PRITCHARD, Alabama (WALA) – Pritchard Chickasaw Water System Chief Executive issued a stern message to customers on Wednesday: “Rates are going up.”
Utilities director Mack Underwood said a rate hike was inevitable if lenders succeeded in getting court-ordered receivers to oversee their operations. And he acknowledged that would be the case if the Pritchard Waters Water and Sewer Board were successful in negotiating a long-term contract with a private investment group to lease and operate the system. He said the Water Board has an obligation to meet debt requirements and maintain services.
“And that means higher water bills,” he said. “I don’t know how much, but the public and customers will have to pay higher water bills.”
Customers of the system are already paying the highest water bills in the state.
Two board members and director attorney Jay Roth held preliminary discussions on Wednesday with representatives of companies that expressed interest in investment deals. These companies are Kohlberg Kravis Roberts & Co., a global investment firm, and Inframark LLC., a leading provider of public and private infrastructure services. Oppenheimer & Co. and Water Capital Partners are acting as project advisors.
The two companies formed Pritchard Water Partners LLC, which would have invested tens of millions of dollars to pay Synovus Bank, the bond collector for the $55.8 million the water system owed in 2019.
The companies will invest additional funds in repairing or replacing aging and failing pipes and equipment. Underwood said the plan also includes automating certain functions of the sewage treatment plant. He also said the utility has a $5 million verbal agreement with the Mobile County Commission and a $1-for-$1 deal with the Alabama Department of Environmental Management.
Financing details are still being negotiated, but Underwood estimated the total private investment to be in the $50 million to $100 million range.
In return for that investment, the private consortium will be paid annual profits for 30-40 years.
Some residents call for a change of leadership
Severia Campbell-Morris, president of Pritchard Concerned Citizens’ Coalition, said she was aware that customers would have to pay more for long-delayed upgrades. But she said the long-term prospects would not improve without a sweeping change in board leadership.
“We were prepared to pay a higher rate. …Our concern is that we do not want the Pritchard Water and Sewer Board to have any further control over the management of this company. I want to see that as a trustee.”
Charles Young said he already pays about $66 a month for water.
“Of course I don’t like it,” he said. “I don’t want interest rates going up. I’m already paying too much. No one is home except me and my wife.”
Negotiating the details of a long-term deal would be just the first step in a potentially thorny road. The Water Board would need to approve the agreement, and so would the Pritchard and Chickasaw City Councils. It would also have to be acceptable to Synovus, which is suing the water system for defaulting on its loans.
Underwood said the payments to the lenders have been completed so far. He said the system makes the first of two annual payments into a reserve fund in May, and will make similar payments in November. The system is in a technical default state as the accounts that are supposed to be used for distribution have not been paid all the required monthly payments.
The utility used the borrowed $25 million to pay off existing debt. Underwood said the system used some of the bond funds to install an automated meter reading system and drill wells. He said about $23.5 million is still unused.
Utilities Consider Buying Alabama Village
Underwood said utilities will continue to seek outside sources of funding. But he said private upfront funding would be a good start.
“The water pipes are old. Many of them need to be replaced,” he said. “A lot of the water and sewer mains have to be replaced. A lot of the service lines have to be replaced. I guess.”
Another option under consideration is to force the approximately 20 remaining residents of the Alabama Village area to sell their homes under prominent ownership, which would be a government agency’s decision to stop the sale of real estate. It is a procedure by which a court order to enforce can be obtained. The law requires property owners to pay fair market value.
It is usually used for construction of highways, construction of public buildings, etc. But board attorney Jay Roth told Fox10 News that he believes it could be used for this purpose as well.
The board underwent an evaluation several months ago to determine what the cost would be. Ross declined to say how much that amount would be, but said the only available funding source was the money the system borrowed in 2019. Ross said he blocked the bank from using bond funds for denunciations through prominent domains.
Underwood said the decades-old water pipes in the village of Alabama are in such bad shape that the system is missing a disproportionate share of the water it supplies to its remaining roughly 24 residents. .
“Eighteen percent of water losses occur in Alabama villages,” he said. “In fact, Alabama Village has a manhole, and the Pritchard Water Authority maintains the pumps every day and pumps water out of that manhole every day. Alabama Village is a major source of water loss.”
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