The Star Beacon; Ashtabula, Ohio

December 11, 2012

Ashtabula County marks 10 years in water business, with mixed results

Star Beacon

JEFFERSON — This month marks the 10th anniversary of Ashtabula County going into the water business, a controversial move that occasionally haunts commissioners, although the current board had nothing to do with the purchase.

In December 2002, the county borrowed $18 million to purchase the aging system — the lines along Route 531 were installed in 1923. The system spans seven townships plus Geneva-on-the-Lake.

Key reasons for the purchase were to hold the line on rate increases and improve the infrastructure, things that seller, Ohio Consumers Water, was lax to do, according to commissioners at the time. Commissioners also touted it as a way to spur economic development.

“It is essential to economic development for Ashtabula County to control both water and sewer systems,” said Commissioner Deborah Newcomb in a December 2002 newspaper story.

Economic development

 One can make the argument that a reliable source of water played a role in bringing Spire Institute and other development in Harpersfield Township. As with most development, however, there’s a double-edged sword in the details.

Larry Meaney, director of the county’s department of environment services, says that while the system can meet Ohio Environmental Protection Agency minimal standards for potable water pressure in that area, a fire at one of the restaurants, Spire buildings or hotels could seriously tax the system.

“That’s where it becomes dicey,” Meaney said.

Ideally, the system needs a 500,000-gallon elevated storage tank to ensure adequate water supply to the I-90/Route 534 businesses on the county system. But Meaney said that is a $2.4 million investment, and thus far the county has not been able to find grant money for the  project.

As a result, Meaney worries about what would happen if the line along Route 534 were to break on a weekend when the Spire and interchange motels were doing a great business. The line is 14 feet down, and it would take hours, if not a day, to get to it and make the repairs. That’s why the county and city recommend Spire add a second service line off Clay Street as part of future development.

Overall, however, the system is much more reliable today than it was 10 years ago. Meaney said water line breaks were costing the county $200,000 annually in the first couple of years of owning the system. On Route 534 alone, there were more than 60 breaks in the first five years.

By tapping into state grants and low-interest loans, lines have been replaced in the most troubled sections of the system. Meaney estimates the county has replaced more than 10 miles of aging lines.

“It is a system with an infrastructure that is in a lot better shape than it used to be,” said Commissioner Joe Moroski.

Keeping rates in check

Customers of the system ultimately foot the bill for these improvements through the rates they pay, although government grants subsidize a portion of them. As with anything in the past decade, with the exception of wages, the rates have gone up. Meaney said in 2002, when the system was purchased, a residential customer who used five units of water would have paid $29.75.

Today, the bill would be $46.40, or an Increase of less than 3 percent annually.

By comparison, the Public Utilities Commission of Ohio granted Ohio American Water, whose assets are now owned by Aqua Ohio, an 18 percent rate increase in February 2005. In 2007 the PUCO approved a 14 percent increase, and in 2008, a 30.37 percent increase. Two years ago, the PUCO granted the utility a 7.1 percent rate increase. And earlier this year, the PUCO authorized Aqua Ohio to implement new rates that represent an increase of 10.85 percent.

Although the county owns the distribution system, it remains sensitive to rate increases by Aqua Ohio, which owns the treatment plant in Ashtabula and sells bulk water to the county. The cost of that bulk water often tracks retail rate increases. Meaney said the county paid just under $1 for a thousand gallons of water 10 years ago; today, the cost is $2.17.

The PUCO does not rule on rates set by public water companies. The board of commissioners sets the rates, and is in the middle of a five-year resolution that set the annual increase at 3 percent. But commissioners froze the rate during 2011 to give customers a break during the difficult economy. A 3 percent increase was allowed to kick in this year.

Growing base

While acquisition of the water system did not bring in an influx of new jobs, its customer base has grown, from about 4,600 to 5,450. That number represents a higher rate of growth than the 1 percent commissioners set as a target when the system was purchased, Meaney said.

With the construction of more than four miles of new lines along Route 45, the system was able to pick up the customers of Rock Creek Village, which purchases bulk water from the county (Rock Creek and other bulk water customers count as only one customer in the total count). Another 25,000 feet of new line was put in the ground to take water to Rome Township.

“We were successful in getting grants for that, and so no assessments had to be done because there was so much agricultural land through there,” Meaney said. Property owners along the new line were given the opportunity to become a customer for a $4,500 tap-in fee.

That kind of flexibility in setting fees gives the board of commissioners the ability to use the system as an economic development tool. For example, a resolution that expires at the end of this year waived tap-in fees for commercial customers this year.

Board President Peggy Carlo, who was a Saybrook Township trustee when the county purchased the system, said she feels that kind of cooperation between the county’s water department and trustees has helped spur residential development in that township. “It’s been worthwhile,” she said.

Overall, commissioners say county ownership has been a “mixed bag.” Rates have been constrained, the system has been improved and new customers added. The county, in effect the citizens, own the system and have a say in how it is run through their representatives, the commissioners.

“Our job is to take this system we inherited and make it the very best we can,” Moroski said.

Critics of the county’s ownership of the utility often cite the heavy debt load and bloating of local government as reasons to sell the system. But commissioners say they have not had any offers and are not seeking a buyer.

The $1 million paid to school districts over the past decade of ownership was part of the $18 million that the county had to borrow to get into the business.

The county borrowed $13 million for 30 years at 4.34 percent from the Ohio Water Development Authority. $5 million was borrowed for 40 years at 4.64 percent through another government lending program.

Additional low-interest or no-interest financing has been obtained to replace failing lines and other infrastructure in the system. The county’s total debt for the department is around $13 million, Meaney said. The county will retire about $1.34 million in water debt next year, or about a third of utility’s $4 million operating budge.

“The debt, at 31 percent, is higher than we’d like to see it,” Meaney said.

When the county took on the system, it also inked a contract with Aqua for services that the county lacked the manpower, systems and expertise to perform. That contract, for $300,000, included services like meter reading and billing. The county also signed a contract for $500,000 in unplanned services, such as water line breaks.

Meaney said the county has slowly taken on those outside services and accordingly reduced its contracts with Aqua.

That necessitated hiring employees — six of them at cost of $303,000 (2013). Total contracts with Aqua and other vendors for 2013 will be $216,000.

Had the county stayed with Aqua, the county would be paying more than $1.1 million for the services next year, Meaney said. That’s because the contracts included a 4 percent annual increase.

“I think that, all in all, even with not being able to control bulk water costs, I think we’ve done OK” Meaney said.