INDIANAPOLIS — For 131 years, Indianapolis Water Company, a private utility, owned the water that flowed from the taps of the city's 1.6 million residents.
Except for a summertime blue-green algae problem that fouled the water in parts of the city, the water was pretty good. But in 2000, the company's parent, NiSource, decided to sell Indianapolis Water, giving city officials the chance to take control of the city's life blood.
"We wanted to protect our most precious resource," said city attorney Robert Clifford.
So it designed a savvy type of contract to keep that control. It built an incentive-based contract that tied at least 20 percent of a company's pay to "political" standards such as customer service or taste and odor. Most contracts focus on regulatory benchmarks and do not tie bonuses to performance, said William G. Reinhardt, editor of Public Works Financing, an industry newsletter.
"It was important to the political management of the water system," he said. "At the end of the day, you don't want people calling you up saying, 'What's wrong with our water, Mayor?'"
The city was up against some powerful adversaries. European giants Suez, Vivendi Environnement and RWE AG all bid for IWC. City attorneys, however, ferreting through the archives discovered an 1870 ordinance that gave Indianapolis first option on the purchase.
After a short court battle, Indianapolis in July 2001 paid $522.5 million for IWC, ending 131 years of private ownership.
The city, however, didn't want the problems of managing and staffing the utility, Clifford said. So it contracted out the management.