PROVIDENCE — The city is considering selling the Providence Water Supply Board and the network of reservoirs and treatment plants it controls in order to pay down the huge debt in the city’s pension system.

City Council members hope that they can rake in a one-time payment of $400 million to $600 million for the water system, which includes the Scituate Reservoir. They plan to form a special committee to obtain an appraisal of the system, and hope that they can line up a private buyer by the end of the fiscal year in June.

The Providence system serves about two-thirds of the state’s residents, has more than 900 miles of pipes, and operates 6 reservoirs covering 4,600 acres.

It is a major asset on paper, but state law prevents Providence from making a profit on the sale of the water itself. Providence can only make enough to cover costs, prompting the city to see how much it will fetch on the open market as the capital city faces another miserable budget year.

“We’re not allowed to use it as an asset. It’s just a liability to us,” said City Council Finance Chairman John J. Igliozzi, who is leading the push to sell the system.

If the system is sold to a private interest, it would not necessarily mean a water rate increase for customers.

A sale would have to be approved by the state’s Public Utilities Commission, and a new buyer would be subject to their price regulations.

“The Division of Public Utilities and Carriers reviews [a] sale to ensure that it is in the best interests of the rate payers,” said PUC spokesman Thomas Kogut.

If it is sold, “We would continue to regulate it very much like we regulate it now,” he said.

The money from a sale would be used to pay off the debt to the city’s pension system, which is owed roughly $700 million. The city pays $60 million annually from its operating budget to cover retirees’ pension payments and pay down the system’s debt, known as its unfunded liability. That payment is escalating each year, and eating up a greater percentage of the city’s operating budget, which is currently $616 million.

If the city could sell the system, it could pay off the pension system’s unfunded liability nearly all at once, and also reduce the amount it needs to pay this year to cover the system’s costs, Igliozzi said.

“It’s a one-time sale that has a lasting benefit,” Igliozzi said. “We get all that money, we earmark it to the unfunded liability. It doesn’t just take care of this year’s budget — it could end up having an impact for 20 years.”

With Providence facing a budget deficit for the coming fiscal year that could match or exceed the $27-million hole it had to fill this past year, that’s an attractive possibility, Igliozzi said.

Providence Mayor David N. Cicilline could not be reached for comment yesterday. But in the past, Cicilline has tried to change state law to allow the city to make a profit off the system.

Those efforts failed, but Cicilline spokeswoman Karen Southern said that the “The mayor has been in conversations with leadership in the Assembly to make sure that residents realize the full value of the system. Those conversations are ongoing.” She said that covers a “range of options,” including leasing or selling the system.

General Assembly approval is not believed to be needed to sell the system, Igliozzi said.

The notion of selling the system has come up before, most notably in 1994, when Mayor Vincent A. Cianci Jr. pushed to get the Narragansett Bay Commission to buy the system for $500 million. The Commission pulled out of the discussion after several months of talks.

At the time, Igliozzi’s older brother, David, was a council member, and worked with other council members to oppose the sale on the grounds that the Bay Commission would likely seek, and obtain, higher rates from the PUC.

Some city leaders have long opposed the sale of the system for other reasons, fearing that they would lose the water board’s status as a reliable source of city jobs, John Igliozzi admitted.

“There are people who don’t want to give up control. But this is for the financial health of the city today, and for the future. It’s more important to worry about the city’s fiscal health now than to think about it as a resource for jobs,” he said.

The Water Supply Board’s Academy Avenue headquarters is in City Councilman Michael A. Solomon’s ward, and Solomon sits on the agency’s board of directors. Later this week, an appraisal committee is to be formed to hire an appraiser to set an appropriate price for the system, Solomon said. Once that is finished, the city may hire a marketing agency to see what buyers can be found.

“Right now, it’s exploratory, we’re going to see the pros and the cons. If it’s feasible, my recommendation is that we sell it,” he said.

The city first got into the water business in 1871, drawing water from the Pawtuxet River, and only started purifying its supply in 1906. The city’s growth led to the creation of several small reservoirs, and in 1926, the construction of the massive Scituate Reservoir and its treatment plant.

The system now delivers water to roughly 75,000 retail customers, in Providence, Cranston, Johnston and North Providence. It also sells water wholesale to the City of Warwick and it supplies the bulk of the water for the Kent County Water Authority, which serves about 26,000 customers in Coventry, West Warwick, Warwick and East Greenwich.

East Providence, Lincoln, Smithfield, Barrington, Bristol and Warren also buy wholesale from the board.

Providence owns the land used for the water operations, and that property is taxable — Providence, in fact, is the biggest single taxpayer to the Town of Scituate.

Last year, Scituate’s Town Council president said the town was interested in acquiring the reservoir, possibly finding a partner to help purchase the property.

Water Supply Board Director Pamela Marchand did not return a call seeking comment yesterday.

dbarbari@projo.com