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Water Commission briefed on Glenlake water system acquisition

Tuesday, September 20, 2011 by Michael Kanin

Members of the City of Austin’s Water and Wastewater Commission heard few details about the Austin Water Utility’s acquisition of the Glenlake Water System on Wednesday evening. Still, Commissioner Chien Lee honed directly in on the question of whether the system carries an inordinate amount of debt.

 

“What are the outstanding bond obligations that the Glenlake Water Supply Corporation owes?” he asked.

 

Lee’s question came as Austin Water officials offered commissioners an update on the acquisition, which would transfer the Glenlake utility from the auspices of the Lower Colorado River Authority (LCRA) to those of the City of Austin. The utility’s Bart Jennings told commissioners that, despite his presence and his presentation, he couldn’t say much about the situation.

 

“We are still in the middle of a real estate acquisition process, so more than likely, there is going to be information that you would like to have…that we will not be able to provide to you,” he said.

 

The Glenlake system is one of 29 water and wastewater utilities put on the block by the LCRA. Staff from that organization and a consultant hired to assist in that sale recommended that the LCRA’s board sell the bulk of those utilities to a private firm, Vancouver-based Corix. However, some of the systems, such as the Glenlake utility, were singled out for sale to various other entities (See In Fact Daily, Aug. 24, 2011).

 

According to a spreadsheet obtained by In Fact Daily, it could take as much as $1.8 million to pay off all of the debt assigned to the Glenlake system. That same document lists the value of the system at $52,020.

 

Jennings told Lee that he couldn’t comment directly on the debt figures. However, he added that the Austin Water Utility typically acquires systems that it deems to have a net positive value (NPV). “All the acquisitions that I have been involved in always have a positive NPV,” Jennings said.

 

He further suggested that the utility could take steps to pay off the debt. “Because the utility has a better interest rate, generally…they take care of their own debt and we will handle that through our commercial paper program,” he said.

 

Jennings wouldn’t comment on the Glenlake system for In Fact Daily. After the hearing, Austin Water Director Greg Meszaros echoed much of Jenning’s evening. “I really don’t want to comment on those kind of matters given that we are in negotiations to purchase this,” he said. “We would ultimately not recommend purchase if we did not believe it was in the best interest of the city and the utility.”

 

Generally speaking, Meszaros said that the utility considers debt as one of the factors in making a purchase of another system. “We always look for a positive net present value, which means that the cost to acquire versus revenues and other matters work from a business perspective,” he added.

 

The LCRA is expected to award the sale of the utilities in late September or October. Should the Austin Water Utility be awarded the Glenlake System, the Water and Wastewater Commission, City Manager Marc Ott and the Austin City Council would all have an opportunity to weigh in on the deal.

 

In the meantime, the LCRA has asked the Austin Water Utility to submit a third bid. Jennings described a rather opaque process to the Commission. “They gave us very minor bits of information and then asked immediately for a bid,” he said. “We had a response to that in terms of what our normal process is. They then allowed us some time to do some due diligence, which was essentially about a week before the second proposal was required.”

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