CCUA offers to take over town’s water system

$20 million offer

By Wesley LeBlanc
Posted 8/15/18

ORANGE PARK – Clay County Utility Authority has its sights set on Orange Park and might shell out some $20 million to acquire the town’s water and wastewater system.

On June 18, CCUA Executive …

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CCUA offers to take over town’s water system

$20 million offer

Posted

ORANGE PARK – Clay County Utility Authority has its sights set on Orange Park and might shell out some $20 million to acquire the town’s water and wastewater system.

On June 18, CCUA Executive Director Tom Morris sent a 3-page letter to Orange Park Town Manager Sarah Campbell that detailed the CCUA’s desire to become the provider of the town’s water utility services. In the letter, Morris laid out both benefits to the town as well as CCUA.

The first benefit to Orange Park that Morris points out in the letter is a large, upfront cash infusion estimated to be around $20 million. However, Campbell said that number could change because the town is conducting its own appraisal of the system’s value. If the town’s is higher, then the town will negotiate accordingly, she said.

While the $20 million would come in a lump-sum payment, the town will lose a significant portion of its revenue if they take it. As it stands, the town earns about $1 million a year from its water utility service. If CCUA begins providing the service, the town would lose that $1 million each year.

“If the only goal is to secure 20 years of funding, then that’ll do it, but the council will have to determine a way to either come up with a new source of revenue [to replace the $1 million a year] or use that $20 million to provide the lost source of revenue,” Campbell said.

In his letter, Morris points out that the town would be free to use the money as it wishes – all $20 million would go into the town’s general fund – including investing the proceeds from the sale to draw an annual income indefinitely. The town could also use some of this money for any other capital improvement needs. In the end though, this will be up to the residents and the council to decide.

“The decision is based on the council after hearing from staff and residents,” Campbell said. “The purchase price will be a major point of discussion throughout all of this.”

In addition to the $20 million, Morris said CCUA would pay the town an annual payment in lieu of taxes equal to 4.5 percent of the revenue generated from the delivery of the utility system services. According to Campbell, this is essentially a franchise fee, or an annual surcharge for the right of CCUA to do business in the town. Morris said that this annual payment would be approximately $425,000.

Moving forward, money will be a major talking point but certainly not the only one. Another facet of the conversation will be the actual service CCUA will provide to Campbell.

Theoretically, Orange Park could at any point face the threat of increased regulation from the State of Florida, which could possibly force the town to pay more money for more systems. Campbell called this a bit of “a boogeyman” as the threat is always looming, which if CCUA began providing the services, is a boogeyman that would crawl under their bed instead.

And while increased regulation isn’t necessarily a bad thing, it being able to come at any time can be worrisome for a town like Orange Park which has roughly 3,000 water and sewer customers. CCUA, which has roughly 55,000 customers, according to Campbell, is significantly more prepared and capable of handling increased regulations that could potentially come at any time.

On top of that, there might come a day where Orange Park is required to cease discharging into the St. Johns River, meaning the town would have to build a new water plant that could cost, according to Morris, upwards of $15 million. If CCUA took over the town’s system, the river discharge issue would go away. Instead, CCUA would eliminate discharge into the river by using plants it already owns, therefore, eliminating the need for Orange Park to have to build a new plant one day.

According to Morris, CCUA has newer technology that creates greater efficiency, such as remote water meter reading, which it began installing in 2013. At present, Orange Park reads water meters about once a month in-person. The CCUA system also helps detect water leaks, which can save customers added costs.

“If someone’s meter never shuts off over a two- or three-day period, that tells us there’s a leak,” Morris said. “When we see these kinds of patterns, we’ll send a technician over to fix it. Our goal is to help our customers, so they don’t get that shocking bill. We provide these services to all of our customers and there’s no reason we wouldn’t extend it to Orange Park.”

CCUA is hoping to make this transition, if approved, as quick and painless as possible, even going so far as to make a commitment to hire all of Orange Park’s current water service employees.

“That’s the very first thing I spoke with Tom Morris about,” Campbell said. “They actually want our employees and need our employees. They’d be guaranteed a position with CCUA and we wouldn’t move forward if they weren’t. We wouldn’t want our employees harmed in any way in this process.”

For Morris, who said CCUA has never attempted a purchase with Orange Park before, the benefits for the company would fall right in line with their legislation.

“That’s what our legislation provides us to do; provide water and sewer service to unincorporated Clay County,” Morris said. “We are neighbors with Orange Park, which creates a very unique opportunity for all parties involved, and we can see a lot of benefits by seeing this transaction through.”

According to Morris, the transaction would take no more than a year. Once that transition is complete, all Orange Park water customers would receive the full CCUA utilities experience, complete with customer service that Campbell.

Despite the letter, Morris points out that the transaction is in its first stages and is only an offer. The next step is a public hearing scheduled at Orange Park Town Council with representatives from CCUA on Sept. 18 at 5:30 p.m. in the Orange Park Town Hall.

“We have just now decided to hold a joint meeting to learn about this and we really don’t know how this is going to pan out,” Orange Park Mayor Gary Meeks said. “Whether it’s worth it or not, we don’t really know yet. Before we take the offer, the main thing we have to do is hold the public hearings on it to figure out if the council wants to do it and the council will make that decision based on how the town feels about it.”

Meeks stopped short of suggesting the town hold a public referendum on the transaction before Council makes a final decision. Until then, he will wait until the September public session. During the meeting, citizens and staff will be able to discuss the offer openly.

“I think this is a really good opportunity for the town to examine its future and what it wants to be,” Campbell said. “My belief is that streets, cops, firefighters and EMTs are part of what makes Orange Park a town. I don’t think we’ve ever gone down the list of water services and what that means to the town. What is the community’s reaction to this offer and how important is the provision of water and sewer service to the town by the town for citizens? These are questions we’re looking to get answered before we move forward with anything.”

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