Mayor’s Statement on Public Utility Service
November 7, 2019
Our public utility operations are the life-blood of our City’s organization. About two-thirds of our City’s annual $13 million dollars in total revenue for all enterprise funds is generated by our utilities. Similarly, about two-thirds of all City employees work for our utility operations, treating sewage, building sewer lines, producing the highest quality, potable water in West Virginia & distributing it throughout Upshur County & in fact to parts of several counties around us, as well as collecting garbage throughout most of Upshur County. Buckhannon has been consistently recognized for our excellence in executing these utility functions- by the West Virginia Department of Environmental Protection, the Health Dept., the Public Service Commission, the DNR, & the WV Rural Water Association. Our City has been in the utility service industry for many decades. Our Sanitary Board was created in 1957, the Waste Collection Board in 1961, & the Water Board in 1963- but long prior to those Board creation dates our City had been executing those utility functions for a substantial part of Upshur County.
Our City has demonstrated aggressive growth of its utility operations while maintaining & upgrading both our sewer & water plants in a manner designed to add decades of service for our community seeking to avoid the tens of millions of dollars required to invest in new plants. Our utility supervisors have been excellent stewards of our facilities. The realizations of developments around us during the past 20 plus years- Jenkins Ford, Buckhannon Toyota, Walmart, Lowes, Cambridge Heights, the Cinema VI, the Hampton Inn, Microtel, Harbor Freight, & the new armory to name but a few projects- have all been made possible due to our City’s investment in its utilities. These entities have created hundreds of jobs for our residents. Buckhannon’s utility operations have greatly raised the quality of life for everyone who resides in Upshur County.
Our City’s utility managers don’t feature just years or decades of service to this community, but they have cumulative centuries of service- Sam Ludlow who earned his masters degree at Cornell University in wastewater management- nearly 50 years, Amby Jenkins 44 years, Buck Samples 40+ years, Kelly Arnold 30 years, Jerry Arnold 26 years; & members of this Council who have served on our utility boards for many years, including my own going on 37 years of facilitating utility development. We are a well-seasoned lot who know how to develop utility projects. We employ excellent engineers in Sam Ludlow & Jay Hollen, project managers, financial & technologically skilled employees, & are able to discharge all legal facets of utility projects with quality counsel from Tom O’Neill.
You might imagine our City officials’ collective dismay & outrage really- to learn just one week ago today that the Upshur County Commission had decided to reassign substantial sewer utility territory, long belonging to our City, to a struggling public service district. Buckhannon was awarded certificates of convenience & necessity back in the mid 1990s from the State of West Virginia to develop utilities in this territory. During the past 25 years, our City Utility Boards have undertaken 14 projects in this territory collectively valued at millions of dollars of improvements. To be kind, the action of the County Commission is incredulous & defies rational explanation. To be blunt- it’s a slap in our City’s face. At its core, this decision should be seen as universally distressful by all utility subscribers throughout our Buckhannon-Upshur community.
Please indulge me while I offer some further facts for our residents to consider. About two years ago, our City officials were contacted about a proposed development on the south side of Route 33 west out near the J.F. Allen property. J.F. Allen was proposing a huge development with scores of buildings & of course they required utilities. City engineer Jay Hollen has a copy of their plans in his office. Our excellent City team immediately began to put together numbers to realize the sewer & water extensions on the south side of Route 33 West. A couple of years prior to that, our City had been approached by commercial players about a sewer extension on the north side of 33 West. The north side project for sewer alone was projected to cost $300,000. A year ago, our Sanitary Board offered to perform the north side project while paying for the first $100,000 of the $300,000 project. The south side project involving a longer stretch of sewer & water is more costly. The two projects together, i.e., north side sewer, & south side sewer & water would well exceed one million dollars. Our City has long had all capabilities to execute these projects, but we had to figure out how to pay for them. Buckhannon has constructed miles upon miles of sewer & water lines. On the south side project, in addition to J.F. Allen, the Shaw brothers who own property on the south side of Route 33 West came to be involved in discussions to take utilities to their property. They, too, need both sewer & water in order to be able to develop their property.
Early on in our conversations with these developers, our City officials explained that there were a couple of different financial models that could be employed to realize the utilities’ projects. Recently Buckhannon introduced a third financial model to undertake these utility projects. Model #1 similar to that which had been utilized in the Lowes project back in the early 2000s, would require annexation of the properties to be served with the City’s General Fund underwriting the utility costs. It’s important to understand that by law in order for the General Fund to participate in a utility project, the project must be occurring within the corporate limits. We simply cannot place financial burdens upon our Buckhannon residents to undertake improvements beyond our City limits. That restriction does not necessarily apply to utility boards, provided those utilities are acting within their territorial designations.
