Travis County Commissioners Court
Tuesday, September 7, 2010,
Item 33
And we indicated that we would call up the kennedy ridge item at about 1:45 p.m.
we do have representatives here from that one.
we'll call up the budget amendments and transfers next.
and the kennedy ridge is number 33.
for the open court discussion, we have mr. Evans here with the southwest water utility.
on this item there were several articles in the Austin american-statesman regarding delinquent payments from the kennedy ridge water supply corporation to southwest water corporation.
and mr. Evans, if there's another representative of southwest -- is there another representative of southwest with you.
>> yes, sir, charlie evans, here representing southwest water.
I have with me mr. Gary rose who has substantive information about southwest water, we'll provide whatever information you need or want.
and answer any questions.
we have this posted under executive session, we do plan to take it in there.
I have three or four questions of legal regarding county authority.
mr. Rose, welcome.
>> are you related to gary rose -- rose and -- and bastrop?
>> no, sir, I get -- there's a lot of rose's in town.
I have an uncle in town last name rose, but I'm not related to any of the roses there.
>> this rose is a permanent citizen, you may want to get to know him.
>> maybe, sir.
>> what comments do you have for us.
>> what I would like to do, judge, either give y'all very brief synopsis, I know that you've had a one page handout to you or I could answer questions.
however you would like to handle it.
>> it would be good, I think judge there's been a lot discussed in the partnership, of course we have calls that have come in here, also, judge.
it would be really good I think if you could just basically tell the public exactly what's going on.
your involvement as far as dealing with the kennedy ridge water supply corporation.
and the residents out there have been impacted with decisions that -- that you've made.
so if you could just give a brief overview for the sake of the public who is looking at this.
probably been following this issue.
so I would like to hear just something real brief, if you can.
>> all right, Commissioner, I would be happy to.
southwest water company bought hornsby bend utility in the year 2000.
since that point in time, we've invested about $20 million into hornsby bend water utility company.
>> I'm sorry, can you repeat, how much money?
>> 20 million.
>> 20 million.
those are for improvements in the water and wastewater system.
kennedy ridge, water supply corporation, buys wholesale water from hornsby bend utility company.
the residents in kennedy ridge are not customers of hornsby bend utility company, they are customers of the kennedy ridge water supply corporation.
in November of 2008, and then again in November of 2009, hornsby bend utility company put a rate increase in going back to the $20 million worth of investment we've made we needed to increase the water and sewer rates.
in January of 2010, we were doing an audit of the contract with kennedy ridge water supply corporation and discovered that kennedy ridge water supply corporation, by contract, was the -- to pay the same water and wastewater rates as the retail customer in hornsby bend utility company pay.
I contacted mr. Steve cantu, at that time the president of the kennedy ridge water supply corporation and let him know two things.
one that their rates would be increasing.
the second item being that the -- that they had not been charged the rate they should have been charged in under the allowances of tceq guidelines we were going to go back and calculate the past 12 months back bill and -- and back bill them for that amount.
we had a couple of meetings with mr. Cantu.
we worked through the questions they had.
we agreed to a payment schedule, payment plan, if you can on the back bill issue before it could be paid over time, pretty generous arrangement, actually, without any penalties or interest put in place on that.
kennedy ridge in turn put in place a customer rate increase within their own utility as well.
the one thing that I would like to stress on this, again neither southwest water through hornsby bend, which we own, we do not supply the water and wastewater to the kennedy ridge residents.
they pay this themselves.
unfortunately I think where part of this got out of hand somewhere, some of the residents in kennedy ridge, five of them, got hold of the account for the kennedy ridge water supply corporation.
and came to payment center, which are basically in convince stores run by an outside vendor named fidelity express.
said they wanted to pay their kennedy ridge water bill.
gave the kennedy ridge water bill account in those payments were received and posted against the kennedy ridge account.
they should not have come to us, they should have taken it to the water supply corporation, because they are customers of the kennedy ridge water supply corporation.
of those five, we have refunded one payment already to one of them.
one of them was voided out.
I refer to my notes.
two more we're still in the process of refunding.
we have cut the refund checks to those.
those are being sent out.
federal express overnight should have those tomorrow.
we are also putting in place a mechanism with their third party vendor whereby they will not be accepting any payments from kennedy ridge customers in the future.
those should have never come to us.
>> there was a certain I guess according to sources, spike as far as increase in -- in the water rates.
and then I guess that was due to the fact of the -- of the -- back arrears that were owed as far as this $20 million investment, infrastructure investment that I guess you all had incurred.
of course you went back and back billed some situations.
I guess my question is right now understand that there are currently three persons in the community that -- that water services have been terminated.
and my concern again is what do -- who would be the party that would look at -- get these persons water turned back on.
