April 8, 2010

The city of Indianapolis is not unique in dealing with the challenges associated with chronic under-
investment in its water and sewer related infrastructure, increasing regulatory standards for water quality,
heightened national security concerns about these assets and limited financial resources. To build a city
that works for all of us, the residents of Indianapolis must be engaged in a public discussion about water
quality coming out of the tap and ending up in our rivers and streams. The citizens of Indianapolis should
be engaged in a discussion about how we address past failures and achieve our collective goal by providing
sufficient funding, setting community wide standards, ensuring effective management of staff and assets
and maintaining transparency and public participation.

Last year I issued a statement noting that municipal ownership of vital community assets such as water,
waste water and storm water systems is important for quality, transparency and public safety
considerations. On March 9, the Mayor entered into a Memorandum of Understanding to sell the water
company to Citizen’s Gas. On March 23, I released a public statement on the proposed deal. The financial
and operational concerns raised in that statement have been reiterated and expanded upon by the
Indianapolis Star, Indianapolis Business Journal and numerous blogs. Despite this growing public concern,
neither the City nor Citizen's Gas have addressed the simple questions posed in my statement.

Subsequently, the Mayor and Citizen’s Gas executives have made comments at public meetings and
presentations that raise additional significant concerns about the proposed transaction and weaken the
rationales in support of it.

Financial leverage: Citizen’s Gas is proposing to borrow the entire amount needed to complete the
transaction – some amount less than $170 million required at closing and $92 million required in October
2011. As proposed, Citizen’s Gas will be assuming nearly $2 billion in debt. Since Citizen’s lacks sufficient
cash to make the “down payment” and without disclosure of pertinent financial information, we are unable
to determine if Citizen’s can properly service this debt or if Citizen’s Gas is acting like an eager homeowner
who wants to purchase an expensive home he or she cannot afford. As noted in the MOU, a sale to Citizen’s
Gas is contingent upon Citizen’s securing financing.

Ineffective leadership: A proposed benefit of the sale is that Citizen’s will be able to operate the combined
entities more efficiently and; therefore, will be able to mitigate future rate increases. First, let’s be clear,
water and sewer rates will increase significantly because Indianapolis has underfunded these systems for
decades. Second, an independent study conducted for the Mayor identified substantial issues with the
current governance structure for the water utilities. Effective leadership would have devised solutions to
these management challenges. Instead, the Mayor has proposed to sell the water company to an enterprise
that has no relevant experience and that must rely upon the incumbent providers to help identify the
anticipated savings that will result in theoretically lower rates in the future. An effective Mayor would work
with Veolia and United Water to generate those savings today for the benefit of the taxpayers and
ratepayers.

Paid for and Authorized by Williams for Indianapolis, Robert Herzog, Treasurer
PO BOX 1061 Indianapolis, IN 46206
Puny purchasing power: A proposed benefit of the sale is that Citizen’s will benefit from lower borrowing
costs as a public trust and that its experience and purchasing power will lower costs associated with
necessary infrastructure costs. As a municipality, the City of Indianapolis has rather low borrowing costs.
Without sufficient financial information we are unable to determine if Citizen’s can borrow money at a rate
more advantageous than the City. Second, independent studies have demonstrated that water and sewer
systems are three times more costly to maintain than natural gas systems. Again Citizen’s Gas will be
dependent upon Veolia and United Water to help it understand, effectively bid and manage projects that are
potentially three times larger than projects it has managed historically; however, these projects are well
within the experience and capability of the current water and sewer management teams.

Disappearing dollars: The Mayor continues to state emphatically that the City will receive $425 million
upon the sale. This is false. First, as is clearly stated in the MOU, the City will receive some amount less than
$170 million at closing. The amount of cash the City will receive will be reduced by the contingencies stated
in the MOU and by any expenses the City incurs to consummate the deal. A study by Public Citizen
estimated costs associated with privatizing assets at over $5 million. It is conceivable that at closing, the
City will receive $145 million or less - hardly sufficient funds to address over $5 billion in combined
infrastructure needs.

Loss of control: The value of community ownership of the water company disappears if Citizen’s Gas should
sell it. While Citizen’s would need court approval to do so, it is not impossible or unheard of for a trust to
sell its assets. If the executives at Citizen's are truly committed to serving the community, than they should
have no problem including a right of first refusal in the agreement. Without this clause, Indianapolis
residents are subject to the whims of future managers and board members of Citizen's.

Rivers of filth: Because of the city’s ancient storm water/sewer design, any time the City receives more than
one quarter inch of rain raw sewage is dumped into rivers and streams, specifically the White River, Fall
Creek, Eagle Creek, Pleasant Run, Bean Creek and Pogue's Run. This presents a health hazard to all
Indianapolis residents and substantially lowers the quality of life for those who live along or near these
bodies of water. Addressing this issue is not only vital to our City's future, but it has been mandated by the
federal government. The estimated price tag for the necessary infrastructure improvements is over $2
billion or approximately three Lucas Oil Stadiums. The MOU indicates that upon the sale, the City retains
liability for the storm water system. Sale of the water utility under these terms would allow Citizens to
dodge one of the largest costs associated with water and sewer service in Indianapolis while leaving the
taxpayers responsible.

Mayoral flip-flop: In proposing this deal, the Mayor stated that the funds received by the City from the sale
would be used to re-build streets, sidewalks and parks. Now the Mayor is suggesting that the funds would
be used to create an economic development fund. What exactly will the Mayor do with the still to be
determined dollars the city will receive?

To be a city that works Indianapolis must provide reliable, clean, abundant water for all its citizens and
businesses. Indianapolis must improve the infrastructure needed to deliver that clean water and to remove
and treat polluted water. Without community wide awareness of the scope of the challenges we face and
community support for solutions to those challenges, Indianapolis will be unable to address its
infrastructure needs in a sustainable manner. Unfortunately, the Mayor has not led this type of community
discussion and unfortunately, the proposed sale does not accomplish any of these goals.

Sincerely,
Brian Williams