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Local residents should not be surprised that the city has spent nearly $300,000 on legal fees in the ongoing battle with Indiana Michigan Power over the City Light lease. Nor should they be surprised when the city spends more – perhaps much more – to make sure citizens are well represented.
Though I&M has, for various reasons, won the upper hand in the public relations battle, Mayor Tom Henry and his administration do have a responsibility to defend the city’s interests in the high-stakes faceoff. They also have a responsibility to inform the public of how much they are spending on the matter; so the release of the totals last week was a welcome, if belated, response to The Journal Gazette’s request for the information.
Unfortunately for the Henry administration, I&M has no similar legal responsibility to tell its ratepayers how much the company is paying for lawyers. To further add to the city’s underdog position in the public-relations battle, mediation efforts limit what either side should say publicly about the status of negotiations, leaving city officials unable to tell the public exactly what is behind the city’s strategy.
At issue is the current value of the “assets” of the former City Light utility, which provided electric service to much of the city’s central core until the city leased the system to I&M in 1974. Now that the lease is about to run its course, both I&M and the city hope the electric company will permanently buy out what is left of the system. The question is the price.
Numerous legal issues are involved, and there is no comparable lease in Indiana that sets a precedent. Considering no real movement has arisen yet in two mediation sessions, residents can likely assume the sides remain at odds over the main point of contention: I&M believes it should pay only for what little equipment still exists, while city officials believe the company must pay a premium for the 30,000-plus customers City Light served. City officials have said that it believes the utility is worth up to $100 million; I&M is likely offering much, much less.
If the issue were not complicated enough, city officials also have to keep in mind that whatever I&M pays will come from the company’s customers, including those in Fort Wayne.
Yet city officials also have a responsibility to make sure its residents receive a fair value for what is left of the former municipal electric company. So far, the city has paid the law firm of the city’s corporate counsel, Tim Haffner, nearly $200,000 in 2008 and 2009. The city cannot be faulted for also hiring an Indianapolis law firm with expertise in electric utility matters (nearly $80,000 over the two years), and with one court case already filed, a separate litigation firm (nearly $15,000.)
With tens of millions of dollars at stake, the $300,000 the city has spent over the past two years appears justified. The money has come not from property taxes but from the payments I&M makes to the city (about $1.74 million per year). The city must continue to monitor its expenses and allow its constituents to monitor them as well.
The costs are just another reason that city residents and I&M ratepayers should insist that both sides negotiate in good faith and seek an agreement fair to city taxpayers and I&M customers alike.
