Kentucky American interested in Lancaster water plants
LANCASTER — The city council here may have a third option when considering how to solve pending water plant capacity issues.Representatives from Lexington-based Kentucky American Water came to the council’s Tuesday work session to express preliminary interest in purchasing the city’s water and sewer plants. John-Mark Hack, KAW director of government affairs, said the company will not know if it wants to make an offer on the plants until it conducts a thorough study of each, mostly through examining city documents. “What we’re proposing is taking a real good look at both those systems and seeing if that is the best option for you all and the best option for us,” he said. Mayor Brenda Powers and the four council members in attendance — Maggie Morris Mick, Bret Baierlein, Mike Sutton and Chris Davis — expressed reservations but generally gave their blessing for KAW to perform its study. “If you would do us a study, we would really appreciate it,” Powers said.The information may help the council develop solutions as the water plant approaches capacity.The current plant is operating at about 73 percent capacity, and most plants upgrade when capacity reaches near 70 percent, Water Plant Superintendent Troy Deshon said.Although Deshon has not issued a mandatory water shortage advisory since he arrived in Lancaster more than 10 years ago, he said Lancaster will either need a new plant or major upgrades in the next four to five years.The council has previously discussed continuing with preliminary plans to build a new $12 million water plant or partnering with Danville in a multi-million dollar pipeline project to allow Lancaster buy water from Danville.The Bluegrass Area Development District estimated recently that, in the best case scenario with grant funding, constructing a new plant would saddle Lancaster with an annual debt service of about $400,000 for 40 years. Funding the construction would also require about a 34 percent rise in water rates, according to BGADD. However, the city would retain local control of the water plant.Pursing the pipeline project with Danville may save the city millions of dollars, but residents would be at the mercy of the Danville City Commission’s rate decisions.An offer from KAW would come with its own set of pros and cons. President Cheryl Norton said KAW would purchase the plants for what their rate bases are worth. This should be enough to cover millions of dollars of debt the water plant has accrued though recent capital investment projects, including water line replacement.It would also place the burden of potentially funding a new plant or making major improvements on KAW, Hack said.“Do you explore the potential of getting rid of a great deal of debt or do you take on a great deal more debt?” he asked to council.As for residents, rates could potentially increase if KAW¿takes over. An average family in Lancaster spends about $25 a month on water, according to BGADD data from this spring. However, Mick noted that Lancaster has a smaller average family than many other cities, so it is likely to be less. KAW currently has rates of about $34 a month for an average family, Norton said. The company operates with single-tariff pricing, meaning all 400,000 customers in 10 counties pay the same rates. This way, when a smaller community requires capital investment, the price of the project is spread over a much larger customer base, Norton said.This can be a positive for smaller cities like Lancaster that may struggle to afford such projects independently.But last year, KAW had to raise all customer rates 29 percent — about $8 a month — to help fund a $164-million water treatment plant and transmission lines intended to address a water supply deficit in Central Kentucky, Norton said.“I can tell you that we have no projects anywhere out there on the horizon that would be anywhere near that dollar amount,” she said.On the upside, Hack noted that if KAW were to purchase the water plant, sewer plant or both, it would strive to maintain current employees as long as they met qualifications and passed a background check.However, Deshon said after the meeting that he and other water plant employees feel that the city should maintain local control of water and rates.“We’ve always been a small town that’s been kind of strapped for money, but I don’t think we’re so financially hurt that we need to sell our water and our sewer,” he said. “”If we sell our water and our sewer, our city’s gone. All we’ve got is fire and police.”But Deshon agreed that it wouldn’t hurt for KAW to conduct its study.Powers said she would speak with KAW officials today and give them an official go ahead to begin their research.