27

Feb
2013

The NKY Water District Waterboarding

Members of the Northern Kentucky Tea Party movement took a close look at some of the numbers behind the Northern Kentucky Water District’s proposed 25 percent rate hike for 2011 and they didn’t like what they saw. Chair massages for district employees and $35,000 worth of water bottles are some examples of spending the organization says it didn't want to see passed on to the water utility’s 80,000 customers in Boone, Kenton and Campbell counties (Tea party questions NKY Water District spending, 2010).

Tea Party members and others became incensed during an October public hearing during which Northern Kentucky Water officials, who attended the gathering at Thomas More College, were not allowed under state rules to detail their rationale for needing the significant increase.

The local political organization was angered by the water district’s announcement that unfunded federal mandates were a significant part of the reason for the rate increase, along with need to replace aging infrastructure and generally rising costs of operating and maintaining the utility and its infrastructure (Tea party opposes proposed water rate hike, 2010). So the group took the unusual step of signing up as an “intervener” in the rate case, which allowed Tea party lawyer Duane Skavdahl to question the utility’s leaders and consultants under oath. Unlike in some other cases, Attorney General Jack Conway’s office did not hire its own experts to examine and challenge the water district’s need for all or part of the rate hike, which should speak volumes about how anemic our Attorney General’s office is when it comes to spending by our special districts (Tea party opposes proposed water rate hike, 2010).

The spending, which became public because state regulators are determining how large of a rate increase to grant the water district, included several items:

  • $1,750 was spent in 2009 for chair massages at the district’s central facility and Fort Thomas Treatment Plant that were provided by licensed massage therapist Jane Proctor.
  • $35,531.20 was spent last year on water bottles with Northern Kentucky Water District labels that the utility fills with its own tap water to promote the quality of that water.
  • Another $1,653 was spent on dues and charges at the Metropolitan Club in downtown Covington.
  • The agency also spent $2,213 on flowers for ill employees or their deceased close family members during 2009 – a high of $314.84 spent in April and a low of $64.95 in June (Tea party questions NKY Water District spending, 2010).

“I think that they’re out of control,” said Terry Donoghue, whose group also believes Water district president and CEO Ron Lovan’s salary of $223,000 is high. “I think we need to have an oversight panel to go in there and see where we can cut costs.”

Donoghue said he believes the district’s six board members – four appointed by Kenton County and two named by Campbell County – must not be adequately doing that. “There’s nobody there to watch over the excessive spending for the customer (Tea party questions NKY Water District spending, 2010).”

On the final day the public was allowed to comment on the Northern Kentucky Water District’s request for a nearly 25 percent rate increase, the Northern Kentucky Tea Party movement asked state regulators to reject the utility’s request (Tea party opposes proposed water rate hike, 2010). The Kentucky Attorney General’s Office, charged with representing utility customers in such rate cases, did not take a position on the overall request, but did ask that the water utility stop some of the spending that the tea party had criticized (Tea party opposes proposed water rate hike, 2010).

Conway’s office also urged regulators not to let the utility charge ratepayers for payments to such groups as the Covington Rotary Club, the Northern Kentucky Chamber of Commerce, Healthpoint Family Care’s Hope Derby and STARS for a 5K run. Such payments “fall outside of the scope of the district’s lawful authority.”

Those payments “do not provide any tangible, material benefit to ratepayers,” assistant attorneys general wrote. “For a water district, such payments, however noble, are outside of the scope of the district’s authority,” they added, observing such payments also “are, at best, uncomfortably on the border of a lawful action (Tea party opposes proposed water rate hike, 2010).”

They further agreed with Tea Party critics that the water district failed to prove its $1,653 payments to the Metropolitan Club in Covington helped meet its goal of “education and communication.” The lawyers did not mention some payments protested by others, such as $35,000 for water bottles, $1,750 for employee wellness chair massages by a licensed massage therapist (a practice that was discontinued) and $2,213 spent on flowers for seriously ill employees or their deceased close relatives (Tea party opposes proposed water rate hike, 2010).

As for the Tea Party’s suggestion that the state should rule the water district does not need to follow the U.S. Environmental Protection Agency’s new Safe Drinking Water Act regulations that require water utilities to remove byproducts created by chemical disinfectants, Conway’s office strongly disagreed.

“While anyone is free to question the balance struck … in terms of the cost versus health benefit (of the new standards) … the rule is the law that Northern must follow,” Conway’s office argued. The lawyers recommended that the water district and industry as a whole more closely track the costs of complying with the new standards, “the Attorney General cannot state, suggest, infer, or otherwise imply that Northern should disobey this law which has been duly enacted after public participation in the rule-making process – regardless of any argument that the law is unfair (Tea party opposes proposed water rate hike, 2010).”

According to the EPA, the regulations are intended to reduce not only bladder cancer, but also colon cancer, rectal cancer, and health risks to pregnant women and their fetuses (Tea Partiers protest clean water rules meant to prevent bladder cancer, 2010). Unfortunately the residents of Northern Kentucky will have to take their word for it since they have not provided any scientific research to support such claims which would substantiate the stricter regulations that are leading to the rate increase. Water district president and CEO Ron Lovan said the giant portion of need for the rate increase is aging infrastructure and more stringent water-treatment standards required by the federal government. The district paid electric bills of $2.4 million last year and paid another $1.9 million just for chemicals, Lovan added (Tea party questions NKY Water District spending, 2010). Shouldn’t the burden of proof rest with the EPA to prove the regulations are necessary before imposing the provisions of the Safe Drinking Water Act that took effect in 2012?

