Lexington residents and businesses will soon be getting their sewer and landfill bills from the Greater Cincinnati Water Works — costing our government an extra $700,000 a year.
Yes, you read that right.
By summer's end, you'll be writing a check to or approving an automatic withdrawal by a municipal utility in another state.
That's because the private Kentucky American Water, which touts itself as a model corporate citizen, cut the city off.
A Kentucky American official last year explained that billing and collections contracts such as the one with Lexington were no longer "a good fit" for the company, which is part of investor-owned American Water, based in Voorhees, N.J.
In most places, the fit would be fine because in most places the city owns both the water and sewer systems. Plus, sewer bills are directly based on water consumption.
But in Lexington, one of very few cities its size that does not own its water utility, things get complicated — usually, as in this case, to the detriment of consumers and taxpayers.
The hunt for a replacement contractor produced eight prospects. Cincinnati's public utility submitted the lowest-cost and highest-ranked bid. But at $2.29 million a year, it's considerably higher than the $1.59 million the city had been paying Kentucky American.
City revenue director Bill O'Mara explained that the cost of billing and collecting for Lexington was an incremental addition to what Kentucky American was doing anyway, while Greater Cincinnati Water Works has to build the new bills and procedures from scratch.
Billing and collections, which now consume 2.5 percent of the revenue from sewer, landfill and water quality fees, will consume 3.5 percent of the revenue under the new contract.
That's $700,000 that will no longer be available for maintaining infrastructure and service in Lexington.
In addition to the contract with Cincinnati's municipal utility, the council on Thursday also will be asked to approve $10,000 to pay a consultant for help preparing the request for proposals and $420,000 for project management related to the switch in billing contractors.
Kentucky American gave the city extra time — until September — to make the transition. And Lexington will still contract with Kentucky American to get monthly data on water usage for each account and to disconnect water service to customers who are chronically delinquent on sewer bills.
At a council work session last week, Mayor Jim Gray called the arrangement "at best a compromise" and said "our city and our citizens have lost in this."
He also said the situation "begs questions about our relationship with Kentucky American" that can't be left exclusively to the state Public Service Commission.
Consumers and taxpayers can hope that sentiment translates into more effective challenges to Kentucky American's rate increases and a tougher approach to negotiating the utility's franchise agreement with the city.
If it does, American Water's executives and stockholders might wish they had worked harder to make the relationship with the city fit.