Sewer District – Missing the Point

piggy-bank-970340__180Apparently the Key Largo Wastewater Treatment District (District) voted to leave the folks in Monroe Park high and dry.  The District will not be providing service to that area despite the fact that there is state money available to do so.  Commissioner Norman Higgins was the only dissenting vote.

Here is the article from the Free Press.  Basically, the rationale for not providing service is that it doesn’t make good “business” sense.  Let’s be clear, the District is NOT a business.  It is a government entity charged with the responsibility of providing sewer service within a specified geographic area.

None of the sewer projects in the Keys make financial sense by the narrow text book definition.  Does that mean we simply let the marine environment go to pot?  Of course not!  Water quality underpins the economy and way of life in the Florida Keys.  This is what I mean when I say the District is missing the point.

Even though it is NOT a business, the District still must carry out its mission in a financially-prudent, cost-effective way.  So, is the Monroe Park project financially onerous?  The District’s previous analysis would indicate that it is not.  In fact, it would provide financial relief to the folks of Monroe Park with minimal impact on the ratepayers.  I consider $6 per EDU per year minimal and I think most people would agree.

Just to be clear, this would not mean that rates need to be increased.  The rate structure as presently designed can absorb it.  If the District can absorb the purchase of the new building, then why can’t it absorb the Monroe Park project?

According to the article, there are some new lower numbers regarding monthly billings in the District’s January 19 agenda.  That is because there is some uncertainty about the number of EDU’s in Monroe Park.  If taken at face value, those numbers suggest that adding the Monroe Park project and billing those customers at the same rate would increase overall costs by $11 per EDU per year.

In it’s analysis, the District didn’t look at the impact on Monroe Park citizens at all.  Under the District’s scenarios, those residents would pay between $15,000 per EDU and almost $45,000 per EDU to build the system on their own.  They would pay between $1,170 and almost $3,600 per EDU per year to operate the system on their own.

Side note:  the analysis provided in the District’s January 19 agenda generates a few questions.  For one thing, they used the same costs whether there were 137 EDU’s or 45 EDU’s.  That doesn’t make a whole lot of sense.  Presumably, if the flow decreases, the costs will decrease somewhat as well.  By failing to take that into account, they overestimated the contribution needed from District-wide ratepayers.  Also, at a construction cost of $45,000 per EDU, it would make sense to abandon the centralized system and look at onsite systems or cluster systems which typically cost around $25,000 per EDU.  At 45 EDU’s that would reduce the construction cost to about $1.1 million.

There’s another bit in the article that grabbed my attention.

[Staff] presented the December 2015 financial report for the district.  The district’s total assets come to over $150 million, while the total liabilities are $55 million.  Staff and commissioners were happy to hear about the debt reduction.
“We’ll be under the $50 million mark by the end of the fiscal year,” Christian added.  Gibbs said, “When I started on this board, coming up on four years ago, we were at 80 something.”

Reducing debt in and of itself does not address the real problem, which is the excessive financial contribution from Key Largo ratepayers.  The District’s debt service payments are around $5 million per year.  At that rate, of course they are going to put a dent in the overall debt burden.

The District also netted $8 million from the interlocal agreement with Islamorada.  That $8 million was applied to debt.  In addition, the District plans to apply another $3 million to debt this year.  Paying down debt is fine, but the District cannot lose sight of who is paying down that debt.  The ratepayers.  The comment above is sort of like patting yourself on the back for making your monthly mortgage payment with somebody else’s money.

That said, the District is to be commended for using resources wisely.  Imagine if Monroe County did the same!  Of course debt reduction should be a top priority.  That is smart and prudent and will hopefully result in financial relief for the ratepayers very soon.  But as of now, there is no concrete plan for financial relief and inquiries are met with stonewalling and hostility.  How will the average family benefit?  What about businesses?  What is the time-line?

I hope the board will shift its focus.  The District needs to look behind the numbers to see what they actually mean to the ratepayers.  Is $11 per year going to impact your average family?  I doubt it.  Will something between $1,170 and $3,600 per year make a difference for people in Monroe Park?  I certainly think it would.

Does it matter to your typical Key Largo ratepayer if the District’s debt decreased from $80 million to $50 million?  Only if it means lower bills and lower assessments.  So far, there’s nothing on the horizon.

Let me add that the board’s attitude on this subject has changed dramatically.  It was the board who pushed for the Monroe Park project to be a top priority for state funding.  I had it lower on the priority list in 2014 because of all the unknowns.  Now for the sake of $11 per year per EDU, they’re going to abandon the project?  Strange.

What happened?

 

 

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