San Marcos Mercury | Local News from San Marcos and Hays County, Texas

August 25th, 2011
LCRA delays decision on utilities sell off

by SEAN BATURA and BRAD ROLLINS

On Tuesday, a Canadian bank working for the Lower Colorado River Authority recommended that the authority sell 24 water/wastewater systems and one raw water pumping station in Texas to a Canadian company.

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

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

LCRA staff concurred on the recommendation and all obvious indicators pointed to Vancouver, B.C.-based Corix being awarded the bid to buy the utilities, including one that serves the Dripping Springs Water Supply Corp. and residential subdivisions along U.S. 290.

On Wednesday, Pct. 4 Commissioner Ray Whisenant took LCRA board members to task for contemplating selling out fellow Texans who want to keep the utilities in public, locally controlled hands. Whisenant is vice chair of — and a driving force behind — the Coalition of Central Texas Utilities Development Corp., a group made up of counties, cities and water supplies that has submitted its own bid to buy the utilities from LCRA.

“I felt like it really is a Texas decision. It’s Texas water used by Texans,” Whisenant said after the meeting.

The LCRA board, however, did not award the bid to Corix, voting instead to postpone choosing a buyer until its September meeting. Further, they directed LCRA staff to contact Hays County’s coalition for “further discussions” about its bid. The prevailing motion also instructed staff to “further explore possible improvements to the bid of Corix Infrastructure and other bidders for the balance of the system.”

Whatever one reads between the lines in that motion, it appeared on Wednesday that Hays County and its partners have a better chance of being awarded the bid than it appeared on Tuesday.

“It leaves it fairly open,” Whisenant said. “The way I feel about it is that it shows the board’s willingness to do what’s within their ability to help find a good, appropriate solution for the divestiture. Now, I think it also tells us that price still has something to do with it.”

LCRA started the year with 32 water and/or wastewater utilities in its portfolio, at least three of which it has already sold or committed to selling. The authority loses $3 million a year on the systems and wants to get out of the retail water business and focus on wholesale, its officials say.

The way LCRA has gone about this divestiture, however, has put governmental and nonprofit bidders at a disadvantage, Whisenant said. Selling the utilities to private companies will inevitably lead to higher rates, coalition advocates have said.

“The [Utilities Development Corp] and the entities it represents don’t have the speculative ability to pay above the level of the value of the assets as well as their revenue-generating capability,” Whisenant said. “…What it really boils down to is that the county doesn’t have any private investors that are willing to put several millions of dollars into this with the idea that they can go three to five years out without a return on it.”

Whisenant said private buyers would want to make a profit on such an investment within 20 or 30 years. A public or nonprofit owner, however, would expect only to cover costs and maintain an ideal debt coverage rate.

The utilities development corporation cannot legally levy property taxes and, so far, the only money it would have for purchase of the systems would come from revenue bonds. Revenue bonds would yield only as much money as future customers of the systems could repay with user fees.

Assuming that Corix bid considerably more than did the coalition, the game has shifted to convincing LCRA board members that they have a moral duty to adhere to the core mission it was given when the Legislature chartered the authority in 1934.

That mission “is to provide reliable, low-cost utility and public services in partnership with our customers and communities and to use our leadership and environmental authority to ensure the protection and constructive use of the area’s natural resources.”

CORRECTION: This article originally stated LCRA had already sold or committed to selling eight water and/or wastewater utilities out of the original 32. LCRA has already sold or committed to selling at least three water and/or wastewater utilities.

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