Seeking new revenue, Providence wants to know value of its water supply

PROVIDENCE, R.I. (WPRI) – How much is Providence’s water supply actually worth? City officials are seeking to find out.

Emily Crowell, a spokesperson for Mayor Jorge Elorza, confirmed Wednesday the city is planning to hire an outside firm to assess the value of the water supply in the Scituate Reservoir, which provides drinking water to 60% of Rhode Island’s population.

Crowell said the valuation is necessary because city officials are considering asking the General Assembly for assistance as they seek to secure more revenue from the water system, potentially through regionalization or a restructuring.

“Before we move forward, we want to find out how much everything is worth,” Crowell said.

Elorza, a Democrat, has repeatedly said he does not want to sell the water supply to a private entity, and the City Council approved a resolution opposing privatization last year. But the mayor has said he would be willing to consider supporting the creation of a regional water authority in the state.

Last year a consultant’s report outlining ways Providence could improve its finances suggested the city should consider a one-time asset transfer worth at least $372 million – the value of the water supply’s assets in 2015 – or smaller annualized payments over time that could come as a result of a sale or lease. The study recommended the proceeds be used to improve the funding of the city’s struggling pension system, which was just 25% funded and faced $985 million in liabilities as of June 30.

Elorza and other city officials have said any attempt to profit from the water supply will likely require enabling legislation from the General Assembly. Eyewitness News has learned Elorza has discussed Providence Water with several lawmakers, but he hasn’t made his plan public and no one from the House or Senate has introduced any water-related bills this year.

The value of the water supply and Providence’s ability to sell it has been a point of contention in city government for many years.

In 1994, then-Mayor Vincent A. “Buddy” Cianci Jr. attempted to sell the system to the Narragansett Bay Commission for $500 million, but the deal fell through. In 2008 the city again considered a sale, and at the time City Council members told The Providence Journal they believed Providence could receive a one-time payment of between $400 million and $600 million to help the pension fund.

Former City Council President Michael Solomon told Eyewitness News one estimate of the value to replace the water system was $1 billion, but he said it wasn’t clear that the city has the legal ability to sell the asset. During a trial involving a lawsuit that challenged Providence’s pension changes in 2013, former Mayor Angel Taveras testified that he didn’t believe the city could benefit from the sale of the water system because the proceeds would need to be returned to ratepayers.

Providence Water sells water directly to approximately 75,000 retail customers throughout the state and provides water to eight other wholesale customers. The city owns the land in Scituate used for its water operations. The taxable value of the land itself was $260 million in 2016, according to the town’s annual audit. Providence is Scituate’s largest taxpayer.

The Providence Water Supply Board has more than 240 employees on the city payroll, most of whom are members of Local 1033 of the Laborers’ International Union. In 2015, the agency spent $10 million on a new building to move its headquarters from Academy Avenue to Dupont Drive. The move is expected to be completed later this year.

CORRECTION: Michael Solomon said the value to replace the water supply is more than $1 billion. The original version of this article stated the value of the water system was more than $1 billion.

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Dan McGowan ( dmcgowan@wpri.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Facebook and Twitter: @danmcgowan