Lebanon Mayor Matt Gentry says his city’s water problems go back decades.
It falls between two watersheds and water drains away, he explained in a missive to constituents. There are no major aquifers nearby.
Lebanon leaders have been looking for more water since at least 2006. But it was this spring that the city of about 17,000 hit its allocation capacity.
Homegrown pharmaceutical giant Eli Lilly & Co. reserved 800,000 gallons of water daily for its project at the Limitless Exploration/Advanced Pace (LEAP) Innovation District, according to Gentry. Lebanon has imposed a moratorium on new residential and other development since.
That also means LEAP can’t entice other tenants until the water woes are solved. Gentry thinks the controversial district might lead to a solution.
Mayor Matt Gentry. (From city of Lebanon)
The city plans to work with Citizens Energy Group to connect itself to additional water — with an expected boost of 25 million gallons daily.
The project would include new water mains, booster stations and tanks, plus treatment plant upgrades, according to Citizens.
It’s not the hotly debated long-haul pipeline stretching 40 miles between Lafayette and Lebanon. It also doesn’t involve tapping water from other utilities or communities to sell to Lebanon, per Citizens.
That’s because the utility already works in and around Boone County.
The utility’s water system encompasses 10 treatment plans along a variety of bodies of water: Fall Creek, the White River and reservoirs at Eagle Creek, Geist, Citizens and Morse. It also has groundwater wells, spokeswoman Laura O’Brien said.
“Citizens Water already serves eight other communities wholesale water in a similar manner and Lebanon would simply become the ninth,” she told the Capital Chronicle via email.
The utility and Lebanon plan to fund the six-year project with loans low-interest from Indiana’s Drinking Water State Revolving Fund, which is fed with federal dollars. They would seek a maximum bond issuance of $700 million, according to Citizens.
Gentry said that amount is a purposefully conservative estimate.
“Imagine (the) worst case possible scenario cost. I don’t think it’ll actually end up being $700 million, but that’s the high (end) you have to estimate based on,” he told the Capital Chronicle. “… They’re trying to project forward; you know, they may be installing pipe in 2031.”
The idea has rankled LEAP-skeptical utility consumer watchdogs.
“This whole thing underscores the obvious … about why in the world we’re building large industrial complexes in the middle of the desert,” said Kerwin Olson, executive director of Citizens Action Coalition.
“Our first concern over water resources is ensuring that households and citizens have water. I’m not sure that that (loan) program was necessarily designed with large industrial projects,” he said.
The Drinking Water State Revolving Loan Fund has roots in 1996 amendments to the federal Safe Drinking Water Act, according to the U.S. Environmental Protection Agency (EPA).
The EPA awards grants to states based on a survey of water system capital improvement needs, conducted every four years. States provide a 20% match.
Kerwin Olson (Photo from Citizens Action Coalition)
The Indiana Finance Authority (IFA) handles the Hoosier State’s program. It uses paybacks from past loans, plus the annual federal funds, to provide Indiana utilities with low-interest loans for water infrastructure projects, spokeswoman Stephanie McFarland wrote by email.
Many projects focus on replacing lead pipes, building treatment plants and improving water quality but the criteria also mention improving a source of water supply.
The agency’s project scoring worksheet emphasizes public health concerns like bacteria and chemical contaminants, alongside community income. It has a section for capacity development.
“Loans and financing and bonds always come with risk, and so depleting a drinking water revolving fund for the purposes of supplying the enormously wealthy Lilly with water should be a concern,” Olson said. “There’s … lots of warranted skepticism here.”
Others say it’s an appropriate use of the funds.
“All projects funded through the IFA’s (state revolving fund) program meet the EPA’s programmatic requirements,” McFarland wrote.
“All water produced by Indiana’s water treatment plants is produced to drinking water standards; thus, it is all considered drinking water,” Citizens’ O’Brien noted.
It’s a lot of money.
The State Budget Committee recently gave the IEDC permission to spend $50 million out of its Deal Closing Fund on the new Citizens water project. The quasi-public agency said it would hand the funds to the IFA for bond financing. The money would cover the first five years of debt service coverage.
McFarland wrote that IFA has used its most recent three federal capitalized grants to generate $500 million in loans to multiple utilities in each of the last three years. Lebanon’s project with Citizens would involve up to $700 million by itself — but not all at once.
And, she continued, “Each loan is structured and limited to the amount that can be supported by utility revenues and/or other security pledged. It would be very unlikely that all the funds would be needed in any one year.”
The project’s leaders say current customers won’t pay the price.
In his note to residents, Gentry said there would be “essentially” two utility districts: one for Lebanon prior to LEAP, and one for LEAP. The latter would pay for the project.
“By my direction and design, the Lebanon Utilities and City teams have worked very hard to insulate and protect our current rate payers from any financial risk or impact of LEAP,” he continued.
Citizens confirmed its existing customers would similarly emerge unscathed.
Gentry told the Capital Chronicle that the city would begin financing procedures in the fall, and work on its wholesale agreement with Citizens. He was aiming for October or November.
The process will involve city and utility public hearings, and will require council approval, he added.
He credited the contentious innovation district in his post to residents.
“Because of the LEAP district, we are able to solve a long-time challenge and bringing additional water to Lebanon without Lebanon’s citizens paying for it. This is best possible case scenario for the citizens of Lebanon; which would not have been possible without the LEAP District.”
Editor Niki Kelly and Reporter Casey Smith contributed reporting.