During its meeting for the month of November, the Mountain Water District addressed a recent report which was released by the Public Service Commission. The investigative report titled “Confronting the Problems Plaguing Kentucky’s Water Utilities” said the district’s request to sell bonds for a 40-year loan to purchase new radio read meters was an example of how boards do not plan for future financial obligations. Of the report, MWD General Manager Roy Sawyers said there are some things he would like to clarify.
“This is something the PSC has written,” Sawyers said. “Nobody has called the district to ask what we were doing. I think the newspaper wrote an article and I don’t remember any phone calls from the newspaper in regards to what we were doing.”
According to the report, situations such as the MWD requesting approval to sell bonds for a 40-year loan of $3.1 million to purchase replacement meters with a useful life expectancy of only 25 years, are examples of how utility boards do not plan for meter testing and/or replacement of how they will finance the required maintenance.
“Many times water utility boards make short-term decisions without regard for the future long-term financial obligations of the utility,” the report said. “It is absurd to obligate a utility to pay for meters that will likely not be in use for the better part of 20 years of the loan. This is an example of what is referred as 023 loan , where an applicant requests commission approval of federal funding in 30 days and the commission cannot reject the application to approve funding pursuant to KRS 278.023(3).”
According to Sawyers, the district had a meeting with USDA Rural Development officials, in which RD advised the district to keep the loan at a 40year term in order to maintain the district’s grant. However, Sawyers said the district was told that it could pay the loan off early.
“Our intentions are to pay this loan off in 20 years,” Sawyers said. “That’s what we proposed.”
Sawyers said one other stumbling block that does’t seem to be brought up either, and that is the wholesale agreement purchase between MWD and the City of Pikeville. According to him, part of RD’s requirement is that the district has to have its wholesale agreement in place for the length of the loan, which is 40 years.
“Pikeville has not been cooperative in anyway in agreeing to sign us an extension,” Sawyers said. “If that’s the case, when this project is complete, we’ll have to go to an independent commercial loan.”
Sawyers said the district has already worked to obtain quotes regarding a possible 20 year loan.
“I just want to clarify this because of some of the stuff that you see is not always true,” Sawyers said. “I’m on board with Donald Trump I guess, but anyhow that’s enough said on that. I clarified that for us and those listening.”
According to PSC spokesman Andrew Melnykovych, MWD had not given that information to the PSC prior to its report.
“The commission did not make its comments in a vacuum,” Melnykovych said, adding the comments in the report were made based on the information provided by Mountain Water in its filing.
Melnykovych said the PSC did not single Mountain Water out regarding the filing, except that the district’s request was a recent example of that type of filing.
In those cases, he said, the commission is unable to reject the loan and is not given enough time to really examine its potential effects on a district and its customers.