$29.5 million price tag offered for New Garden sewer system
07/26/2016 01:09PM ● Published by Richard Gaw
As people began to gather at a public meeting on July 25 to discuss the proposed sale of the New Garden Township sewer system, the front of the township meeting room was filled with enough men in suits to resemble a boardroom photo shoot.
They were all there: members of the township's Sewer Sale Evaluation Committee, the Board of Supervisors and various attorneys, engineers and consultants, all of whom came armed with information, legalese and rationale.
Yet, it was the team from Aqua Pennsylvania Wastewater, Inc. (Aqua), however, who absorbed most of the spotlight, because they were there to spell out their reasons and intentions for wanting to pay the township $29.5 million to purchase its sewer system.
For the last two years, residents of New Garden Township have heard the repeated rumor that the township may sell off their sewer system. In fact, the topic was been on the board's agenda 18 times over that period and been the focus of five separate written reports. Although no final deal has been reached, Aqua has tendered a hefty offer, one that would alleviate the township from having to invest several millions of dollars over the next few years to repair a severely outdated system.
“The board is always looking at our revenues and expenses, as well as how they relate to our assets and liabilities,” said supervisor Randy Geouque, who also serves on the Sewer Sale Evaluation Committee. “The sewer system is probably the township's biggest asset, but it's also our biggest liability. As we look at the capital plan for the sewer system, we realize that a substantial investment would need to be made over the next ten years, and would undoubtedly require a significant increase in sewer rates to our customers.”
Geouque cited additional reasons for pursuing the sale of the system: increasing regulatory mandates that are being placed on sewer systems, and the increasing costs to maintain systems within these regulatory environments.
“During this entire process, the driving factor has not been about money, but what is best both short-term and long-term for our sewer customers, and the township as a whole,” he added.
As introduced by company president Steve Tagert, Aqua, based in Kennett Square, is far from the youngest kid on the water utility company block. Formerly known as the Philadelphia Suburban Water Company, the 130-year-old company serves customers in eight states, most prominently in Pennsylvania, where it spent $240 million on infrastructure improvements last year, and is anticipated to spend another $240 million this year.
If the township agrees to the sale – which is expected to be determined at the board's Aug. 15 meeting – it stands to secure a deal that is loaded with incentives. In addition to payment, Aqua will contribute $20,000 toward the township's closing costs, assume responsibility for the system's permits and assets, and be responsible for the provision of wastewater service to customers.
In addition, Aqua will complete all modifications, improvements and requirements, in order to meet all regulatory agency requirements. Most importantly, Aqua will make all repairs to the sewer system's infrastructure, which would save the township from having to shell out an estimated $12 million over the next four years, as specified in the New Garden Sewer Authority's five-year plan.
Selling its sewer system would no doubt create a sizable financial wellspring the township could tap in order to pay for a growing wish list of projects. Township Manager Tony Scheivert said that the proceeds of the sale may be targeted toward paying off the debt on the sewer system, reserving funds to satisfy pre-existing obligations of the system; establishing capital funds for vehicle and equipment purchases; funding several capital improvement and maintenance needs, such as repairing roads and bridges; establishing a tax stabilization fund to offset future real estate tax increases; and providing funding for the township's park.
Perhaps the largest – and desperately needed – project in this wish list would be the construction of a new home for the newly-formed Southern Chester County Regional Police Department, a merged cooperative between the New Garden Township Police Department and the West Grove Borough Police Department.
Currently, the township's police department operates out of a 1,100-square-foot connected series of temporary, modular trailers, as a temporary office space after mold infestation closed the unit's former barracks. On April 25, a presentation at the township building unveiled early plans for the construction of a 19,500 square-foot barracks which, if approved by the township, would cost between $6.5 million and $7.5 million, if the project is to begin in 2017.
If the sewer system is sold to Aqua, the township's residents stand to benefit as well. Currently, a typical resident's sewer bill is $189 per quarter. Under the conditions of the sale, sewer rates will be frozen during the first two years following the sale, and in following years, rates will be compounded at a four percent annual growth rate over the next ten years. At the end of ten years, the anticipated user charge will be $263 per quarter.
Comparatively, those numbers fall well below the rate that users would pay if the township decides not to sell the system. With no sale, the cost of projected upgrades to the system's infrastructure – as well as increased financing and operating costs – would jack sewer rates up about 40 percent in 2017, an additional 27.5 percent in 2018, and at the end of a ten-year period, customers will pay $340 per quarter.
Throughout the meeting, both supervisors and consultants made repeated reference to two key talking points that have served as the foundation for the idea of selling the system: the need for rate stability, and the benefits of turning over the keys of its sewer system to an expert.
“There are risks with respect to your capital,” said public finance attorney Steve Goldfield told the supervisors. “'How much will it cost? What will the interest rates be?' If you go status quo, then you assume the risk. It's yours, and whatever it happens, you have to pay for it. If you do a transfer, it becomes Aqua's issue, and they're a lot better equipped with equity and lines of credit, and they have a bigger customer base.”
“There is a lot of risk in keeping the sewer system, not just in current costs but in future costs,” said Board Chairman Richard Ayotte. “We have the choice to sell it to someone who can fix it and run it, or we can spend a lot of money to fix it ourselves.”
Over time, Geouque said, “the regulatory environment is not going to do anything but get more regulated and complicated, and as a township, I don't think we're necessarily prepared to take all of those things on.”
It's an advantage for Aqua, too, Tagert said.
“Because we have a larger customer base, we are able to make the improvements and spread them over that larger customer base,” he told the audience. “All of these economies of scale allow us to run a much cleaner operation than many smaller operations can. Our cost of debt is less...so we believe that we can do the projects cheaper than a municipality can.
“One of the things we have heard is that every body in New Garden Township is looking to keep open space,” Tagert added. “We don't run water mains and sewer mains in order to attract new growth. We follow the growth. The growth would be controlled by the township. We don't run sewer lines and expect people to hook up to it. It works the other way around.”
To contact Staff Writer Richard L. Gaw, e-mail email@example.com.