Since 2003, water rates also have increased by 71 percent for the roughly 300,000 customers of the Northern Kentucky Water District, which serves Campbell and Kenton counties and parts of Boone, Grant and Pendleton counties. That includes the cost of absorbing several municipal water districts over the years, as well as a 25 percent increase in January 2011 to cover the cost of complying with new federal drinking water regulations. (Yikes! Water rates up 71%, 2012).

The trend toward higher bills is being driven by:

  • The cost of paying off the debt on bonds municipalities issue to fund expensive repairs or upgrades on aging water systems.
  • Increases in the cost of electricity, chemicals and fuel used to supply and treat water.
  • Compliance with federal government clean-water mandates.
  • Rising pension and health care costs for water agency workers.
  • Increased security safeguards for water systems since the 9/11 terror attacks.

The costs continue to rise even though residential water usage dropped sharply nationwide in the past three decades amid conservation efforts (Yikes! Water rates up 71%, 2012).

U.S. water systems will need as much as $1 trillion in infrastructure improvements by 2035 to keep up with drinking water needs, according to a survey of industry experts released in June.

The bond debt needed to fund those projects’ work will be passed on to consumers, including the many Americans struggling with the economic fallout of the great recession (Yikes! Water rates up 71%, 2012).

The Northern Kentucky Water District will raise water rates again by 6.47 percent over the next 13 months. The Kentucky Public Service Commission approved the district’s plan to increase rates by 3.34 percent on Jan. 1 and then by an additional 3.03 percent on Jan. 1, 2014 (N.Ky. residents will pay 6.47 percent more for water, 2012).

The added revenue will help pay for Environmental Protection Agency-mandated improvements to the Fort Thomas water treatment plant and repairs to aging water lines, said Ron Lovan, president of the Northern Kentucky Water District.

“The significant drivers are the unfunded mandates, aging infrastructure and, as we look forward, the rising operating costs for power and chemicals,” Lovan said.

The water district has invested $28 million into a new disinfection system mandated by the EPA for the Fort Thomas treatment facility, he said. The district has also spent $9 million in the past year replacing aging infrastructure, notably the $300,000 waterline replacement project just completed in Latonia, and spent $4 million replacing a distribution mainline off Horse Branch Road in Crestview Hills and Edgewood (N.Ky. residents will pay 6.47 percent more for water, 2012).

Northern Kentuckians pay almost double what Cincinnati residents pay for water. Greater Cincinnati Water Works charges a customer who uses 6,000 gallons per month $68.83 quarterly, compared to the $122.73 charged in Northern Kentucky. Louisville’s rates are $93.76 per quarter for the same usage (N.Ky. residents will pay 6.47 percent more for water, 2012).

Lovan was quick to point out that the Northern Kentucky Water District’s 6.47 percent rate increase is much lower than the 25 percent rate increase approved by the public service commission in January 2011. (N.Ky. residents will pay 6.47 percent more for water, 2012). According to Lovan the Northern Kentucky Water District will likely increase rates in the single digits to cover repair costs and the rising cost of energy and chemicals in the future. (N.Ky. residents will pay 6.47 percent more for water, 2012).

Why are water bills going up around much of Northern Kentucky while they are going down in Walton? The Walton City Council approved two measures that will reduce water service prices for Walton residents. The first is eliminating the $4 monthly line maintenance fee (Walton decreasing water bills, 2013).

Along with striking the fee, Walton is also not passing rate increases from the Northern Kentucky Water District (NKWD) on to its residents. The city buys its water from NKWD, which is implementing a 2.2 percent rate increase this year and a 1.9 percent increase next year (Walton decreasing water bills, 2013).

Walton’s water operation is financially stable enough that there’s no need to pass on those increases to residents, Mayor Phil Trzop said.

“It’s an efficiency of operations,” he said. “If you watch your dimes, the dollars take care of themselves (Walton decreasing water bills, 2013).”

Does the statement by Trzop and the actions of the Walton City Council imply that the Northern Kentucky Water District isn’t an efficient operation?

What can you do? First you can contact the Legislature Message Line at 1-800-372-7181 and express your support for HB 1 which would require financial reporting for our special districts through an online registry available to the public. Second, if you suspect fraud, abuse, or waste going on in your local government or public service agency, call the Alert Hotline or click on the SAFE-house link listed below and report it via the auditor’s website.

Adam Edelen

Kentucky State Auditor

209 St. Clair St.
Frankfort, Ky. 40601-1817
Phone: 502.564.5841
Alert Hotline: 1 800 KY-ALERT (1.800.592.5378)
Fax: 502.564.2912
8:00 A.M. until 5:00 P.M. (EDT)

To report fraud, waste and abuse: SAFE-house

Website: http://auditor.ky.gov/Pages/default.aspx

There a just too many government, public service agencies, and special taxing districts for Edelen’s staff to monitor simultaneously. We need to be their eyes and ears when there are misuses of public funds occurring. With everyone’s help we can hold our public institutions accountable to the tax payer.