PSC has approved the sale of the Utility Solutions/Double Tree water system to the Four Corners Water & Sewer District. Next steps are working on offering bonds for sale – available in November with completed sale in December.
Many clients have asked why the system is changing hands – below is from the FAQ section of the Four Corners WSD website and gives a good explanation about the why…read more at http://www.fourcornerswatersewer.org/index.html
Why does the District want to spend all this money? The Four Corners County Water & Sewer District Board of Directors believes that the acquisition is the most transparent and cost-effective way to provide water and sewer service to lot owners in the District. Public ownership of the infrastructure will eliminate the profit margin included in rate-based fees allowed by the Montana Public Service Commission (PSC). In addition, as a public entity, the District is run by a 5-member Board made up of landowners, residents, and business owners of Four Corners who are elected by their constituents. All meetings are open to the public and the District’s books are audited every year, providing fiscal accountability and transparency in its operations. Annual operating budgets are decided by the Board and records are open to the public. Sewer and water rates would be set by the District Board after conducting a public hearing.
Why does the District believes it can run the operations for less money than a for-profit company? The District can borrow money at a lower interest rate than a private company; government entities don’t pay taxes on land; water and sewer districts don’t require a profit for a return to shareholders; the District will pay competitive salaries and the market may not be the same as in a family-owned corporation.
Will there be enough capacity to serve the entire District as it builds out? Yes. With a few small exceptions, the District knows how many lots are planned to be platted in each development that is part of the District; these numbers were approved by Montana DEQ during each subdivision approval process. After the current expansion is done, the sewer plant will have sufficient capacity to provide service to all of these approved lots and there are enough water rights and wells to serve them. Developments that ask to annex will be considered on a case-by-case basis and will not be allowed to annex if there is not sufficient capacity.
What are the risks of acquiring the system? Most of the risks are inherent in the system – so users will end up paying for them regardless of who owns it. For instance, if a stretch of pipe dissolves, users will be charged for the cost of replacing it whether Utility Solutions or the District owns the pipe. However, the system is relatively new, mostly installed 2002-2007, so the kinds of problems encountered in Bozeman are unlikely.
There are two risks that are specific to District ownership: unknowns in the Utility Solutions budget and the transition. The District will get a better look at Utility Solutions’ books during the due diligence period and will be able to abandon the purchase if the numbers don’t make sense. Past negotiations have been thorough enough that it would have been obvious if Utility Solutions were running the system at a loss.
The transition will be handled with a formal plan (required by the PSC as well as by the Board) that includes finding qualified people to run the system. The project manager is confident that the District will be able to find qualified people, possibly including one or more current employees at Utility Solutions.
What about maintenance costs in the future? For the past several months, Utility Solutions has been including all maintenance costs in its monthly report to the board so the Board can see what they are and include them in the operations budget being developed. Revenue over and above what is needed for operations will be added to the reserve until it is large enough to cover projected maintenance and repairs; under the current budget projections, approximately $400,000 will be put in the reserve each year until it is fully funded. Part of the $450,000 reserve that will be borrowed is for maintenance costs that might come up before the District has enough time to save enough money for maintenance costs.
Won’t this be expensive for lot owners and residents? Regardless of who owns the water and sewer system, the expenses of providing water and sewer services will still exist and have to be paid for. This purchase appears to be the best way to get these services at the lowest cost to everyone.