>> Commissioner, that would be the kennedy ridge water supply corporation.
they are the owner of that utility system, those customers are the retail customers of the water supply corporation and the shut off for non-payment was done by the kennedy ridge water supply corporation.
>> so arrangements can be made with the -- have there been arrangements or is there a possibility I guess for arrangements I guess with the kennedy ridge water supply corporation to actually assure that the persons get their service reinstated?
>> Commissioner, I'm sorry,ance for kennedy ridge again.
>> I can't answer for kennedy ridge.
>> I know that you can't.
I know that you have worked on a deferred plan.
>> yes, sir.
I have talked to the now acting president of the kennedy ridge water supply corporation and he has expressed to me that they would make arrangements with their customers.
>> and despite -- this is a very poor community.
despite that -- the spike that has been substantial, I guess, as far as increases is concerned, may have to -- may impact folks as far as affordability is concerned.
I guess my question is, is there any way that -- is there anything possible that you can do to -- to look at the affordability of -- of -- of what's going on out there?
because that's pretty serious increase in the rate.
whether you are dealing with arrears or whatever.
that's a pretty increase as far as rates are concerned as far as taking care of the arrears that have been brought up as far as at this point.
so is there any arrangement that can be made to maybe mitigate the -- the increase for those particular arrears?
>> Commissioner, one of the things that we are able to do as southwest water company in other states is have life line rates where --
>> life line rates.
>> life line rates.
you see those on your utility bills, electric utility bills, where you can make a donation of a dollar, three dollars, five dollars, whatever you want, it goes in to help people that are financially challenged.
currently in the state of Texas that cannot be done.
we are working with members of the legislature to try to get the law changed in Texas.
the best thing that we can do in Texas is institute a program whereby water utilities can take donations from people that are -- that are customers of the water utility that want to assist folks in need.
and be able to hold those funds aside and apply them to those situations where people need help paying their bills.
>> you are a ccn, is that correct.
>> yes, sir, we have a ccn, that is correct.
>> all right.
the city of Austin is also a ccn.
lcra manville, you know -- the list goes on and on, aqua water, ccn.
the water supplier.
my question to you is that -- the city of Austin I don't know if they turn people's water off, I don't really know.
but if a person gets delinquent in their bills, hot summers months, folks aren't able to pay they make arrangements with folks.
as a ccn, who I'm asking is there any way possible that that can happen in this particular situation under a ccn.
if the city of Austin can do it, why can't you?
>> it can happen under ccn, Commissioner, but in this case the owner of the ccn for that service area is the kennedy ridge water supply corporation.
it is their ccn.
it is their retail customers.
>> the requirement of a same rate as Austin's colony, what contract is that contained in?
>> there is a wholesale water and wastewater service provider agreement between hornsby bend utility companies and the kennedy ridge water supply corporation.
>> what's the date of that contract?
>> I do not recall off the top of my head, sir.
>> was that in there from the beginning, you think.
>> yes, sir, yes, sir.
>> so that would date back -- almost 20 years, 18 years.
>> yeah.
it goes back into the '80s, sometimes, die believe.
sometimes -- die believe.
it -- I do believe.
it goes back some time.
>> there's no dispute that that language is in the contract between kennedy ridge and hornsby bend.
when you acquired that business you also acquired contract provisions, I take it.
>> yes, sir.
>> okay.
so today, though, kennedy ridge is how delinquent, can you tell us that?
>> as of September 1st, just over $70,000 totally owed, that does include their total bill.
on the past due amount, the original past due's, just over 65,000, they have paid roughly 14,500 towards the past due.
the 70,000 and change includes past due amounts plus current monthly billing.
>> you have about 170 customers there is what I read.
>> according to the tceq, yes, sir.
>> and southwest position now is that you will continue to work with kennedy ridge as long as there seems to be progress made.
>> for the record, the water supply corporation's board has been very good to work with.
we have met with them on multiple locations -- multiple indications, they are living up to -- multiple occasions, they are living up to all of the commitments that they have made.
we have got a method of working this out over time.
>> finally from me, the obligations to pay the arrearage, which the contract required under the same rate language, that is not regulated by tceq or anything?
that's a contract provision between kennedy ridge and southwest?
>> yes, sir.
but on that topic, mr. Cantu did take a copy of the contract down to the tceq and have them review it.
they said to -- yeah, we don't necessarily have oversight over this contract, but this contract is being interpreted correctly and that the water supply corporation does owe those amounts.
>> so to your knowledge, mr. Cantu is there today?
>> no, sir, he's no longer there.
>> okay.
mr.
>> [indiscernible] is he the one that you've been dealing with.
>> since mr. Cantu has left, yes, sir.
