Citizens get answers on water transfer, Nov. 5 bond vote

Posted by : Monitor Admin | On : July 31, 2013

Monitor Photo/David Webb Kemp city administrator James Whitehead talks about the change in billing once the city transfers water rights to West Cedar Creek Municipal Utility District, using a chart projected on the wall behind him.

Monitor Photo/David Webb
Kemp city administrator James Whitehead talks about the change in billing once the city transfers water rights to West Cedar Creek Municipal Utility District, using a chart projected on the wall behind him.

By David Webb
The Monitor Correspondent

KEMP–The Kemp City Council set in motion a plan to transfer the city’s water and sewer operation to West Cedar Creek Municipal Utility District during a special meeting July 25 following a town hall meeting at City Hall.
The council approved an ordinance authorizing the issuance of general obligation refunding bonds for $875,000 that will be used to pay off the city’s debt to the U.S. Department of Agriculture. Comparing the process to refinancing a home mortgage, city administrator James Whitehead said the USDA’s demand that it be repaid prior to the transfer of ownership made it necessary to issue the bonds.
Next, the council approved a purchase agreement between the city and WCCMUD to transfer all of the city’s water and sewer assets, although no money will actually change hands.
Finally, the council approved an ordinance calling for a special election Nov. 5 for voters to decide whether to allow the transfer to take place.
The council held the town meeting prior to opening the council meeting so the public could ask questions about the proposed plan. About 40 people attended the meeting, filling most of the available seats.
The majority of the audience seemed pleased with the presentation, especially after learning that increases to water and sewer bills would be minimal. City staff used an overhead projector to display an analysis of current and projected water bills for the audience to see, and copies of the analysis were distributed to the audience afterwards.
Based on an analysis using 5,000 gallons water per meter, Kemp water and sewer bills would increase by $16.94 monthly for in-town residents, bills for water and sewer would decrease by $3 for residents in the unincorporated area, and bills for water only would increase by $7 for residents in the unincorporated area who do not have sewer service. Those figures include the consideration of capital improvement charges ($25 monthly) and debt service ($10 monthly).
For water and sewer service only,, based on 5,000 gallons, Kemp in-town customers now pay $90.81 and out-of-town customers pay $120.75. Out-of-town residents without sewer service pay $70.50. Under WCCMUD for water and sewer service only based on 5,000 gallons, Kemp in-town and out-of-town customers would pay $117.75 monthly. Out-of-town customers without sewer would pay $77.50 monthly.
Those figures do not reflect charges for garbage and other services such as ambulance and fire charged on Kemp utility bills that would continue to be billed.
Most of the discussion in the city’s staff presentation involved how the transfer process would be carried out and how much water and sewer bills would be after WCCMUD takes over the operation. WCCMUD general manager A.P. “Tony” Ciardo attended the meeting and addressed the audience, pledging his commitment to providing the city with a reliable operation.
Ciardo told the audience it would be an expensive undertaking for WCCMUD. The board of directors approved the transfer more in the interest of being good, helpful neighbors. The operation would at best “break even,” he said.
“It is not a good deal for West Cedar Creek, and it is not good for our customers,” Ciardo said. “It’s a great deal for you all.”
WCCMUD now has 8,000 customer meters which will help absorb the cost of adding Kemp’s 700 meters to the operation and make the necessary investments to repair the city’s systems, Ciardo said. WCCMUD is able to charge less for water and sewer rates to its customers than the city could because it is a much larger system financed by many more customers, he explained.
City administrator James Whitehead told the audience that the city staff and WCCMUD had worked diligently for many months to put the plan together to guarantee that Kemp would be assured a safe, reliable water and sewer system in the future. In the summer of 2011, the failure of the city’s deteriorating water system worsened by the severe drought made national news when water had to be trucked in and distributed to residents in the downtown area.
“We are in bad shape,” Whitehead said. “We are one foot away from disaster. It’s bad all over the state.”
