Mayor's proposal raises many questions
Saturday, February 09, 2008
Patrick O'Donnell
Plain Dealer Reporter

Akron - Mayor Don Plusquellic's plan to sell the city's sewer system to a private company is unprecedented in its size and scale.
But so is his goal of raising more than $100 million to send the city's students to college for free.
Both parts of the plan he announced Thursday would break new ground for cities. Though there are similarities with other efforts around the country, the city has a lot to work out to make Plusquellic's vision a reality.
High on the list is finding a buyer for the sewer system in what could be the largest sale of a city sewer system ever in the country, public utilities experts said Friday. Next on the list comes the large sewer rate hikes experts expect.
"If it's in private hands, they will come in and raise rates," said Susan Bruninga, spokeswoman for the National Association of Clean Water Agencies. "They not only have to respond to their customers - you and I - but to their shareholders. There's a profit motive there."
Bruninga said Akron's plan surprised about 200 managers of water and sewer systems at a conference in Phoenix her organization hosted over the last few days. Though several communities have hired private companies to run water and sewer systems - including Indianapolis, Milwaukee and Atlanta - managers at the conference could not think of any large municipalities that sold the systems or leased them outright.
Atlanta ended its 20-year arrangement with a company to run its water system after just four years because of problems.
Julius Ciaccia, manager of the regional sewer district covering Cleveland and 60 suburbs, said "there's no way" a private company could keep rates down, recoup its $100 million-plus investment and still make money.
"It's counter-intuitive," he said. "It just can't happen."
Akron was already likely to see a rise in rates without any sale. The city is under orders from the Environmental Protection Agency to stop dumping untreated sewage into the Cuyahoga River and its tributaries during rain storms. Akron has a plan to make improvements. But the nearly $400 million cost will be a major item in the sale.
"It still has to get done," said Akron Service Director Rick Merolla. "It's just a matter of how a new owner can negotiate a deal with the EPA."
Bruninga said she also worries that a private owner would take shortcuts on maintenance, letting the system deteriorate over years. Her association opposes any privatization of utilities.
But she said there are likely companies, some based in Europe, that might have interest in Akron's system if the deal were priced right for them.

What they do in Kalamazoo
How much Akron would need to pay for the scholarships is unclear. Right now, the proposal would pay tuition and fees for residents to attend either the University of Akron or a trade school in Akron. Students would have to apply for other financial aid, which would be used before the city scholarships kick in.
Though Akron city schools graduate more than 1,500 students each year, it's unknown how many would take advantage of the scholarship program.
It would not cover private colleges or other state schools -- so Ohio State or Miami universities would not be included.
UA also has admissions standards. Although it has programs for lower-performing students, no community colleges would be included in the scholarship plan.
Though about 80 percent of UA students receive some financial aid, university officials were unable to say how much they received on average to offset the school's $8,400 tuition.
Plusquellic's plan to create an endowment fund for the scholarships -- in which interest and other returns on the fund would pay annual expenses -- also will depend upon the stock and bond markets.
The UA's endowment averaged a 10 percent return over the last three years.
Plusquellic's model, the "Kalamazoo Promise," has several differences that make comparisons difficult. That plan, for graduates of the Kalamazoo, Mich., public schools, sends students for free to any state school in Michigan.
Students must attend Kalamazoo Public Schools all four years of high school to qualify. Those students have 65 percent of their college tuition covered.
Students receive 5 percent more for every additional grade they spend in the school system.
Started in 2006, the schol- arship spends about $3.5 million for about 600 students to attend col lege. Those come from two graduat ing classes of between 500 and 600 each.
Those numbers fluctuate constantly, said plan administrator Robert Jorth. Some students start at non-included schools and transfer to included ones, or vice versa. Many start, then drop out.
Unlike Akron's plan, the Kalamazoo Promise is not limited to colleges within Kalamazoo. But Jorth said about 65 percent of scholarship students attend Western Michigan University and the community college in Kalamazoo.
The Promise also does not require other financial aid to be used first so students can use other aid on room and board or books.
And the Kalamazoo Promise is paid for by anonymous donors who will not release financial details of the funding.
Jorth said he does not know if they created an endowment fund, though most in the city estimate it would need to be between $250 million and $300 million to keep the plan working.
Jorth cautioned that all data about the program and its effects are limited and that it is premature to draw conclusions.
Akron spokesman Mark Williamson says Plusquellic views the concept as a way to thwart urban decay, re-energizing the city using the promise of free college or trade school tuition to lure back residents and businesses.
He said a city such as Akron or Cleveland needs to think progressively to alter current downward trends.
"If that's on the table," he said. "People may say, Wait a minute, I'll live in the city. Let's go buy a home in Akron.' "
In Kalamazoo, the scholarships have brought some benefits.
Jorth said the school district has seen a jump of 1,000 more students in the two years; those moved in from 32 states and 90 different communities or returned from charter schools.
George Erickcek, an analyst with the Kalamazoo-based W.E. Upjohn Institute for Employment Research, said the Kalamazoo area gained 600 jobs in 2007, a small increase that still represented a break from the malaise gripping many northern cities.
"In an area like this, any increase is worth noting," he said.
Housing prices also seem trapped in the same negative cycle affecting other areas, such as Northeast Ohio, he said.
However, Kalamazoo's population, after years of steady decline, seems to have stabilized.
He did not know how much the Promise affected either the jobs or house sales.
But Jorth said people in the community love the plan.
"There's a lot of subjective stuff that's happened with morale and civic pride," Jorth said. "It's been a very good thing for Kalamazoo."