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LCRA, coalition ready to begin negotiations for West Travis water utilities

Tuesday, December 20, 2011 by Michael Kanin

The general manager of the Lower Colorado River Authority  and the head of the Coalition of Central Texas Utilities Development Corporation on Monday each signed a memorandum of understanding that will govern negotiations for the sale of the LCRA’s West Travis County water and wastewater systems. The move completes the first part of a lengthy and contentious effort to transfer ownership of the utilities to the coalition.


The parties have until Jan. 17 to finish negotiations for the systems. The price will be roughly $140 million dollars, to be paid in installments from Nov. 2012 to May 2019.


With a final agreement, the plaintiffs in a longstanding rate case against the LCRA are expected to settle their issue with the utility. At least one of those parties – Larry Fox of West Travis County Municipal Utility District No. 5 – told In Fact Daily that he would support a settlement, so long as the utilities are indeed transferred to the control of the coalition (See In Fact Daily Dec. 15, 2011).


Frank Salvato, administrator for the City of Bee Cave, told In Fact Daily that the city is “working on the issues.” He noted that “it’s up to council to make” a decision about the rate case. That discussion has taken place in executive session. Salvato declined further comment.


The Bee Cave Council is set to meet again on Jan. 10. That will come just a week before the deadline for an agreement between the LCRA and the coalition.


The West Travis County Regional water and wastewater systems are a collection of small municipal utilities in the western portion of that jurisdiction. They include MUDs 3 and 5, as well as the City of Bee Cave. Those are the parties involved in the rate case that would be settled with the sale.


The sale of the West Travis systems would mark the final step in an effort by the LCRA to take itself out of the direct water and wastewater supply business. In November, the utility’s board authorized staff to negotiate for the sale of 18 smaller systems to Corix, a private Canadian firm.


Despite a clear switch in its mission away from water and wastewater utilities, the LCRA seems set to hold on to its West Lake Hills and Rollingwood wastewater systems. The West Lake Hills system is rumored to be among the most profitable for the organization.


However, the organization may also be working on a contract with Corix that would transfer responsibility for the operations of those utilities to the private firm. Corix has a similar arrangement with the University of Oklahoma in Norman for its water system.


The memorandum of understanding between the LCRA and the coalition details some payment dates, a remedy for default if the coalition can’t make the payments, and a provision that states that the coalition is responsible for finding employees with “experiences and licenses necessary to operate” its new assets. Though it seems to hedge toward a preference for hiring current LCRA employees, it also leaves room for the coalition to contract with a private entity for those services.


Corix has hinted that it would be interested in such an arrangement. Those details would need to be sorted out by the time the coalition takes control of the utilities, which would happen in mid-March 2012.


The complete details of the payment schedule have not yet been finalized. Early terms contained in the memorandum make some payments contingent on the coalition’s utility holding certain bond ratings. The payments could fluctuate if it does not.

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