Model #2 would require financial participation from the benefitting parties, a passing of the hat if you will- similar to projects previously undertaken along Brushy Fork Road. Our Utility Boards using this method have completed successful utility projects through partnerships with St. Joseph’s Hospital (Hampton Inn), Mike Ross, C.J. Martin, John Jenkins, Bill Minsker, & others who financially supported utility extensions to serve their properties situated outside of our corporate limits. We are in the final phase of a sewer project with C.J. Martin right now.
Model #3 is a utility surcharge model, whereby the utility board(s) would finance upfront the cost of the project, while imposing regular, sewer fees together with a surcharge fee to pay for the project over 20 or so years. This model has been utilized for the past 20 years along the Brushy Fork Road for sewer & is on the cusp of retirement as the project has nearly been paid for by the Brushy Fork customers. It’s important to underscore the reality of all utility projects- all of which require funding. Buckhannon’s three different models have all been implemented successfully through these partnered methods whereby the utility shares in the expense of executing projects collaborating with developers.
The project manager for J.F. Allen suddenly left the company about a year and a half ago, & project discussions stalled. Our conversations with the previous project manager had proven productive, & we were optimistic that our Utility Boards could come to terms on these utility projects with these substantial developers.
In June of 2019, City architect Bryson VanNostrand offered to contact J.F. Allen’s President, Greg Hadjis, to jump-start project discussions. During the first of July, the primary players returned to the negotiation table at City Hall to discuss ways to move the utility projects forward. About this same time & then unbeknownst to our City officials, County Commissioner Terry Cutright, broached the Tennerton Public Service District, about the PSD’s ability to deliver sewer service to the project area. We believe a similar overture was made toward the Hodgesville Public Service District about the opportunity to deliver water to the project area. Commissioner Cutright sought to broker deals with the PSDs in defiance of the utility territory long assigned to Buckhannon. Both the Tennerton (sewer) Public Service District & the Hodgesville (water) Public Service District are managed by Terry Gould. Mr. Gould has confirmed the overtures made by Commissioner Cutright, & his visits with Mr. Gould are reflected in the Tennerton PSD’s minutes received by our City. It’s important to understand that Commissioner Cutright is one of the three “judges” who last Thursday moved to take Buckhannon’s utility territory & reassign it to Tennerton PSD. City officials have come to understand that Mr. Cutright solicited Tennerton PSD’s involvement in this matter.
As an aside to the Route 33 West utility projects, both the Tennerton & Hodgesville Public Service Districts became substantially delinquent in their monthly payments owed to our City for sewage treatment or providing water- & were on the cusp of financial collapse just a year ago. Mr. Gould then advised City officials & our utility boards that if Buckhannon pressed the PSDs for payment, he would be forced to file for bankruptcy protection & our utility boards may receive nothing while being saddled by the PSC with assuming operation of these challenged PSD utilities. The West Virginia Public Service Commission was drawn into these matters & strongly urged our utility boards to forgive tens of thousands of dollars in interest & late fees owed to the City by both the Tennerton & Hodgesville PSDs. Our utility boards acquiesced to the PSC’s requests, still leaving principal delinquencies exceeding $100,000 owed by each PSD to our City.
Our City utility operations were moderately impacted by these substantial PSD delinquencies & non-payments. Our utility operations are completely reliant on customers actually paying their utility bills. Unlike regular utility customers, our City is prohibited from discontinuing utility service to PSDs while awaiting payment. Substantial delinquencies involving these PSDs still persist today. A month ago, our City through a Freedom of Information Act (FOIA) request sought financial information from both PSDs, yet in defiance of state statutes, we have received none of the requested information that is vital to our utility planning and to being responsive to the pending attempt to remove territory from Buckhannon’s utilities’ base. Additionally, the City for years has been vigilant in insisting that “I & I” issues, that stands for inflow & infiltration, or sometimes called extraneous flow- needed to be addressed in the Tennerton’s decades’ old system. Similarly, the Hodgesville PSD experienced immense water loss in a decrepit system where for every gallon of water delivered, a half gallon ends up leaking into the ground. Both PSDs currently have substantial financial & performance challenges. The Upshur County Commission is well aware of those challenges.
Our sewer plant has a maximum capacity & cannot treat millions of gallons of storm water every time it rains. Buckhannon has invested considerable sums to reduce our own I & I. State & federal oversight agencies require us to minimize extraneous flow. Our water plant similarly has limits when it comes to producing potable water for our residents & businesses county-wide. We do not have an infinite supply of potable water, & during low water flow or drought as was experienced just last month, it becomes even more critical to protect our precious, limited water supply. The major water leak that persisted for about two weeks along the north side of Route 33 west last month during a drought alert exemplifies the physical plant challenges of the Hodgesville PSD water system & was the most recent frustration befalling our City. The precious water that seeped into the ground was produced by Buckhannon’s water plant.
