The Mobile Area Water and Sewer System announced Sept. 2 it will not take control of the Prichard Water Works and Sewer Board, despite a voter referendum approved in June which allowed MAWSS to assume the Prichard system’s assets.

After a special-called executive session Sept. 2, MAWSS spokeswoman Barbara Shaw cited a recently approved $32.8 million third-party management contract, financial shortfalls and regulatory deficiencies as some of the reasons MAWSS could not take over the Prichard system.

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“It is with much regret we announce today that the Mobile Area Water and Sewer System cannot take over the Prichard Water Works due to a number of issues beyond MAWSS’ control,” MAWSS Chair Maynard Odom said in a statement. “This decision was reached after an intense assessment of the system’s current contractual obligations, financial stability and its capital needs.”

Shaw said a vote from the board was not even necessary as there was no motion made to adopt a resolution to accept the Prichard system.

Severn Trent contract

Just a week before the countywide vote to merge the two entities, the Prichard board approved a multi-million dollar, five-year management contract with Severn Trent Services (STS), which made it virtually impossible for MAWSS to assume responsibility of the system, Odom said.

According to a news release, a review of financial information from late June showed Prichard was three months behind in payments, owing more than $1.2 million to STS.

A memo to the Prichard board dated July 23 showed the system was three months behind in its payments to STS, stating “funds are not available to pay … invoices totaling $1,255,513.59”

During the same fiscal year, MAWSS concluded the Prichard board entered into numerous new contracts with an engineering firm, lobbyists, a public relations firm and a consultant, which led to additional expenses while also trying to meet its financial obligations to STS.

Consequently, MAWSS said this left the Prichard system with a severe cash flow problem, where expenses exceeded revenues, and would ultimately leave MAWSS responsible for all legal contracts and debts if they took over.

In 2009, MAWSS offered to manage the Prichard system at a lower cost and offered to assist Prichard within the last year, MAWSS Director Charles Hyland added. Instead, Hyland said Prichard chose to sign a five-year renewal with STS, a commitment he believes their customers just cannot afford.

“MAWSS wanted to bring more cost effective service to Prichard,” Hyland said. “This would have been a win-win for Prichard and would have also aided economic development in the region. But that’s not possible if we are paying a management company to do what we do on a daily basis.”

Condition of the Prichard system

MAWSS claimed the Prichard Board was not acting in the best interest of its customers when they renewed the Severn Trent contract and neglected to address other issues facing the “troubled” system, including the likelihood of infrastructure failures within the Prichard system. MAWSS contends that maintenance and replacement of aging equipment within Prichard’s plants and infrastructures has been deferred due to lack of funds.

In a May 2014 monthly report STS compiled for the Prichard board, the contractor divulged several “critical issues” including a leaking roof at the filter plant needing “immediate attention,” a bar screen repair at Grover Street Plant, a grit pump repair at Eight Mile Plant and a repair to a break in the Main Street sewer line.

Odom also said Prichard was due to receive a new permit from the Alabama Department of Environmental Management for the Carlos Morris Wastewater Treatment Plant, which is likely to require construction of a $4 million outfall project to bring it into regulatory compliance.

According to MAWSS, once the new permit is received, the plant will be unable to meet new limits for discharge into Three Mile Creek and a new outfall will need to be constructed.

Legal concerns

After MAWSS’ Sept. 2 verdict, many questioned the legality of their decision. However, in a May 29, 2014, letter to Sen. Vivian Figures from the State of Alabama Legislative Reference Service, Legislative Analysist John Treadwell stated the Mobile Board could elect not to adopt a resolution assuming or discharging all obligations of the Prichard Water System.

Furthermore, he wrote, “If the Mobile Board elects not to adopt a resolution assuming or discharging all liabilities of the Prichard board, the transfer of assets and liabilities from the Prichard board to the Mobile board does not occur and the Prichard board would continue to operate as it currently exists.”

In November 2010, State Rep. Napoleon Bracy was elected to the House of Representatives and joined Sen. Figures’ efforts to pass legislation that would give citizens a chance to vote on combining the Prichard and Mobile water systems.

The legislation was passed and on June 3, 2014, 52.5 percent of voters in the county said “yes” to approving the takeover.

“We applaud Sen. Vivian Davis-Figures, Rep. Napoleon Bracy, the Concerned Citizens of Prichard and the voters in Mobile County who voted to allow MAWSS to manage the system,” Odom said. “But after assessing the impact of the STS contract and other issues, we just could not make the transfer work favorably without raising the rates of Prichard customers and no one wants to see that happen.”

Prichard’s “Five-Point Plan”

According to the Prichard Water Works and Sewer Board’s website, the Prichard system details a five-point plan to restructure its bonds, produce its own water, discharge to the Mobile River and expand its capacity to grow and provide enhanced customer service.

Prichard Mayor Troy Ephriam said he is happy with MAWSS’ decision not to absorb the Prichard system and believes the Prichard system can move forward now that a decision has finally been made. With the uncertainty of MAWSS’ verdict, which he called a “clear, present threat,” no longer lingering over their heads, Ephriam believes the Prichard board is ready to execute its plan.

“We are pleased with the decision,” he said. “I do think we have challenges still in front of us, but we also have an opportunity to move forward. We are ready to resolve these problems.”

The Prichard board cites its “excellent” credit rating as putting them in a position to restructure their bonds, which they say will save their utility millions of dollars. With these savings, they plan to reinvest in the system to provide significant upgrades to Prichard water.

Secondly, the Prichard system said they want to eventually produce their own water, instead of purchasing it wholesale from MAWSS to the tune of about $128,000 per month. When MAWSS raises water costs, the increases are then passed on to Prichard customers, according to the Prichard board.

The Prichard system admitted state environmental officials mandated they begin discharging wastewater from Three Mile Creek to the Mobile River by 2015 and noted the system already has a pipeline to comply.

In addition, the Prichard board said they have the capacity to expand the water and sewer system and have plans to replace 19-inch water and sewer lines as part of the improvements.

They also plan to extend sewer lines to connect those who are currently using septic tanks in the Prichard community.

Lastly, Prichard Water said their plan also includes the addition of an online bill paying system they hope to have by 2015, if not by the end of this year.

With high water bills being a major concern of Prichard citizens, Ephriam said he believes MAWSS was not going to be able to offer rate reduction. However, he said his obligation is to meet the need of Prichard citizens who are searching for some relief with their bills.

“I think we have a plan in place to address that,” Ephriam said. “I’m going to push for an immediate reduction … I think the citizens need that.”

In an official statement, the Prichard water board said, “we would like to let you, our valued customers, know that Prichard Water is a solvent, stable and sound utility with assets valued at more than $75 million. Prichard Water has a fiduciary responsibility to our customers and the City of Prichard to protect our utility from what was for us a five-year hostile takeover attempt.”

Kim Davis, a spokeswoman for the Prichard Water and Sewer Board, said the board is not making any further comments regarding the MAWSS decision at this time.

“At the end of the day, I don’t think they [MAWSS] really wanted the system,” Ephriam said.

 

Follow up to the story “MAWSS declines takeover of Prichard system” published by Lagniappe on Sept. 2, 2014.