SEWER RATES TO INCREASE BY 23.9% AND WILL CONTINUE TO ESCALATE

On May 21, 2010 The Oldham County Sewer District held a meeting to discuss their proposed budget for the upcoming year as well as a proposed rate increase for all customers. Also present at the meeting was Scott Davis, Bob Diebel, and Rick Rash, members of the Fiscal Court Utilities Committee.

A brief history of sewers in Oldham County is necessary to have a better understanding of the situation. Several years ago the Planning and Zoning Commission passed rules that were approved by the Fiscal Court which required that homes built on smaller lots had to be on sewers. Since there was no county-wide sewer system this meant that developers wishing to develop subdivisions had to build individual treatment plants for their subdivisions. These are referred to as “package plants.” There were and still are several of these plants around Oldham County. Many of these plants began to have problems as they were operating without sufficient capacity to serve all of the homes that they were forced to service. Further, some of them were not properly maintained for many years.

The county, for a variety of reasons, decided to form a sewer district. The sewer district purchased these small package plants and brought them into their system. In reality, some of the plants should have been given to the district or the district should have been paid to take them because they had so many problems and were a financial burden to operate. In addition to the package plants, the sewer district constructed plants at Buckner and most recently a plant known as the Ohio River plant. The district is also operating a plant at the reformatory in LaGrange.

The state Division of Water monitors these plants and determines how many customers each plant is capable of servicing. At the present time only the plant at the reformatory and the Ohio River plant are not running at capacity. Also, LaGrange has a plant located near the Oldham Reserve on New Moody Lane that is not a part of the OCSD. It was disclosed at this latest meeting that the LaGrange plant is also operating at capacity. This makes me wonder what they are going to do to address the needs of businesses and the additional housing at the Oldham Reserve if it ever starts to develop. It looks to me like someone will have to build another plant. I am sure that it will be the taxpayers. This is just another example of poor planning by the people who thought that the Oldham reserve was a great idea. Small minds with big eyes will cause problems.

A few years ago the City of Crestwood put in sewers and they were initially serviced by the Metropolitan Sewer District. Subsequently, Crestwood decided to merge its district with the OCSD, however MSD continued treatment for an agreed upon cost and surcharge to the customers.

Over the years the management of the OCSD has been below par and according to Stan Clark, the current chief financial officer of Oldham County, the books are in such disarray that an audit cannot be performed in a timely manner as is required by state law. Clark and County Judge/Executive Duane Murner claim that the books had to be reconstructed for periods dating back all the way to 1998. The audit is still not complete and is months overdue.

Over the years the OCSD sold future “tap-ons” (taps) to developers that they did not have sufficient capacity to service. According to the current board of the OCSD, the developers knew that the capacity was not available but they purchased the taps because the fee was going to increase significantly in some instances and in other instances the developers just wanted to get a place in line. However, the sewer district used the money received from the taps for daily operational expenses, not to retire debt on the plants. The district used about 1.8 million dollars of those fees for operational expenses.

In 2008, it became obvious that the OCSD had serious management problems. Judge-Executive Duane Murner then forced the sewer district to get rid of all of its employees and enter into a contract with Veolia Water Company to operate the district. At the time Dennis Deibel, the mayor of Crestwood, was the chairman of the district. When it became obvious that Veolia Water was going to manage the district, Deibel resigned from the district board and took the City of Crestwood out of the district. He also took $61,000 with him that he claimed belonged to the City of Crestwood. In any event, when the dust settled the sewer district had outstanding debt exceeding ten million dollars and no credit.

Then the OCSD asked the Fiscal Court to assume responsibility of over seven million dollars of that debt. Their stated basis for the request was that the county could get a better rate on the outstanding bonds that would result in a savings to the district. (The sewer district is supposed to repay the county the seven million dollars.) The Fiscal Court, knowing that the sewer district books were a mess, and without knowing the real financial condition of the district, assumed the responsibility for the debt. Stan Clark, said at the meeting yesterday that the district is insolvent – nobody will loan it money. I am on record as having said at the time the Fiscal Court assumed the responsibility for the debt, another reason the sewer district wanted the county to assume the debt was so that it would then be debt free and would be able to borrow even more money. They denied this. Well, guess what. The sewer district has applied for a 2.5 million dollar loan. However, to get the loan the district must show that it has enough income to repay the loan. Thus the district wants to increase the sewer rates by 23.9% now. The present chairman of the sewer district, Horace Harrod, said that people can expect rate increases of at least 5% per year in the future due to the management contract that the sewer district has with Veolia Water Company. Over the next five years, they anticipate rate increases of over 40% in total.

The district claims that their income is down 12% due to people using less water. (I guess the moral of the story is; try to conserve and you will have to pay more for using less.) Stan Clark said that part of the reason that water consumption is down is because throughout the county 3% of the homes have their water turned off which means that they have no water bill and therefore no sewer bill. He said that figure was 5% for the Glen Oaks subdivision. He said that he believed that the discontinued water service was due to homes being in foreclosure.

The district claims that the only way that they can make more money is to have more customers. They seem to be specifically targeting two proposed subdivisions, Buckner Crossings and Quail Creek. Both of these developments would be serviced by the Buckner plant. However, that plant is already operating at capacity and the state will not allow them to take on any more customers. The district’s solution is to put in a new pipeline to the plant at the Kentucky State Reformatory and take the Buckner plant offline. There are two problems here. First and foremost is that the district is gambling that the economy will pick up as well as the housing market. They are willing to make this gamble after stating that many homes are already in foreclosure. Further, everybody knows that the housing market is in the tank. The other problem is that the sewer district wants to promote more development in a county that just indicated that it doesn’t want uncontrolled development by rejecting the candidates who have been supported by developers. Also, the district does not seem to be concerned about the affect of the additional development on the remaining parts of the infrastructure.

We can expect to see the sewer district push for additional development in the future to solve a problem that was caused by development and bad management. I am not convinced that the management is any better today than it ever was. The Fiscal Court has some control over the district by having the final say on the rate increases. However, the Fiscal Court certainly has not been up to the task of having sufficient oversight over the district in the past. Remember, Judge Murner has been telling us for several months that the required audit of the sewer district was coming shortly. Now we are being told that it will be done in June. Seeing is believing.

The sewer district came to the meeting hoping to get their proposed rate increase approved by the utilities committee. However, Magistrate Scott Davis brought up the matter of the audit and it became apparent that he would not vote for the increase without seeing the audit. Hopefully, that pressure will drive the district to have the audit by June. The people should be glad that Scott Davis is around to step up for them. Other magistrates will question a few things to make it look as though they know what they are doing, even though in most cases they have no clue. Perhaps they do know something but when all is said and done they vote for whatever the Murner administration wants. Scott Davis remains firm in his beliefs. Scott Davis’ absence from the next court will certainly result in a void for all of the people in the county.

The sewer district, like the Oldham Reserve, is a ticking time bomb. Incoming Judge-Executive Voegele will have a lot on his plate. Judge-Executive Murner and the current Fiscal Court have pushed out interest and principal payments that were due in order to balance the budget. They have always touted a balanced budget. Not paying your bills makes it easier to give a false impression that you have balanced the budget.

Management of the sewer district reminds me of the Obama administration in that both believe that you get out of debt by borrowing more and spending more. Hang on folks! We are in for a long ride.