For years, Buckhannon has been insistent with all of PSDs that our utility boards need to regularly receive meeting minutes, agendas, & financial reports from all of our utility “partners.” Buckhannon liberally & regularly shares all of such documents. It’s important to understand that PSDs are created by county commissions, & are statutorily subject to county oversight. Minutes & agendas of all PSD meetings are required to be regularly filed with the county commission. Annual financial reports are required to be filed with both the County Commission & the West Virginia Public Service Commission, yet year after year- the Tennerton & Hodgesville PSDs defy state statute & administrative rules & regulations & fail to file these mandatory reports. When pressed by the City for minutes a few months ago, Mr. Gould advised the City that we could FOIA the PSD minutes & other documents. These two PSDs are the very entities Commissioner Cutright solicited this summer to replace Buckhannon as the utility providers along Route 33 West.
Following the early July meeting with the Route 33 developers, I provided later on in July directly to Greg Hadjis & at his request, copies of our City ordinances involving B & O taxation so that his company could better evaluate the annexation model. Discussion ensued about City officials appearing before a J.F. Allen board meeting to explain possible financing of the utility projects. Apparently at some point, Commissioner Cutright introduced Mr. Gould to the developers. Thrasher Engineering then was engaged by Tennerton PSD. In September, City officials were stunned to learn that a meeting before the County Commission to discuss removing utility territory of Buckhannon was scheduled. Buckhannon officials were not invited to participate in this meeting. The 33 West developers had forged an alliance with Commissioner Cutright & the Tennerton PSD. This was all occurring while Buckhannon awaited the developers’ response to our City’s overtures in early July.
Tennerton PSD has presented a $5.6 million proposal to take sewer to 150 or so properties on the western side of Route 33. During the past month, Buckhannon surveyed all of the residential property owners who comprise the vast majority of the 150 or so customers, & determined that only 24% of the residential property owners desire public sewer service. These residents if assigned to Tennerton PSD will be required to participate in public sewer despite many of them having invested thousands of dollars in their own septic or aerator systems. It’s upon the backs of these residents that the overwhelming majority of debt will be serviced to realize sewer for the Route 33 West commercial developers.
All three of Buckhannon’s financial model proposals are fair & equitable with appropriate contributions expected from all benefitting parties who seek these utility services. Buckhannon has not sought to further burden either the current or potential residential utility customers with the expense of these commercially motivated projects. Understand that if Tennerton PSD undertakes this project that not only will the 150 customers who are not now utility customers will be required to participate in paying for the developers’ project but- the 891 current Tennerton PSD sewer customers also will see their sewer rates substantially increased to pay for this project, too. Buckhannon has conducted itself ethically, transparently, & with integrity throughout the pendency of this matter. No cause has been shown to remove Buckhannon of its utility territory. Buckhannon is able to complete these projects in a fraction of the time expected by Tennerton PSD to deliver sewer service & much more affordably. Our Sanitary Board has gone on record that it can achieve completion of the north side sewer project during the 2020 construction season, & the south side sewer & water projects during the 2021 construction season. The earliest that a Tennerton sewer project could commence is estimated in 2023.
This evening, I request that our City Council take a formal position to vigorously support the anticipated actions of our Sanitary Board & possibly our Water Board, if necessary, to protect their respective utility territory rights along Route 33 West & to challenge this decision by the County Commission before a final court if necessary. These actions could very well involve both litigation involving local entities & administrative action before the West Virginia Public Service Commission. I believe it is imperative that Buckhannon first & foremost protect & preserve its utility territory. Buckhannon must have room to grow & expand. Last week’s action by the County Commission was unfounded, arbitrary, & capricious, & erects a wall around our City that will inhibit Buckhannon’s opportunity to grow. There has been absolutely no showing of cause supporting any possible conclusion that our City utility boards cannot complete the projects along Route 33 west or any other place for that matter. The seminal question in reassigning utility territory has to be a supported finding that the entity from whom the territory is proposed to be taken cannot perform the work.
We all are mindful of the investments made by those who came before us to realize these utility opportunities- J.D. Hinkle, Jr., Binky Poundstone, Harley Brown, Bill Short, Tony Gum, & many others. Our residents have come to expect & deserve our very best. We have some of our excellent team members present this evening & I know that they will be happy to address questions. Let us stand strong together to assure that Buckhannon utility territory remains Buckhannon’s utility territory.
Mayor David McCauley & Buckhannon City Council