Commission unable to stop rising sewer rates in North Shelby

An Analysis

Off the bat, this article isn’t meant for general consumption, as many will find it tedious. However, for about 4,000 North Shelby residences, what’s below I feel is important.

You’ve already seen the history of the North Shelby Water Treatment Plant and heard what happened at the often-contentious meeting on Feb. 4, but just like some of you, 280 Living doesn’t think the issue can be completely covered by talking about the past. So, I found some things digging through the 2005 contract between Shelby County and SouthWest Water Company that I wanted to point out.

Driving a large portion of the meeting was a provision in the contract that covers what the Shelby County Commission can do if it objects to a rate increase. One thing is to appoint a review board, which members of the audience seemed to think would provide better oversight than the present procedure.

Currently, County Manager Alex Dudchock and his staff review proposed rate increases to determine if they violate the 2005 contract. Chances are none will, but there is another reason why using the Commission to act as a deterrent for rate increases isn’t and won’t be effective.

According to the contract, it can’t stop your rates from going up.

The Commission has the ability to stall increases (again, only if the increase violates the contract) through a complicated procedure that will inevitably work against it. If it objects, it has a limited window to hire a sewer rate consultant, and according to Water Services Manager Charles Lay, the County has never been required to do that before and can’t even estimate what one would cost.

It’s expensive – more than $100 an hour according to some documents I found on the Internet. I called a few rate consultants as well, but didn’t hear back before deadline.

The process follows that SouthWest Water would also hire a consultant, and the two consultants would choose a third consultant to be hired. The cost of the third consultant would be split between SouthWest and the County.

Consultants would be employed for approximately 30 days, and the cost is entirely a gamble – not an investment. The county can’t dictate to a consultant that it wants the rate to come down; the consultant determines, based on evidence, what he or she feels the increase should be. Each of the three would present what he or she feels is a justified increase following the process. After that, the three would either agree on a number or take the average.

Best-case scenario, you’re rates only increase by the contracted 8 percent per year. Worst case, and more likely, the increase is equal to or higher than proposed. SouthWest Water will be able to justify it.

Shelby Commissioner Rick Shepherd, a Greystone resident subject to the same rates you are, agreed that the County may be limited in offering direct or immediate help.

“(The County has) nothing to gain from rates going up,” he said Feb. 8. “But as long as the system services county residents and the company is abiding by the contract, we can want to get involved all we want, but we can’t legally do anything.”

So, Shepherd said, he and other residents may look into appealing to the State Legislature to have the Alabama Public Service Commission oversee wastewater rates in the state. The PSC already regulates rates for some utility services, including natural gas, and SouthWest Water included a clause in the contract in case it occurs.

It’s a long shot. But to prepare for that, you’ll need the audits.

Residents at the meeting were furious when they learned the Commission doesn’t annually audit SouthWest Water. Of course, as stated during the meeting by Commissioner Lindsey Allison, it can’t and has no reason to according to the contract.

However, pursuant to provision 7.13 of the contract, the Commission should be receiving both quarterly and annual financial statements.

7.13: The Buyer shall furnish the County, within one hundred twenty (120) days after the end of each fiscal year of the Buyer, the audited year end financial statements reported upon by the Buyer's independent public accountant and the Buyer's annual reports on Form 10-K. The Buyer shall also furnish the County with copies of the Buyer's quarterly reports on Form 10-Q and other filings of the Buyer filed with the Securities and Exchange Commission.

SouthWest Water’s 10-K forms are its audits filed with the Securities and Exchange Commission. The company’s 2006-2011 reports should be available through the County Commission, and the 2012 report should be available in May. The most current version of this is from Fiscal Year 2009 and can be found here.

But Lay said as far as he knows, they haven’t been submitted.

I make no insinuation that SouthWest Water has committed any illegal or even questionable act that can be uncovered in these reports. I’m only saying these are the documents that members of the audience chastised members of the Commission for not having.

Though the Commission couldn’t produce them for me before deadline, Lay said they should be available soon.

I don’t like seeing you pay what you are for sewer service and I wouldn’t like to pay it either. But the Commission is acting in accordance with the contract. SouthWest is acting in accordance with the contract. Your rising rates are covered by the contract.

Help may be out there; it's just going to require more work - and more civility - to find.