New deal will save Metropolitan Sewer District ratepayers at least $5 million every year

Posted at 1:30 PM, Jul 26, 2017
and last updated 2017-07-26 17:57:57-04

CINCINNATI -- City and county officials have struck a deal for the future of the region’s sewer district that they say will save ratepayers at least $5 million every year.

The 50-year agreement between the city and county over sewer operations that comes to an end next year has created years of uncertainty over which entity – the city or the county – might control the Metropolitan Sewer District's assets and employees moving forward.

For the last 50 years, the county has claimed ownership to the sewer district while the city has managed it. Ahead of the contract’s expiration, city and county leaders geared up for a turf war over the sewer district, spending millions of dollars annually on legal fees and attorneys.

“Our long nightmare of unaccountability and anxiety with respect to future operations of the Metropolitan Sewer District is coming to an end,” Hamilton County Commission President Todd Portune said in an interview with WCPO Wednesday morning.

Under the proposed deal, the county and city would hand over daily oversight of the sewer district to a five-member, citizen-led board. The board would also have hiring and firing power. The county commission, however, would still set sewer rates.

In recent months, MSD has been embroiled in a series of controversies: from an FBI investigation of the sewer’s operations to frustration with the way MSD handles claims over raw sewage flooding backing up in homeowners' basements.

Meanwhile, home and business owners have suffered sticker shock as sewer rates have skyrocketed in recent years, rising more than 128 percent since 2004. The average homeowner pays about $800 a year to the sewer system.

Cincinnati Mayor John Cranley, as well as Vice Mayor David Mann, worked closely with Hamilton County Commissioners Todd Portune and Denise Driehaus to ink the deal. All four are Democrats. 

They reached the deal after more than a year of negotiations, which were held in private because of a court-ordered gag on public discussions related to MSD. 

Hamilton County Commissioner Chris Monzel, the commission's lone Republican, said he will refuse to sign the new agreement. Monzel objected to the a proposal in the agreement that hands over management of the sewer's day-to-day operations to a citizen-led board.

"A major concern with this proposed agreement is establishment of a five-member Citizens Board that will make decisions on important hiring practices and daily MSD operations," Monzel said in a statement. "I believe that a five-person board, not answerable to ratepayers, is unacceptable and should only be advisory in nature.”

The deal reached Wednesday doesn’t guarantee rates will go down but could prevent massive fee hikes in the future as the county takes on a federally mandated $3 billion overhaul of the sewer system, Portune said.

They could not yet put a price tag on how much money would be saved under the new agreement but estimated at least a $5 million annual savings on the legal fees the city and county spend disputing ownership of the sewer district. Because of the ongoing dispute, local leaders estimated another $5 million has been wasted in project delays.

Another requirement that could save ratepayers money: a push to utilize existing sewer district employees to execute projects – not high-dollar consultants.

Additionally, Portune believes creditors will look favorably on the deal, which could impact the interest rates the county receives when it borrows money for future projects.

The sewer has an all-funds budget of $525 million every year.

Under the proposed agreement, which Cincinnati City Council and the Hamilton County Commission could approve as early as next week, here are the major changes that would be made to the way the sewer district operates:

• A five-member, citizen-led board will oversee day-to-day sewer operations. The board will have significant control of the multi-million dollar operation, including hiring and firing power of the sewer district’s director.

• The county will appoint three members to the citizen board, while the city will appoint two.

• Members of the citizen board will be paid $12,000 yearly for their work.

• The county commission will retain control of sewer rates.

• The county promises to execute nearly $25 million worth of projects that will control odor stemming from the sewer plant. The projects will primarily impact East Price Hill, where raw sewage smells often permeate the air.

• The sewer system’s roughly 600 employees will become county employees but stay in the city’s pension system.

• That move – allowing county employees to participate in a city pension -- will require a change in state law but it’s necessary to keep the city’s vulnerable pension system stable, Cranley told WCPO.

“It would have been catastrophic,” Cranley said. “It would destabilize the retirement security for thousands of existing employees as well as… jeopardize the city’s credit rating.”

• Employees will remain in their union. Cranley said the deal has the support of the collective bargaining unit, AFSCME, that represents MSD employees.

An agreement alleviates uncertainty for hundreds of MSD employees, Cranley said.

“That has a huge impact on workforce morale, the emotional stability of families of workers, and what’s going to happen to them,” he said.

Council and the commission are expected to vote on the deal next Tuesday. But even if it passes, the deal will still hinge on convincing Ohio lawmakers to change a state law. Local leaders will request the Republican-controlled statehouse to permit sewer employees to continue to make contributions to the city's pension fund. 

Driehaus said Wednesday that discussions with statehouse leaders have not yet begun because of the gag order. She said the legislation leaders will ask the state to pass will be specific to Hamilton County.  

"It's been very difficult to have any conversations with anybody," Driehaus said. "We expect that we can now talk to the legislators, explain the nuances of the agreement, and they would have to likely introduce a piece of legislation or amendment. I remain optimistic about how we will get that done." 

Monzel said he is concerned about that legislation passing the statehouse and destroying the deal. 

"If they don't get exactly what they want in this agreement, it falls apart," Monzel said. "How can that get through the state?" 

City and county leaders Wednesday called the deal a compromise.

They said the only way to keep both a city and county stake in the sewer system was to hand some of the control to the citizen board.

But some city and county boards have come under scrutiny in recent years.

Last year, an audit questioned the way the the Cincinnati Parks Board, a citizen-led group that oversees the city’s parks system, spends money and raised concerns about a lack of oversight on the board’s spending habits. And in recent months, public leaders have questioned the transparency of a citizen board, led by leaders city and county officials appoint, that oversees Cincinnati’s riverfront project, The Banks.

Mann, the city’s Vice Mayor, said the citizen board was necessary to finalize a deal.

“The board is the mechanism to which the city maintains it role,” Mann said. “We had to have some mechanism like that for us to be comfortable to continue.”

If passed, the new agreement will begin in May 2018 and last 45 years.