>> okay.
>> judge --
>> question --
>> was there not a wholesale water contract signed between hornsby bend and kennedy ridge in 2006?
>> not that I'm aware of, no, sir.
>> I think the contract goes back to when I was Commissioner and we really put the system in.
that would be back in early 1990's.
'92, '93.
>> that was the original?
>> that was the one that I recall.
if it were amended after that, I wouldn't know.
>> well, when we -- when we did the improvements to the water and wastewater in 2006, if there was a contract negotiated between hornsby bend and kennedy ridge, I saw a copy of it in my file on Friday.
now maybe that needs to be looked into more, but --
>> was that the contract per chance for the construction of the water and wastewater lines to serve the subdivision?
>> no, it's a water and wastewater services supply contract.
>> are you referring to the one tom when the improvements that were made as far as the water lines that came in under the -- under the grant application -- what he's talking about is the step program that -- that a small town, environmental program, that -- that whereby we were able to receive grant funding from the Texas department of housing community affairs, and the requirement for -- for that -- that -- in receiving that grant was to -- to have residents of the -- of the subdivision, in other words, kennedy ridge, actually provide the sweat equity to install those lines.
and, of course, that was done under that grant scenario.
so if there's been revisions for the amended portion of that, some other stuff brought later, with the drainage in road improvements and also the drainage shrinkage, actually shrinking the floodplain, with those type of improvements that came in later was something that was also looked into.
a little more than 3 point some odd million total just on those topics that I just mentioned.
so if there is a -- there is a contract that has been amended, I guess my point is you are you saying that you have no knowledge of that, maybe a minutes portion of a contract.
>> to my knowledge, obviously we will go back and check this, to my knowledge, the 2006 contract was where we actually made the hookups with the new water line and the new sewer collection line and did the actual construction activities related with bringing the community online as you were talking about.
>> yeah, yeah.
>> I'll be happy to show you a copy of what I've got to try to clear it up.
>> okay, thank you, sir.
>> the question is what does the contract say.
no is there another contract -- I can foresee an amendment --
>> I looked at it on Friday and it spoke to what rates would be charged.
>> let's try to find our copy, if you would try to find yours we would appreciate it.
but southwest acquired ownership the of the honest bee water supply when.
>> 2000, the year 2000.
>> any other questions or comments.
>> I have some, you said that you put 20 million in capital improvements since you bought it.
>> since we bought it.
>> obviously that could affect rates in one way or another.
what -- categorically what types of improvements did you put in?
>> improvements to the water system, four lift stations, added additional water supply sources and additional water supply piping, built elevated tanks, just -- just basically expansion and upgrades to both the water and wastewater systems.
>> just typically, maybe there isn't a typical, but when you negotiate the water rates with these water districts likendy ridge, the -- are they tip daily for a set period of time with a fixed rate?
I'm on a learning curve.
>> they are typically for a long period of time because people want to know that they have got a guaranteed water supply source.
you don't want to build a subdivision or go into an agreement where you are going to run out of water in the relatively near future.
typically they are at a rate that's at least equal to if not some percentage above the ongoing retail rate of the -- of the -- of the-- of the customers that are being supplied.
the supply source.
so in this -- in this case the rate is the same as the retail customers in hornsby bend pay, sometimes when you are an outside wholesale provider, you pay some premium over the retail rates.
>> we'll try to find our contract and if you will do the same, if we turn up another one we can decide whether we need to discuss that by phone or what have you.
you came here from houston, right?
>> no, sir, I'm here in Austin, I'm local.
>> okay.
Commissioner?
>> Commissioner Huber's question and your answer might have covered it.
but i, too, have a learning curve here.
the rate -- the wholesale rates are -- did you say the same as your retail rates?
>> yes, ma'am.
>> okay.
how many wholesale contracts does the hornsby bend -- does hornsby bend have?
>> just the one with kennedy ridge that.
is the only one.
that is the only one.
>> ostensibly they could be the --
>> as the ccn pointed out is in the kennedy ridge water supply corporation's name.
hornsby bend entered into the agreement to help the community be able to acquire water and wastewater services.
>> uh-huh.
so if -- if you sell to kennedy ridge on wholesale, what you are -- what the -- what the general retail is that you are selling, then when kennedy ridge factors in their o and m, then their rates are going to be higher than the rest of the retail rates out there; is that right?
>> sure, they have to pay somebody to read the meters, send the bills, collect the payments, post the payments, fix water leaks, whatever else happens out there, yes, ma'am.
>> anything further?
thank you very much.
>> thank you.
>> we will take this into executive session, we have a couple of other legal questions for legal.
>> thank you, gary.
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Last Modified:
Tuesday, September 7, 2010, 2010 6:54 PM