The city’s situation is so dire that the connection process with WCCMUD has already begun, even though the administrative process cannot be finalized until after the Nov. 5 election. WCCMUD has already assisted Kemp with repairs to pumps at the water treatment plant to keep the system operating.
A $350,000 grant the city received from the USDA will be used to construct an eight-inch, 22,914-foot pipeline along Highway 274 and County Road 4023 to the WCCMUD water plant. The cost of the project will require another $230,000 investment that WCCMUD is making.
City Attorney Terry Welch said that in addition to all of the help the city has received from Kaufman County and the Texas Department of Transportation in granting it right-of-way privileges for the pipeline, city staff received a pleasant surprise when it offered the refunding bonds for sale on July 22 through Southwest Financial Securities. Regions Bank of Fort Worth offered the city a 3.1815 percent interest rate that will save $284,000 over the course of 20 years. The USDA bonds carried a 4.228 percent rate and would not be paid off until 2045, whereas the new debt will pay off in 2033. Banks in Salt Lake City and the neighboring city of Athens also made offers that were less attractive.
“We were actually kind of shocked,” Welch said. “We thought it would be in the 5 percent range.”
Once the debts are paid, the water and sewer bills will no longer include a charge for capital improvements and debt service that initially must be charged, Ciardo said. City staff said most of the current debt owed to the USDA is related to the sewer system.
Mayor Laura Hanna Peace said she personally is in favor of transferring the city’s assets to WCCMUD. She noted that the final decision is still up to the voters.
“Anyone who wants to vote no, I want to know what your solution is,” Peace said. “I want to ensure the city has water in the future.”
City officials noted that if voters do not approve the plan, the state would likely come in and take over the water and sewer systems.
“I know from past experience that when the state gets involved, the price of doing business goes up two or three times,” Whitehead said.
If voters approve the plan, WCCMUD will begin billing customers for water and sewer services, and it will also collect other charges such as garbage now on city utility bills and transfer those funds to the city.
The city bills commercial customers $20.35 monthly and residential customers $11.44 per cart for garbage. It also bills customers $5 monthly for ambulance service and $1 for fire department service. There is an optional $1 voluntary charge for an emergency siren system.
After the meeting, several residents said they would campaign for the plan, and that they would begin installing “Vote Yes” signs in yards around the city. Peace said that she personally would contribute money to help the campaign. When Councilman David Smith was asked if one of the “Vote Yes” signs could be placed in his yard he offered to let the residents “stick it on the roof of my house.”
Kemp resident Allen Palmer who asked numerous questions during the meeting said he was impressed by the presentation and the reaction of the audience to the plan.
“It was one of the best meetings I’ve been to here,” Palmer said. “We didn’t have anyone starting a fight in the audience like we have had in the past.”
Paula Patterson, a resident who receives water from Kemp but lives in the unincorporated area, said she also was impressed by the information and relieved to know city staff came up with such a good plan.
“I think it was one of the most informative meetings I’ve been to in Kemp,” Patterson said. “I really liked the overhead projector.”
Kemp resident Leodis Buckey said he thought the presentation was good, but he still had concerns that it might wind up being more expensive. “I like the idea, but what is the final cost going to be?”
Ciardo noted that WCCMUD will be taking over all responsibility for the system with ownership of it so Kemp customers will be responsible only for paying their individual bills. Whatever is needed to repair the system, such as repairing the treatment plant and replacing deteriorating steel pipes, will be accomplished, he said. “All I can do is tell you we will fix it,” Ciardo said to a resident who complained about the deteriorating state of the city’s water and waste system.
Welch said city staff had researched the issue thoroughly, and there should be no surprises. “We’ve tried to uncover every stone we could,” Welch said. “Unfortunately, there is no easy fix.”
Welch said that only residents who live inside the city limits will be allowed to vote in the election, but Patterson said she and others who depend on Kemp water will participate in the “Vote Yes” campaign. Several of the out-of-city customers said they are delighted by the plan and the anticipated costs, noting that they would have gladly agreed to pay much more “just to have water.”