Will the swap agreement enable the Key Largo Wastewater Treatment District (the District) to provide financial relief to its ratepayers? Will they be able to lower rates or assessments? That’s what this agreement should be about. Is it really worth doing otherwise? The money would be better spent on projects that reduce costs or increase revenue as a way to provide financial relief.
There is a brief mention of rate relief in the keysnews story, “Commission Approves Fund Swap“. I already went into considerable detail about the agreement itself and concerns related to it, especially paragraph 16. You can read more about it here, here and here.
This comment, in particular, caught my attention:
Ratepayers, according to Christian, will save around $106 on their bills per equivalent dwelling unit per year. The figure equates to a savings of about $8 a month.
‘Christian’ is Paul Christian, the District’s current General Manager. As I recall, the $8 a month refers to the amount of the monthly base charge that goes toward debt service per EDU**.
When I requested a financial analysis of the interlocal agreement, I was told that no such document existed. The last analysis I’m aware of was done before the $17 million was approved by the legislature in April/May 2014. The analysis was meant to compare the effect of using $17 million to pay down debt versus using $17 million for new projects. It was being used to argue that the Mayfield Grant should be allowed to refinance projects as originally intended because that was the best way to provide needed financial relief to the ratepayers. The analysis assumed a lump sum payment of $17 million that could be immediately applied to debt. That would have reduced annual debt service payments by $1.6 million per year for the entire term of the loan. It would have saved ratepayers $110 per EDU per year on rates and about $42 per year on assessments. Here’s a link: FInal 10-29-2013 PRMG Memo. The analysis did not consider the $8-$9 million in remaining construction. At the time, Islamorada was making payments on its $10 million capital contribution to the District. The thought was that those payments would be used to finance the remaining projects.
A lot has changed since then. The state came through with $50 million for the Keys, $17 million of that was for the District. Unfortunately, the money came with the requirement that it be used for “new projects”. Islamorada paid the remainder of its capital contribution charge early. The District applied that money to debt, which improved the future financial picture, but wasn’t enough to offer immediate relief to the ratepayers.
Is the current agreement with the county enough to lower rates by $8 per EDU per month? I don’t know. The agreement with the county is not structured as a lump sum payment and the payments are interest-free. There’s also the remaining $8-$9 million in construction projects that still need to be paid for. There’s no word yet on where that money will come from. These three conditions together could significantly reduce the benefit available to District ratepayers. A rate reduction is possible but more information is definitely needed.
Let’s hope the state comes through with the next $50 million, including $12.5 million for the District. That would definitely be a game-changer.
**One EDU (equivalent dwelling unit) is equal to one typical single family home in terms of wastewater flow.