Superior, Wisconsin, is working toward a bond-financed acquisition of the water system currently owned by Superior Water, Light, and Power.
The last investor-owned water utility in Wisconsin, its takeover would require a referendum and could involve a condemnation action by the city, according to an appraisal of the system's fair market value commissioned by the city.
Mayor Jim Paine said every other city in Wisconsin runs its own water utility, "and we've also checked the rates. They all have lower rates. Every single one of them. Superior pays the highest water rates in the state of Wisconsin."
The planned acquisition by the city, population 26,620, would likely be funded by a 30-year revenue bond. Assuming an interest rate of 4.5%, the city would pay annual debt service of $3.6 million, as well as ongoing capital improvement plan and lead service line replacement financing obligations, the appraisal said.
The March 31
The water system includes a water treatment plant, a water tower, a reservoir, approximately 150 miles of water system mains and over 1,200 fire hydrants, Raftelis said.
A Feb. 19 analysis by
On Dec. 15, SWL&P's parent company, ALLETE, Inc.,
Under current ownership, Superior's water rates are expected to increase by about 4% to 12% per year over the next 10 years, averaging 6% per year, according to an
"We assumed that SWL&P would earn its authorized rate of return of 7.94%," Raftelis said in the report. "Under this proforma projection, the typical residential water customer monthly bill would rise from $53.53 in 2026 to $99 in 2036, an 85% increase."
Under municipal ownership, the report said, the total annual revenue requirement in 2027 is about $10.6 million, $2.1 million less than under current ownership. That would let Superior charge rates that are 10% or more lower in the first year of city ownership.
Over the next decade, city ownership would see rates rise 51%, compared to 85% under current ownership. The net effect, Raftelis said, would limit the typical residential customer's monthly bill to $80.59 by 2036.
"The removal of the investor return and tax burden has a moderating effect on the overall rate requirement under city ownership relative to what SWL&P would otherwise charge," Raftelis said.
"The main difference is, if the city acquires the water utility, we would take out a municipal bond," Paine said. "We would pay those rates, and the city gets much better rates, and passes that on to customers. So instead of 7% to 10% — which it's usually closer to 10% — we would be paying, we're projecting about 4.5%, but that's conservative. We're likely to pay far less than that."
An SWL&P spokesperson did not respond to questions, but emailed a statement from April 2 saying the correct valuation of the water system alone is $100 million plus transition costs.
"SWL&P has always been transparent about our rates and operations, and we encourage residents to review Concentric's independent study for themselves," SWL&P President Rob Sandstrom said in the statement. "We believe Superior deserves a fact-based conversation about its future, not promises that ignore the real costs involved."
Raftelis said in its appraisal, "We acknowledge that SWL&P has reported various regulatory assets and liabilities associated with the water system. We have not considered or included these items in our opinion of value. However, we do not accede that all such items merit compensation."
A website for the
The website says the municipal bonds could "lead to higher taxes, higher rates or cuts in other municipal services."
It adds, "No one knows for sure — but no matter the outcome, everyone in Superior is on the hook for that debt."
Paine said "right now we're looking at the water utility," not the other assets, and SWL&P's estimate of over $100 million "was not an appraisal at all. It was a market study… The number we released, $58 million, is an actual appraisal conducted by licensed appraisers."
Superior Community Coalition spokesman Bill Fennessey said the coalition formed in early 2025. While its website is now devoted to criticizing the city's water system plans, the Fennessey said the coalition was formed "to get things done for the community," like lobbying legislators so that SWL&P could access federal funding for lead service line replacement.
Fennessey argued that Internal Revenue System rules would require the acquisition be paid for with taxable debt because it involves the takeover of a private utility, and that would translate to $15 to $20 million a year in debt payments for about 30 years. He assumed Superior would be trying to acquire all three utilities at a total cost of $274 to $306 million.
As for the coalition's claim that the acquisition would strain the city unduly, Fennessey insisted that Superior differs from all the other municipalities in Wisconsin that manage to run their water utilities.
"Most of those municipal systems were built and have been run by those communities for generations. Superior would be starting from scratch," he said.
"There's no institutional knowledge to draw on, and there's no guarantee the experienced workforce at SWL&P would transfer over," he added.
"It is pretty much Superior Water, Light and Power, and the allies that they have that make money through their affiliations with (SWL&P)," Paine said of the coalition's membership. "Those are the only folks opposing it. They claim they have a number of community members, but generally speaking, those are members of the building trades who also profit from their association with Superior Water, Light and Power."
The union members now working for the investor-owned utility "would also profit by working for us," Paine said.
Under city ownership, Paine said, citizens could vote for the officials who would run the water utility, and could remove those people from office if their decisions negatively impacted residents.
"The entire city council and the mayor would live in the city would be paying those rates," he added. "That is not true of (SWL&P's) board, and when they demand rate increases from the Public Service Commission, there is nothing we can do about it. We can complain, we can file public comment, and that's what we have been doing. It has not resulted in lower rates."
The public knows that local elected officials are more accountable than BlackRock, he said. "And so when this goes to public referendum, I expect it to pass."
Superior wasn't always an anomaly within Wisconsin, Paine added.
The story of how the city wound up in its current situation "begins pretty much with the foundation of the state and the city," he said. "As water utilities developed, some were public, some were private, and Superior's was private. And those were developed under very different laws at the turn of the 20th century."
Eventually, he said, due to "abuse by corporations," a push for publicly-owned utilities — and other services, like transit — began.
"There was an effort during the progressive movement in Wisconsin in the early part of the 20th century to protect communities by allowing them to municipalize many of the services in their community, and that included public utilities," Paine said. "So that's where utility law was born. Since that time, every other city has chosen to do that. Many were always public water utilities; the ones that were private, though, have all converted to municipal-owned," with the exception of Superior.
Superior's general obligation debt is rated
Multiple City Council members contacted by the Bond Buyer did not respond to requests for comment.
