U.S. Water News Online
LEXINGTON, Ky. -- Those involved in the fight over
ownership of the local water company here don't agree on much, but
both sides say the struggle likely will be long and divisive.
Officials with Kentucky-American Water Co. consistently have said
the company is not for sale. But the Lexington-Fayette Urban County
Council voted to place a motion approving condemnation of the company
on the council agenda.
Condemnation is a legal process that would compel
Kentucky-American to sell itself to the city. The price of the sale
would be determined by a jury.
Kentucky-American has, along with its predecessors, provided water
service in Kentucky's second-largest city for 118 years.
Kentucky-American's parent company, American Water of Voorhees, N.J.,
was bought last year for $8.6 billion by a company that falls under
the umbrella of RWE AG, a German industrial giant. The sale included
more than 800 water systems in the U.S. and Canada.
Since that sale, a handful of towns around the nation have
discussed starting condemnation proceedings against local water
systems now owned by RWE AG.
Lexington's mayor, Teresa Ann Isaac, made local ownership of the
water company an issue in her election campaign last year.
A dozen citizens -- including former Kentucky Gov. Edward T.
``Ned'' Breathitt and influential businessmen -- have offered to
guarantee a $750,000 bank loan to the city to pay for expenses of the
The fight thus far in Lexington has been similar to those in other
towns. Kentucky-American has touted the benefits of private ownership
and says customers will pay lower prices than if the local government
takes control of the company. Pro-condemnation forces dispute that
and claim that money earned by Kentucky-American not only doesn't
stay in the state, it goes overseas.
``I think that the trend to globalization has been reversed in
regard to local utilities,'' said Foster Ockerman Jr., a Lexington
lawyer working with Bluegrass FLOW (For Local Ownership of Water), a
grass-roots organization. ``Communities are seeing it is not
advantageous to have outside ownership.''
That viewpoint is shortsighted, counters David Schultz, American
Water's vice president of operations for the company's southeast
region, which includes six states, including Kentucky.
``The problem is, it says that foreign industries are not welcome
in our town,'' Schultz said. ``This is a global economy.
(Discouraging foreign industries) is not a good thing.''
Schultz also emphasizes that ``water is a local business. The
service is provided locally, managed at the local level and it's
regulated locally. It's all right there.''
Kentucky-American also provides service to parts of Scott,
Bourbon, Jessamine, Woodford, Clark, Harrison, Owen, Grant, and
Gallatin counties. The possible impact of a Lexington takeover on the
surrounding area has not been discussed much, Winchester City Manager
Ed Burtner said.
``This affects not just Fayette County, but all of central
Kentucky,'' Burtner said.
But even as they watch the Lexington case with interest, officials
in surrounding towns aren't quite sure what to think yet about the
``I'm going to reserve any kind of judgment on it,'' said Bob
Riddle, the general manager of Georgetown Municipal Water and Sewer
Service in Scott County, which has about 9,500 customers and buys
five percent of its daily demand for water from Kentucky-American.
``We're very happy with the service provided by Kentucky-American.
They have worked with us well from a water-company perspective,''
Riddle and Tom Caukins, the city utility director for
Nicholasville in Jessamine County -- which has about 140 customers on
its system that take service from Kentucky-American -- both said it
wouldn't make much difference whether water comes from
Kentucky-American or Lexington.
Eighty-five percent of U.S. water systems are owned by the
communities they serve. Some of those -- including large cities like
Stockton, Calif., population 250,000 -- are moving toward
privatization of services, citing the rising cost of infrastructure
Lexington is merely the latest city to consider moving in the
other direction, and likely the largest with a population of 260,000.
Many of those cases have involved systems run by American Water,
which was bought by London-based Thames Water, the water arm of RWE
AG. Thames is the world's third-largest water utility, and among its
holdings are water systems in 27 states.
Grafton, Mass., successfully condemned its water utility, but only
after a lengthy court battle that ended in 1994. In September 1995,
after a two-year battle, Huber Heights, Ohio, threatened condemnation
and took over its water system from what is now American Water.
An issue in all the towns has been the value of their respective
In Grafton, George Raftelis -- an independent consultant hired by
the city -- estimated the town's system to be worth $1.1 million. A
court ruled the city instead should pay $5.6 million for the system.
Raftelis also did a preliminary assessment of Kentucky-American
for Lexington, and said the city's system was worth between $157.7
million and $352.8 million. Schultz said Raftelis' reasoning was
flawed and that the company's assets in Lexington are worth much
``We will continue in the hopes they don't take us to court,''
Schultz said. ``If they take us to court, then that's where the facts
replace the emotion, and the risk for the government becomes
reality,'' Schultz said.
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