Tuesday, April 12, 2011

Water and Sewer Task Force looks for (1) buyers and (2) cost estimates for repairing systems

Story and photos by Dick Yarmy
University of Kentucky School of Journalism and Telecommunications

The city of Midway’s Water and Sewer Task Force met Friday, April 8 to share fact-finding studies addressing Midway’s aging water and sewer systems. The committee decided to widen the search for potential purchasers and to expand the effort to quantify the cost of repairing the systems.
The committee is studying two options: Selling the city’s assets to an outside company, such as Kentucky American Water Co., the current supplier, which would own and operate the systems, or having the city refurbish the systems and maintain ownership.

“Whether we do this, or Kentucky American Water does this, it will be costly to the citizens of Midway either way,” Mayor Tom Bozarth said. “We are educating ourselves as to what needs to be done, or has to be done.”

The education began with a presentation by committee member Bob Blankenship of HMB Professional Engineers Inc., left. Blankenship estimated a cost of $1,423,150 to address the “trouble spots” in the water lines of the 70-year old system. The estimate covered replacing the lines in one segment of the city and showed costs based on using today’s technology. As an example, Blankenship mentioned using plastic line to replace the old cast iron sections of the system. To view a map, click here; for a breakdown of costs, here.

“I don’t want to give the false impression that this is all you have to do,” Blankenship said. The report is a good representation of the work that would be needed on the whole water system, he added. Blankenship said the estimate addressed issues like small pipes, dead-ends and hydrants connected to pipes that are too small to provide sufficient water pressure.

Based on the sample covered in the estimate, Blankenship said the cost to do the complete water system could run at least another $900,000. Adding this amount to the “trouble spots” budget yields a total estimate of $2.3 million to refurbish the system.

Blankenship said it would take at least that much, or slightly more, to repair the sewer lines, which are larger and must be laid downhill to drain naturally. A future study will examine costs for refurbishing the sewer lines.

Blankenship offered ideas to increase revenues for the system, mentioning the city’s water hauling station. “It appears you are charging only 5-10 cents more than you pay Kentucky Water,” he said. “Maybe you should raise the price to 40 or 50 cents above your costs.”

Another idea was to ask the Kentucky Rural Water Association to start looking for water loss in the system. “There’s no charge for that,” he said.

“At the end of the day, what we have to deal with is the cost of getting our infrastructure up to speed to compare with what Kentucky American Water might offer us to take the system over,” said Bozarth.

Kentucky American has been supplying water to the city of Midway for the past 25 years, based on a 40-year commitment made in 1985. Residents of Midway received notice last December of a rate hike of $2.69 per 1,000 gal. of water.

“To some people, Kentucky Water is a dirty word,” said James Johnson, task force chairman, left. He asked if there was any other company that might be interested in purchasing Midway’s assets.

Bozarth said the city would have to find someone who would want to buy the assets and be more than just a water re-seller. If an interested party was just a water supplier, he said, a separate agreement would be needed to handle the city’s sewer needs. “How many people would be willing to take over a system that would require more than $2 million to just update?” He asked.

One committee member is in a unique position to evaluate the situation: former Kentucky American president Roy Mundy, vice president of development at Midway College, “Kentucky-American looks at acquisitions like this as a five-year strategic plan,” Mundy said.

“When they are acquiring a system, it’s because of a problem and part of their commitment is to solve the problem.” They can immediately fix the serious liabilities, such as fire hydrants, and spread the cost over 118,000 customers in Central Kentucky, said Mundy, left.

“We tried to buy the system when Becky Moore was mayor,” Mundy recalled, and from recent contacts it appears the company is still interested, he added. “And they won’t do it unless the deal will take the city out of debt –– they understand that.” Mundy said, referring to bond issues and other debts related to a proposed acquisition’s water and sewer system.

Several years ago Kentucky American bought the water system in Owen County, which some members of the task force visited recently.

“When Kentucky-American bought Owenton’s system it eliminated their debt and freed up $900,000 to do other things,” said Johnson.

“Employees were taken care of,” said Aaron Hamilton, right, a member of the task force and city council. Kentucky American hired the city’s workers, who received salary raises and improved benefits, he added.

Danny Smith moved that the committee begin contacting Kentucky-American for more information on their interest to purchase the city’s water and sewer system. After a suggestion by Council Member Joy Arnold, a guest sitting in for Council Member Dan Roller, Smith amended his motion to include Kentucky-American Water and any other prospective prospects.

After the motion passed, Bozarth set goals for more fact finding. He asked Blankenship to “zero in” on cost estimates by extending the initial budget to include the city’s entire water line system. Bozarth expressed interest in arriving at a cost per resident, and exploring any grant money that might be available.

Blankenship suggested that a useable benchmark would be a 30/70 rural development grant/loan mix from the Rural Development program of the U.S. Department of Agriculture.

Bozarth reminded the committee of the methodical approach he expects in facing this challenge. “This will take a year to gather all this information,” he said. “We’re going to take small bites, and do it a part at a time.”

The committee will meet again at noon May 10 in the dining hall at Midway College. The task force meetings are open to all citizens.

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