January 24th, 2011
County protests LCRA water systems sell-off

San Marcos resident Lenee Lovejoy, left, and Hays County Precinct 4 Commissioner Ray Whisenant, right, at last week’s meeting of the Hays County Commissioners Court. Photo by Sean Batura.

By SEAN BATURA
News Reporter

Hays County commissioners are accusing the Lower Colorado River Authority (LCRA) of abandoning its responsibility to provide low-cost utility services.

Commissioners say water/wastewater utility customers in northern Hays County may face higher rates if LCRA proceeds with plans to sell its 32 water/wastewater systems. LCRA, a non-profit conservation and reclamation district created by the Texas legislature in 1934, said it can no longer forestall water/wastewater rate increases of at least 10 percent if it retains possession of the systems.

In a resolution unanimously passed Tuesday, commissioners said LCRA’s board announced plans to market 32 water/wastewater systems “as a single block to the highest bidder.”

LCRA representative Robert Cullick said his organization does plan to market the 32 water/wastewater systems, though not to the “highest bidder,” and probably not as one block.

“The board recognizes that (providing water/wastewater is) part of the mission, but we don’t receive any tax dollars and we don’t make any profit,” Cullick said. “Which means that all the money that comes into the LCRA comes from customers, and we provide cost-of-service-based prices. So if we have a utility system like water/wastewater that doesn’t cover its cost, that money has to come eventually from some other customer.”

LCRA also provides electricity, public parks, environmental management, and economic development services.

Hays County and other entities expressed the desire that LCRA legally obligate itself to offer individual water/wastewater systems for sale to private and public entities currently served by LCRA.

Cullick said selling the systems piecemeal to local entities will not allow LCRA to recoup its investment in the systems. Cullick said growth in the region has required significant capital improvement investments of more than $300 million in the 32 systems.

One of the 32 water/wastewater systems serves an estimated 20,380 people in northern Hays County and southern Travis County.

Precinct 4 Commissioner Ray Whisenant (R-Dripping Springs), who represents northern Hays County, said he is concerned that LCRA’s plans may result in private entities having too great a role in the extraction and distribution of water. Whisenant said the extraction and distribution of an “essential” resource of a “limited supply” cannot be privatized without increasing the likelihood of higher water/wastewater rates for customers.

Cullick declined to predict whether LCRA’s intended sale of the system serving parts of northern Hays County will result in rate increases for residents, though he said LCRA would definitely have to increase rates.

Commissioners said LCRA’s board did not give sufficient notice of its plans to pass a Nov. 17 resolution that expressed LCRA’s intent to sell the 32 systems and set a 60-day deadline for completing current negotiations for some of the systems. According to the Nov. 17 resolution, the LCRA in 2007 began to rethink its strategy of growing the water/wastewater utility systems. The LCRA board directed its staff in 2007 to evaluate the feasibility of selling the systems.

“We said in 2008 that we were interested in selling the utility systems to communities,” Cullick said. “About a dozen utilities said, ‘Well, okay, we’re interested in buying.’ Six of those sales have been completed and six more are more or less underway. And so, we kind of already moved through that period of saying we’re offering these utilities to communities. At this point, it seems best to move forward and see … how to go ahead and divest the rest of the system. Up until now, LCRA has wanted to keep parts of it and not completely divest. But looking at the future of continued rate increases and continued financial difficulties, the (LCRA) board said, ‘It’s time to divest the whole thing.'”

Cullick said the six systems currently being negotiated for sale do not include the one serving northern Hays County. Cullick said it will take 18 to 24 months for each sale of water/wastewater systems to occur, due to the complexity of that type of transaction.

“And the proposed buyer will have a lot of time to have a conversation with folks about what they plan and (what) any concerns that the community would be,” Cullick said.

LCRA’s board said a buyer of the water/wastewater systems must meet four criteria, including 1) the ability and commitment of the buyer to provide reliable and quality utility services 2) the ability of the buyer to invest capital for additional, necessary water and wastewater utility infrastructure 3) the commitment of the buyer to meet applicable regulatory requirements, and 4) the willingness of the buyer to compensate LCRA for its investment in water and wastewater utility systems.