In September, the Oxford Area Sewer Authority announced that it was starting the process that could result in the sale of its state-of-the-art wastewater treatment system to the Delaware County Regional Water Authority (DELCORA).

At the most recent Oxford Borough Council meeting on Nov. 19, David Busch, the executive director of the Oxford Area Sewer Authority, provided an update about the Sewer Authority's activities—including the potential sale.

Busch said that while progress is still being made toward finalizing the agreement with DELCORA, the deal is not going to be completed as quickly as was originally thought. Initially, there was a goal of completing an Asset Purchase Agreement within 90 days and finalizing the entire agreement within 150 days. The sale will take more time than that.

“There are still a lot of details to be worked out and that takes some time,” Busch explained.

He provided a quick recap of the Sewer Authority's financial situation that prompted the exploration of the sale of the wastewater treatment system. The sewer authority obtained a $27 million loan from the U.S. Department of Agriculture to expand the wastewater treatment plant's capacity. The four member municipalities of the Sewer Authority—Oxford Borough, Lower Oxford Township, East Nottingham Township, and West Nottingham Township—agreed to guarantee that loan, with each municipality assuming a portion of the debt.

The sewer authority subsequently fell behind on its debt-service payments because commercial and residential connections to the system were slower than had been projected. The sewer authority missed two debt-service payments totaling a combined $1.2 million, opening up the possibility that the member municipalities would need to make good on those payments.

The Sewer Authority raised its sewer rates and eventually negotiated a work-out agreement with the United States Department of Agriculture so that the $1.2 million wasn't due immediately.

Busch was brought on board after the debt-service payments were missed and the rates were raised in an effort to improve the Sewer Authority's overall financial situation.

“I was directed to right the ship, and then sell the ship,” Busch explained.

Through cost-cutting and additional rate increases, the Sewer Authority was able to meet all its financial obligations, including the scheduled debt-service payments this year, Busch said.

He explained that, after a four-percent increase in sewer rates in 2018, the Sewer Authority has a balanced budget for 2018 and 2019. No increase in sewer rates is anticipated for 2019.

In addition to the wastewater treatment system, the Sewer Authority has been exploring the possibility of selling a 35-acre property that it owns. They already have someone interested in buying the property, Busch said, but the property is situated in three different municipalities, which complicates matters. The Sewer Authority is also looking at selling the building it owns on Third Street in Oxford.

If those assets are sold, the proceeds can be used to take of a portion of the outstanding debt on the loan. If the Sewer Authority finalizes an agreement with DELCORA before those assets are sold, ownership of them would pass to DELCORA, which would then pursue the sale of those assets, with the proceeds only applied to the Sewer Authority and no other DELCORA interests.

Should DELCORA purchase the wastewater treatment plant, it would assume the responsibility for the remaining balance of the $27 million loan from the U.S. Department of Agriculture, which would clear the obligation to guarantee the loan from the four member municipalities.

For residents who live in the Sewer Authority's service area, one of the most important details about the potential agreement is that DELCORA will freeze usage rates for a three-year-rate. After that period, DELVORA will adjust the rates using best practices. Additionally, if the sale is completed, DELCORA will operate the OASA as a stand-alone entity, and will establish an advisory committee comprised of residents in the service area. For employees of OASA, DELCORA will extend employment offer letters to each current full-time employee.

Busch said that one additional requirement of selling the wastewater treatment plant is that an Act 537 Plan special study will need to be filed with the state.

After Busch's update, council members asked several questions.

Council member John Thompson asked what the Sewer Authority's assets are valued at, and whether it would be more than the approximately $27 million in debt that DELCORA would be assuming.

Busch acknowledged that the Sewer Authority's assets are probably more than $27 million. But DELCORA will need to get its own loan approved from the U.S. Department of Agriculture, and the goal will be to pay off the debt a lot faster than the 30-year loan that the Sewer Authority had.

Busch pointed out that a private company could come in and offer more money to buy the wastewater treatment plant, but the major downside to that would be that the private company would pass those costs on to the rate-payers—local residents and business owners.

Busch said that having ownership of the wastewater treatment plant transfer to an entity like DELCORA would be a very favorable outcome for the municipalities and local residents.

“Delcora is a stable entity with a track record of acquiring sewer systems,” Busch explained.

He added that it's possible that the deal to transfer assets to Delcora could be completed by the spring or summer of 2019.