As the sale of the Town’s water and wastewater utilities continues its march forward, Town Hall meetings have been scheduled for February 16th and 19th, with the PPEA/utility consultant and VAW on hand to answer any questions. Town Manager Hozey has supplied the following comments to prime the pump before the actual meetings:
As mentioned in my last PPEA message, the Town is attempting to address community questions associated with the potential sale of our utilities. Last time, we covered the main question we’ve been hearing, which was why we would consider this action. Briefly restated, we are exploring this opportunity
to see if we can improve the quality and quantity of our water, to provide better environmental stewardship regarding our wastewater operation, to ensure timely maintenance/upgrades of both systems, and to keep utility rates below what the Town would likely have to charge if we kept the systems.
This message will cover some of the other questions being raised, and the process we would use to address them.
If we decided to continue exploring this option, the next step would be to sit down with the company and negotiate a comprehensive agreement. This agreement is not cookie-cutter, it would be very specific to Cape Charles. This is where the rubber meets the road, and where we could address our concerns. So, the devil would be in the details of this negotiation.
It would be during the development of this agreement that we would tackle issues like how future regionalization of the system might occur, how the Annexation Agreement is addressed, and what capital investments will be made. This is also where we would establish how future rate structures will be determined. And of course, what compensation we would get for the sale. Therefore, the specific details for each of these issues are still to be determined. But we can comment in general terms about them.
For example, we could ensure the door would be left open to possible future regionalization efforts. But those efforts would have to make good business sense for the expanded area, and not negatively impact Cape Charles residents. All expansions like that would also have to be approved by the State Corporation Commission (SCC), where the Town could weigh-in on any specific proposal.
Remember, it’s always the roll of the SCC to act in the public’s best interest, not the company’s.
The Annexation Agreement issue is probably not something that most residents understand. Very basically, it refers to the portion of Bay Creek south of the harbor, and states that when the Town’s existing utility capacity is reached, the developer of that area is on the hook to help pay for a future expansion of the water and wastewater plants. So, Preserve Communities (Bay Creek) would have to be a party to the comprehensive agreement, so that their current liability is appropriately transferred to the new agreement.
Regarding future rate structures, Virginia American Water’s (VAW) proposal is based on keeping our rates as they are now for the next three years. After that time, they would start making rate cases to the SCC to begin bringing our rates in line with their consolidated statewide rate, which is lower than our current rates, and could result in our rates actually going down. During this time, VAW is also projecting capital investment in our systems of approximately $10 million.
When it comes to the purchase price itself, the procedure is fairly straightforward. It would be based on the Fair Market Value (FMV) of the infrastructure. This is determined by three independent appraisals; one conducted by the Town, one conducted by VAW, and one conducted by the SCC. The average of those three appraisals becomes the FMV. The Town would use the proceeds of the sale to first wipe out all remaining municipal debt, and then have public discussions about what to do with anything remaining.
As you can see, there is still a lot more to this process; and why public input is critical before any decision is made to start negotiations toward a comprehensive agreement. Town Hall meetings are scheduled for this purpose on February 16th and 19th, with our PPEA/utility consultant and VAW on hand. We will also continue putting out additional information with this series of PPEA messages. As always, please let me know if there is anything you are curious about that we haven’t already covered, and we’ll try to work that into future messages.