You may think that here at Aqua, our day-to-day operations revolve almost entirely around the intersection of science and engineering. We’re a water company, after all!
What may surprise you, though, is that even though those fields are paramount to our mission to provide and protect Earth’s most essential resource, plenty of our work is intertwined with the worlds of finance and public policy.
Think about it: When Aqua acquires a water system from a municipality, we go through extensive legal processes in order to ensure the handoff goes smoothly. And one of the many factors that can improve those processes for all involved parties is the presence of municipal fair market value (MFMV) legislation.
We spoke to Aqua Ohio President Ed Kolodziej to learn more about MFMV legislation and how it benefits both communities and customers.
Ed Kolodziej (second from left) and colleagues at the opening of a new facility in Ohio
What’s the benefit to my town?
In January 2019, Ohio Governor John Kasich signed legislation allowing companies like Aqua to pay fair market value for the purchase of water and wastewater systems. Before these changes, system values were determined by their depreciated original cost, which generally did not reflect a reasonable market value for those assets.
Think of it this way: If the value of a home was established under the old Ohio formula, you would only consider the original purchase price of the home and the cost of improvements you did, minus their depreciation over time. Under the new fair market value system, the value of a home also considers things like the recent selling prices of similar homes nearby, curb appeal, replacement cost, and desirablility of the neighborhood. All of these items can have a significant impact on the true value of the home.
When we apply this logic to the sale of water systems, it’s clear why local municipalities benefit from fair market value legislation. When Aqua purchases the system, themunicipality receives a reasonable market value in return, which can then go toward numerous other local projects, from schools to parks to fire departments.
“By partnering with a regulated utility through a purchase agreement, an Ohio community can shed the burdens of utility operation and maintenance, immediately improve their financial position, and potentially create a new source of revenue for their general fund,” Kolodziej explained. “The regulated utility brings operational efficiencies and economies of scale along with sorely needed investment dollars to the table and therefore earns a return on their investments.”
What’s the benefit to customers like me?
If you’ve been following our Aquastructure series since its inception, you know one thing for sure: better water infrastructure leads to better water quality.
“Around our state, water and wastewater infrastructure is in disrepair, reliability is suffering, compliance with health and environmental regulations is at risk and government-owned utilities across the state are behind the eight ball,” said Kolodziej.
“The American Society of Civil Engineers (ASCE) says Ohio communities need to spend $26.78 billion on water and wastewater systems in the next 20 years. There are no easy answers, and most have no idea where the resources will come from.”
Kolodziej is right: The answers aren’t always easy. But that’s where Aqua can help. By working with municipal officials to acquire the municipal water and wastewater systems, we’re able to ease the burden of these necessary improvements for communities like yours.
The acquisition process allows us to carefully assess the state of aging water and wastewater systems and then implement crucial upgrades, many of which are long overdue. Replacing water mains, service lines, main line valves, and fire hydrants are often among the first order of business.
Because water infrastructure, water quality, and public health are inherently linked, these upgrades lead to delivering better drinking water, therefore leading to healthier communities as a whole. That’s something everyone can get behind.
Ohio is our sixth Aqua state to enact this type of fair market value legislation, joining states like Illinois and Pennsylvania in giving municipalities even more reason to ease the burden of water and wastewater operations.
“I encourage elected leaders across the state, especially those with budget or environmental compliance challenges, to explore the new opportunities created by the new Municipal Fair Market Value rules,” Kolodziej added. “More and more communities are benefiting by unleashing the power of regulated utility investment.”
To learn even more about how Aqua can help improve local finances in a community like yours, visit WaterByAqua.com.