Asbill: Rate structure does not support needed improvements

By Sheila Harris [email protected]

The Missouri Public Service Commission (PSC) recently approved the sale of the City of Neosho’s water and wastewater systems to Missouri American Water (MAW) for $34.5 million, with the completed sale announced by MAW on Sept. 3.

A subsidiary of the publicly-traded American Water Works Company, Missouri American Water operates public water and wastewater systems across Missouri, as well as in other states. As a shareholder-owned utility corporation serving the public, they are subject to the regulations of the PSC.

A City of Neosho press release stated that the City’s water infrastructure had been in place for over 80 years, and required “substantial upgrades and improvements,” that would “cost tens of millions of dollars, require dramatic rate increases and/or the approval of bond measures with additional taxes and take decades” to complete.

Neosho’s situation is not uncommon, according to Richard Asbill, Cassville city administrator.

“Most rural communities that operate their own water and wastewater systems face similar challenges with aging infrastructure and coming up with the funds to make upgrades,” he said.

According to a Sept. 3 article in The Joplin Globe, Neosho “reported that the water lines [there] leak 50% or more of the water that is filtered before it reaches any water customer.”

Asbill explained that leaks are unavoidable as public water systems age, and that Cassville has its fair share.

“If you pump 100,000 gallons of water from wells, but only 88,000 gallons are going through meters, you have to start doing some evaluating,” Asbill said. “Did the loss occur in a month, or over a year? Is the loss tied to one major leak, or to leakage throughout the overall infrastructure?”

Asbill and Mike Hagins. Cassville public works director who manages the water and wastewater system, explained that Cassville’s karst topography provides its own challenges.

“Water leaks in Cassville might not show up on the surface of the ground,” Asbill said. “Water might drain directly into the ground through cracks in the bedrock and run right into Flat Creek.”

Because of Cassville’s terrain, each of the City’s five wells are situated at different elevations, which presents challenges with balancing water pressure.

“Most of our wells are interconnected, to provide back-up if a pump goes down and to balance water pressure,” Mike Hagins said. “We still need to run a connecting water line between Pump 3 and Pump 4 [located near Walmart and the 911 Center].”

According to Asbill, that project, along with needed general infrastructure improvements, will carry a price tag of several million dollars.

Asbill says he doesn’t judge the City of Neosho for selling their water and wastewater systems to a private corporation.

“Selling water infrastructure has its advantages,” he said. “And, it can even be considered beneficial to the residents. Corporations can come up with funds for improvements more quickly, and thus make upgrades more quickly, whereas the wheels turn slowly with city council decisions and expenditures.

“The sale of the water system to a private corporation, might, at first, feel like a cash windfall to a city that has bills to pay, but there can be drawbacks.”

Asbill cites the scenario of a city finding itself in the position of having to pay the very company they sold to, for the water they use for public purposes.

Another drawback, Asbill said, could be the unpredictable future rate hikes private corporations will charge to cover their initial investments.

“Unlike a corporation made up of private investors who are expecting a certain profit-margin as a return on their investments, your local city council members are directly accessible to residents and can offer transparency that isn’t always available with distant corporations,” he said.

For natives of Barry County, where public water and wastewater systems are locally owned and operated, the idea of investor-owned public water systems, with publicly-traded stock, may seem like a foreign concept. However, Heather Peters, Water Pollution Section Chief with the DNR, says that private ownership of public water and wastewater utilities is not a new development.

“For drinking water systems [in Missouri], 1,061 are publicly owned, and 1,761 are privately owned,” Peters said. “For wastewater systems, 770 are publicly owned and 1,812 are privately owned.”

Peters stated that Missouri American Water Company owns 46 water systems and 65 wastewater systems in Missouri.

According to Peters, examples of other private companies that own water systems include Missouri Water Association Inc., with 30 systems; Confluence Rivers Utility Operating Company, Inc, with 27 systems; Liberty Utilities, with 21 systems; and Ozarks Clean Water Co., with 15 systems.

Other privately-owned, public wastewater systems include Lake Area Waste Water Association, Inc., with 85 systems; Confluence Rivers Utility Operating Company, Inc., with 74 systems; and Liberty Utilities (Missouri Water) LLC, with eight systems, Peters says.

“Privatization of public systems can be seen in pretty much all types of drinking water treatment and wastewater treatment systems — large and small, urban and rural,” Peters said. “Most of the time, it is because a private company that owns many facilities may have resources that an individual municipal system may struggle to meet.”

Asbill said Cassville does not currently have the rate structure in place to support the needed improvements to the city’s water system.

“We’re not marketing our infrastructure,” Asbill said. “We’re comfortable owning our water and sewer systems, but we do have maintenance and upgrade needs, so we’re evaluating rate increases to cover those unavoidable expenses.”

Asbill said options will be discussed in upcoming Cassville city council meetings. Meetings are held the second Tuesday of each month, at 4 p.m.