August 10th, 2011
Hays County makes bid to buy LCRA utilities

by SEAN BATURA

Hays County and its partners in a nonprofit corporation on Monday submitted a bid to buy the Lower Colorado River Authority’s sprawling water and wastewater utilities.

This map shows the areas of Hays and Travis counties served by LCRA's West Travis County Regional Water System. Click map to enlarge.

The 27 or 28 utilities LCRA has put up for sale, flung from Matagorda County on the coast to San Saba in the Hill Country, include the West Travis County Regional Water System, which serves about 7,000 residents directly in Hays County and others through water supplies and utility districts that buy water wholesale.

Hays County Pct. 4 Commissioner Ray Whisenant, a Dripping Spring Republican who represents the county on the Coalition of Central Texas Utilities Development Corporation’s board, said the UDC offered only as much money as it estimated users of the systems could repay through revenue bonds backed by future user fees. The corporation was formed by Hays County and the cities of Bee Cave, Leander, West Lake Hills and Sunrise Beach and 17 other entities including the city of Dripping Springs and the Dripping Springs Water Supply Corp.

Answering questions at Tuesday’s commissioners court session from two activists opposing the county’s pursuit of the endeavor, Whisenant repeatedly said the court has no intention of committing property tax revenue to fund the acquisition.

“I know of no consideration, I’ve made no offer, and we are not legally obligated to commit ad valorem tax funds from Hays County to the UDC or for any purpose associated the LCRA divestiture,” Whisenant said.

Whisenant and other officials said disclosing the bid amount could jeopardize the coalition’s efforts but said the number would eventually be disclosed, after LCRA chooses a buyer. They also offered few details on how the deal would play out should the Central Texas UDC prevail in its bid to buy the utilities. Whisenant said the preferred scenario involves breaking the system into components to be owned by various water utilities or end users who rely on LCRA for water and wastewater.

The 32 utilities LCRA started with cost the authority $300 million to acquire and build, and are falling short of breaking even by about $3 million a year, authority officials have said. Water/wastewater utilities are generally expected to be self-sufficient. LCRA decided in 2008 to divest itself of all water/wastewater utilities and focus on long-range water availability planning.
Whisenant noted that LCRA has already sold off four or five of the utilities, leaving 27 or 28 in the current bid package.

Hays County has contributed about $65,000 to prepare and submit the UDC’s indicative and final bids to LCRA. Commissioners allocated the money from the county’s LCRA Service Fee Fund, for which the county anticipated revenues of $200,000 this year. The fund is composed of money paid to the county by LCRA under a contract negotiated in 2001 when LCRA laid a water pipeline along US 290 from the Colorado River.

The UDC has the power to incur debt, though it cannot financially obligate its members — and ultimately Hays County property taxpayers — in any way, Whisenant said. The coalition may only pay off debt with revenues from the purchased water/wastewater systems, or with contractual agreements with local governments, and others, to purchase portions of the water/wastewater systems. Whisenant said the UDC would be “self-sustaining.”

Pct. 1 Commissioner Debbie Gonzales Ingalsbe, whose area includes much of the eastern Kyle area, said her support is contingent on taxpayers not served by the utility not being on the hook for buying it.

“When we had these discussions, one of the reasons that I felt that I could support it is that … we are not committing our taxpayers to any portion of that cost,” Ingalsbe said.

Pct. 2 Commissioner Mark Jones did not comment in open court about the matter but has consistently opposed the county’s involvement in the effort.

The Hays County Water and Sewer Authority, originally formed in 2000 but dormant for most of the decade except as a vehicle for the county to collect the LCRA service fee, has recently been dusted off and could play a role in operation of the utilities if the coalition is successful in buying them.

Whisenant said the ideal situation would be for the water and sewer authority and other interested parties to form a public utility agency through which the the West Travis County Regional Water System could be owned and operated. Whisenant said this would allow for more reasonable water user fees.

“If the UDC purchases (the LCRA systems) and we don’t participate in a regional authority, then the next option is whether the (water and sewer authority) would want to exercise its ability to own and contract with Travis County’s side of that general operating area to provide treated surface, potable water to Hays County through the infrastructure required to do that,” Whisenant said.

The West Travis County Regional Water System serves an estimated 20,380 people in Hays and Travis Counties, including 7,000 water users in northern Hays County. It is also the only obvious water source for much of fast-growing Hays County, especially the affluent Dripping Springs area along U.S. 290. LCRA’s holdings do not include any wastewater systems in Hays County. The LCRA has invested about $140 million in its water system in Hays and western Travis counties, LCRA representative Robert Cullick has said.

Commissioners created HCWSA in 2000 “to facilitate planning for water and sewer utility facilities and infrastructure for unincorporated areas of the County that are not currently served by or located within a municipality, certificated water or sewer utility,” in the words of its unanimously-approved enabling resolution. Like the Central Texas UDC, the water and sewer authority could not levy taxes or financially obligate Hays County taxpayers beyond the issuance of revenue bonds secured by Hays County users of the LCRA water system.

Whisenant said the UDC cannot spend county tax dollars for any purpose and taxpayers are not liable for any decisions made by the corporation.

Two members of the public attending Tuesday’s commissioners court meeting evinced skepticism about the wisdom of the county’s participation in the UDC and the bid for the LCRA systems, and pressed Whisenant for assurances that property taxpayers would be insulated from the costs.

“Under no circumstances am I interesting in connecting financial responsibility (for the bid) to the taxpayers,” said Charles O’Dell, a Dripping Springs area resident who styles himself a taxpayer watchdog.

In reply to their opposition to the use of county funds for activities associated with the UDC, Whisenant said Hays County cannot be legally liable for the repayment of revenue bonds issued by the UDC.

Brad Rollins contributed to this report.

DOWNLOADS

» West Travis County Regional Water System map [pdf] » Hays County Water & Sewer Authority boundaries [pdf]