutes Chuck Osborne for his work on this issue and he should be publicly recognized by Council and Mayor Held for his hard work in sifting through the Arcadis report and for reminding City officials of past mistakes made.

For it from our mistakes that we human beings learn the most.

It is looking more and more to the SCPR that North Canton is looking to repeat the mistakes of the past in selling one of its most valuable resources:  it's water and negotiating in too much of a hurry without an adequate handle on the negotiating landscape.

Who knows?  A pause in the North Canton/Aqua negotiating process and North Canton equipping itself with knowledge might provide an opportunity for North Canton with a serendipitous opportunity to plug some the $1 million dollar hole in its 2011 budget.

Perhaps there will be enough of an annual revenue increase from a more equitable (to North Canton taxpayers) water rate structure for Aqua that North Canton might lean - in negotiations - on Aqua to make a sizable advance.

Of course, such a willingness by Aqua would command a consideration on reducing the price to Aqua to correlate with the cost of loss of the value of money in the hand of Aqua, if such an advance were made.

It could be a win-win-win: for North Canton, for Aqua and for a citizen (Osborne) trying to help he City he loves.

Will wisdom prevail from whatever its source may be?  Or, will it be "damn the torpedos ... full speed ahead."