MABS Q&A: PEL explains difference between Aqua, MABS plant manager opinions on costs
SENTINEL FILE PHOTO - A Shenandoah Municipal Authority truck at a work site in the borough.
SHENANDOAH – The Pennsylvania Economy League, the organization advising the Borough of Shenandoah regarding the potential sale of the municipal authority, is continuing their Q&A initiative, and has provided another set for publication.
Questions can still be submitted via an email address has set up, [email protected], and it is expected that answers will be provided weekly.
The question-and-answer initiative is part of the ongoing effort to engage and inform the public about the potential sale of MABS to Aqua Pennsylvania, a private water company based in the Philadelphia area.
As part of the public engagement effort, two public hearings will held on Oct. 19 and Oct 26 at 7:00pm at the Shenandoah Area Senior Citizens Center on North Market Street. As a result of the coronavirus pandemic, in-person attendance will be limited, though the hearings will be broadcast via Zoom.
The following are the answers to submitted questions, published as they were submitted to the Sentinel.
Question: The Superintendent of the Water Plant has stated that he doesn’t think that the potential investment in the plant will be anywhere near the $8 million estimate provided. Where does this number come from and why the large difference in opinion?
Answer: The Superintendent of the Water Plant believes that the current needs for improvement to the plant – according to the statement published in the newspaper – was likely nearer to $1.8 million. The Superintendent also reported that MABS was replacing the filter media for the first time since the plant was put in service, and that it probably could have been done sooner. His estimate is likely for the short-term needs of the plant. Aqua is looking at a long-term capital plan. MABS does not have a five year capital improvement plan, nor does it have a capital reserve or sufficient surplus revenues to fund any such plan.
It is typical for municipal authorities and municipalities to wait as long as possible, to defer maintenance and improvements so that they don’t have to increase rates. To invest in the plant right now would require significant rate increases. While avoiding rate increases is popular in most communities, it comes with risk to water quality and reliability. MABS has not indicated a willingness to increase rates to even undertake the $1.8 million of plant improvements mentioned above, let alone the $16 million in improvements to the distribution system and water sources.
The bulk of the improvements proposed by Aqua, are in the area of distribution and water sources ($16 million or so), not the plant. The first estimate of total capital needs to the system, received by the Borough, was undertaken by the former CEO of the Lehigh County Authority. In his report, he estimated that improvements during the course of the next 20-30 years would total $30 million to $40 million across the system. During the bidding process, Schuylkill County Authority, who declined to submit a proposal, was asked why they did not submit a bid. They replied that they knew that the capital needs of the system were very significant and that if they bought the system they would have to impose the necessary rate increases on the 3000 some odd customers in the Borough. They agreed that the capital needs over the next several decades would likely exceed $30 million.
During the bidding process the two largest investor owned utilities brought engineers to a site visit, toured the service area and reviewed documents provided to them. Both bidders “estimated” the capital needs to be between $20 million and $30 million. Of course, these are only estimates and once a new operator came on site, they could reduce their estimate if they find that maintenance and replacement projects have been kept up with over the years, or they might increase their estimate if they find that maintenance and improvements, have not been kept up (like the filter screens). Whether the plant needs $8 million or $1.8 million; or somewhere in between is not really the issue. The issue is whether the Borough wants to pay for clean and reliable water by imposing the costs on approximately 3,000 people, or would prefer to spread the costs out over 450,000 people. In either case rates will go up; Aqua has an incentive to keep up with the maintenance and improvements; MABS has financial challenges and political challenges to overcome, to do the same.
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