How much water rates will rise in Sellersburg might depend on whether the town purchases a private water utility company.
A deal offered Monday would sell Riverside Water Co. for a purchase price of $2.5 million, including its assets, property and debts owed, to Sellersburg.
“It ain’t perfect, but it’s pretty darn good,” Chris Cotterill, attorney for David Stinson, owner of Riverside Water Co., said of the deal presented at the Sellersburg Town Council meeting. “I think you know what kind of investments you need to make in it and you get any number of benefits out of it. You’re taking a utility with no liabilities, you’re paying off the debt that Riverside owes your town, you’re already interconnected to the system — there’s no better owner of this utility than Sellersburg.”
Sellersburg Town Attorney Jake Elder explained that by buying the water company, Sellersburg would be able to set up a capital improvements fund, in addition to adding about 1,200 new customers. The town currently serves 3,400 water customers, according to Municipal Works Director Ken Alexander.
“You will not see 1,200 customers within the next 20 years,” Alexander said. “Our territory does not allow us to have that kind of growth.”
The purchase price would be amended into a $5 million bond sought by the town to make improvements to it’s water system and paid by water customers over the life of the bond, Elder said.
However, the potential purchase hit a snag: Removing a cellular tower located atop the Riverside Water Co. According to the deal presented, Riverside Water would retain the rights to the Sprint cellular service tower and the revenues throughout the terms of the contract, estimated at $138,238.
The contract is set to expire in 2020.
After some discussion, Town Council President Paul Rhodes asked for a change to the contract that would allow Sellersburg to take control of the Sprint assets on the water tower, including the revenue payments owed over the term of the contract with Riverside Water Co. The change was unanimously approved by the council.
But Cotterill said Riverside Water will have to consider the council’s decision to amend the deal and he did not offer a timeline on when a response would be returned to the council.
The council approved on first reading an ordinance to purchase Riverside Water Co. by a vote of 4-1, with Town Councilman Brian Meyer voting against. The ordinance agreeing to the purchase will need to be approved for a second reading.
Meyer said he has questions about the condition of the system the town would be purchasing.
“I don’t think they can guarantee what I’m looking for,” he said.
Just with the preliminary engineering completed by Sellersburg, the maintenance and repair costs to Riverside Water’s system could total about $500,000 to $600,000 over the next 10 years, according to Alexander.
Monday’s discussion came after the two sides revisited an offer from this spring to sell the Jeffersonville-based water wholesaler to the town. Previous attempts to negotiate a deal did not pan out, which included a price tag of about $1.3 million, including debt owed to the town, and that the owner would retain certain property on-site.
Improvements outlined for Sellersburg’s water system, before the purchase of Riverside Water was discussed, included upgrades to the town’s water-treatment plant; drilling for two new supply wells; construction of a new booster station; a new 500,000-gallon water storage tank; and to refurbish two of its existing water tanks.
According to an Umbaugh and Associates water-rate study, in order for the town’s existing customers to pay the bond for the improvements — based on 5,000 gallons of water usage per month — rates would increase from $13.25 to $27. The town council asked Umbaugh to take another look at the change in rates after it was presented with the purchase offer.
According to a revised water rate study presented at the town council’s June 24 meeting, the rate increase would still total $27. However, the inclusion of Riverside Water would allow the town to set up a capital improvement fund to protect against future rate increases.
“It gives us 1,200 more water customers to spread the cost over and therefore decrease the rate that we may have to charge [in the future],” said Town Councilman Terry Langford.
Rhodes added it protects the town from paying for projects out of its general-fund monies.
“What it’s going to translate to is to allow us to have a capital operating fund without taking money out of our general fund,” he said.
And the purchase price would be covered by the rate paid by water users within a decade, according to Cotterill.
“You’ll pay off the full cost of this utility in 7-10 years depending upon the rate structure you pay ... and at the end of the day you’ll have bigger buying power for your combined utilities,” he said.
With more customers and more revenues, the future bonding capacity for the town’s water utility would also increase.
By adding Riverside’s system and capacity to Sellersburg’s water utility it could also reduce the number of modifications planned to Sellersburg’s system.
Alexander said it could eliminate the construction of a new water tank planned for the south end of Sellersburg near Ind. 60 and keeping an existing tank at Riverside Water Co. would be unnecessary.
“They’re expensive assets to keep, and if you don’t have to keep it, that’s just one asset over the next 20 years that you don’t have to plan for,” Alexander said.
Elder said even if a deal is reached and an approval does occur, it would be at least 90-120 days before Sellersburg could close on the sale of the water system. The Indiana Utility Regulatory Commission would also have to approve the deal.