March 28, 2024

City hears proposal to privatize wastewater

The city of Creston currently owns its own wastewater treatment facilities along with miles of underground piping. The city council listened to a proposal from Iowa American Water Company to change that. The council agreed to consider the proposal and will place it on the agenda for possible action on a future date.

IAWC, an investor-owned company, would like to buy Creston’s wastewater treatment system. It is a subsidiary of American Water Company, which owns and operates water and wastewater treatment facilities across the U.S. delivering a billion gallons of water to 15 million customers in 46 states.

A recent change in Iowa law allows companies such as IAWC to purchase utilities for fair market price rather than the previous depreciated price.

“In the past state law allowed our company to pay a community the cost of their system minus depreciation,” Frank Grage of IAWC said. “When you take systems that have a 20 to 30 year depreciation cycle and they’re 60, 70, 80 or even 100 years or more old, there is so much depreciation that the value is gone by law.”

IAWC would be responsible for maintaining and upgrading the system as well as setting rates. The city of Creston would be able to use the receipts from the sale to pay off debt related to the wastewater system and then add any additional money to its general fund.

The Iowa Utilities Board governs the allowed price and rate of return for wastewater treatment in Iowa. IAWC would have to go before the IUB to change rates in the future.

Creston’s wastewater pipes are aging, Grage said. This proposal would shift the responsibility of upgrading them to IAWC instead of the city.

IAWC would also become a tax payer, paying taxes on “every foot of pipe” used for the wastewater system making them one of the largest tax payers in the area.

Grage said IAWC would retain the current employees and future employees would be recruited from Creston. In addition, current employees would gain the opportunity for advancement and portability that comes from working for a national company.

The next step would be a data exchange allowing IAWC to estimate the value of Creston’s wastewater treatment system and look at expenses such as fuel costs before they would make an offer. This step would require no cost or commitment from the city.