Fairfield First Selectman Bill Gerber has recently has gone on the road assailing the $2.4 billion sale of Aquarion Water Co. to a regional water authority.
Appearing on WICC’s Lisa Wexler show podcast May 28, Gerber explained all that he thinks is wrong with the deal for Eversource to spin off the water utility to the South Central Connecticut Regional Water Authority (RWA) earlier this year. In doing so, it created the Aquarion Water Authority, which will stand alongside the RWA.
“My concerns are not complex,” Gerber told Wexler. “It’s basic business 101. I can’t figure out how the $2.4 billion of debt that is going on to Aquarion to pay for this deal – a leveraged buyout – is going to be paid off. This regional water authority in Southwest Connecticut is going to issue $2.4 billion in bonds and put it under Aquarion.
“It’s better than a leveraged buyout because you can always raise rates since it is a monopoly. It looks like they are going to have to (raise rates). It’s basic accounting. How are they going to pay for $2.4 billion in debt when they only make $30 million a year right now? They have to pay somewhere in the range of $140 million a year to pay down their debt.”
The value of the deal includes approximately $1.6 billion in cash and $800 million of net debt that will be extinguished at closing.
Gerber and Easton First Selectman David Bindelglass both applied for intervenor status in the state Public Utilities Regulatory Authority (PURA)’s approval of the Aquarion acquisition. They will appear before PURA June 25 at 12:30 p.m. for a hearing on the change of control.
RWA makes its case
The Representative Policy Board, which is one of two boards that oversee RWA, in September 2024 deemed the acquisition consistent with RWA’s mission.
“After considering all the evidence presented, the RPB believes that the Application is consistent with the RWA’s mission, vision, and values,” the decision stated. “It supports the RWA’s mission to provide customers with high-quality water and services at a reasonable cost while promoting the preservation of watershed lands and aquifers…The presentations at the public hearing reinforced the need for, and importance of, the Application.”
In its findings of fact, RPB stated that the “proposed acquisition of the AWC would mean that the 59 towns noted in Section A of the Final Decision, would become part of the Aquarion Water District, pursuant to enabling legislation.
“The acquisition and associated financing will have no adverse impact on RWA or AWC customers as they would receive benefits from the transaction,” it continued. “The RWA would also structure the acquisition debt such that there is not an impact on RWA customers or AWC customer rates.”
Gerber is concerned about the impact the sale of Aquarion will have on Fairfield’s Grand List and property tax revenue.
“They were Fairfield’s largest taxpayer because of that infrastructure they have added,” he told Wexler. “But this new company is a quasi-public entity that doesn’t have to pay taxes. They only make a payment in lieu of taxes (PILOT), which is flexible. It’s what they can pay what they can afford. They said they would not raise rates. None of this holds water, literally.”
Gerber explained his thinking on the downside of the transaction in a May 22 letter to residents. He wrote:
“Water is a precious commodity. Our lives and livelihoods depend on reliable access to clean water. The customer base of the Aquarion Water Company (AWC) may feel vulnerability as this company serving 60 municipalities in Connecticut has changed ownership between private-sector companies twice over the last 20 years. Macquarie Bank acquired AWC for $860 million in 2006, then sold it to Eversource Energy in 2017 for $1.675 billion.”
“It is unclear why the Connecticut State Legislature changed State law decisively and specifically to accommodate and facilitate RWA management’s desire for aggressive expansion. The Regional Water Authority in Connecticut was created in 1977 by the Connecticut General Assembly. The RWA subsequently purchased the assets of the New Haven Water Co. in 1980. However, RWA was very limited as to the types and size of acquisitions or additional businesses lines.
“Unexpectedly, in a June 2024 special session of the State Legislature “the Senate passed a 137-page omnibus bill in a special session originally envisioned primarily as a means to rectify a motor vehicle taxing problem left over from the regular session but eventually included an Aquarion issue that came as an 11th-hour surprise.”
With the authority to issue public debt to finance the Aquarion purchase, the RWA approved a resolution allowing it to establish the general terms and provisions of the authority’s bonds, notes or other obligations to be used to finance the acquisition the Aquarion Water Co. That would include water system revenue bond anticipation notes.
