Agreement Reached to Resolve Sewer Overflow Litigation

City, Federal and State Regulators Reach Agreement to Resolve Sewer Overflow Litigation Settlement nets City time for critical planning and implementation for long-term upgrades to sewer system

(EVANSVILLE, IN) – November 9, 2010 – Evansville Mayor Jonathan Weinzapfel today announced that
after lengthy, arduous negotiations with the U.S. Department of Justice (DOJ), the U.S. Environmental
Protection Agency (EPA) and the Indiana Department of Environmental Management (IDEM), an
agreement has been reached to resolve the lawsuit DOJ filed against the City in September 2009
regarding alleged violations of the Clean Water Act (the Act). The agreement, or consent decree, is set tobe approved by the Water and Sewer Utility Board this afternoon.

The agreement is of the type previously reached by hundreds of municipalities across the country and
dozens in Indiana. Under terms of the agreement, the City will have more than two years to finish
developing a plan for upgrades to the combined and separate sewer systems and an additional 19.5 to 25years to make the improvements.

“It is unfortunate that Federal and State regulators chose to waste resources bringing this suit against the City. We never disagreed that there was a need to make upgrades to our system to address the decades old problem of sewage overflowing from our combined sewer system during rain events,” said Mayor Weinzapfel. “But we strongly disagreed with the terms under which DOJ sought to force us to make those improvements. By taking a hard line and fighting for terms that are fair, we now have a deal that makes sense for Evansville.”

The schedule outlined in the agreement is important to allow sufficient time to properly assess the needs
of the sewer system and identify a long-term, affordable and cost-effective plan that fits Evansville’s
needs. Such a plan will have to be phased in over time.

When the DOJ filed suit, it was demanding a mere six months to develop a plan and only ten years to
complete all of the improvements. Such a fast implementation period would have had a dramatic impact
on sewer rates and was not justified given Evansville’s already demonstrated commitment to making
improvements to address sewer and flooding problems. Additionally, as proposed improvements are
considered by the City over the next two years, the public will have an opportunity to evaluate and
provide input into upgrade options.

The DOJ also ultimately agreed with the City’s plan to develop an “Integrated Overflow Control Plan”
rather than separate plans for combined sewer improvements and separate sanitary sewer improvements,
conceding that integrated and coordinated improvements to the systems were more logical and practical
since most of the City’s separate sanitary sewer system flows through the combined system. Separate
planning and implementation of improvements would have significantly added to the total costs of the
projects and made it very difficult to properly plan and budget for improvements. The City plans to
aggressively pursue green, sustainable solutions as part of the final plan. Project costs will not be known
until the plan is fully developed, but it is expected that improvements will cost many millions of dollars.
Consequently, sewer rate increases necessary to fund the improvements are also not yet known.

The City will also be required to pay a civil penalty in this matter. Such penalties are a part of every
consent decree Federal regulators enter into with local governments. The penalty in this case was
negotiated forcefully. In the end, the City will be required to pay a $490,000 civil penalty ($70,000
State/$420,000 Federal) to resolve all claims and liability for alleged past violations. While this amount
is in line with what other cities have been required to pay, it is much lower than what the DOJ initially
demanded.

The City’s agreement with the regulators does not resolve the City’s claims against Environmental
Management Corporation (EMC), the City’s former operator which is now owned by American Water.
In fact, the consent decree has language that expressly anticipates that the City will continue to pursue
EMC to pay the civil penalty and other out-of-pocket costs and damages. The City brought EMC into the
Federal lawsuit last year, and intends to continue to pursue EMC aggressively. EMC operated the City’s
system for more than 15 years with express and sole responsibility for compliance over that period.
Unfortunately, EMC failed to stand with the City to help defend this case. The City believes EMC is
clearly responsible for the penalty and should be held accountable for failing to comply with its
contractual obligation to properly run the City’s system.

The City has also agreed to conduct reviews of plant and sewer system operations and develop more
clearly-defined operational procedures. These operational improvements should have been developed and
implemented long ago by EMC; and EMC’s failings put the City in a difficult position in this litigation.
After the Utility Board votes on the consent decree today and it is signed by the parties, it will be filed in
Federal Court. After a 30-day public comment period, the City anticipates the Court will accept and enterthe decree as final.