Quigley argues for town takeover of private water system
TOWN OF ULSTER, N.Y. » Town Supervisor James Quigley says the Kingsvale water company is simply driven by a profit motive in its attempt to convince customers to oppose a town takeover of the system.
In a telephone interview Friday, Quigley said a letter to customers from the New York American Water Company failed to note that the town of Ulster has significant experience operating water districts.
“The town has seven water districts, two of which we took over from private developers,” he said.
“American Waterworks is allowed a 6 percent return on their invested capital,” Quigley said. “Management recently commented to me that they invested $1.3 million in the Whittier water (system). Six percent (of) $1.3 million is $78,000 that they are capable of returning in rates . ... So the ratepayers in Whittier at some point are to end up paying for that $1.3 million in improvements.”
In July, members of the Ulster Town Board agreed to negotiate for the town takeover of the systems owned by Kingsvale in the Whittier and Deer Run subdivisions.
In a letter to the Freeman, Rob Powelson, president and chief executive of the National Association of Water Companies, argued that Kingsvale customers should look to a system takeover in Felton, Calif., as an example.
“The final purchase price of the water system was more than six times what the town had estimated and residents are now stuck paying an average of $535 in new bond taxes annually for 30 years to finance the purchase,” he wrote.
“When local governments pursue a water system takeover the process usually takes years and costs taxpayers millions of dollars,” Powelson wrote. “In the end, a court will likely rule on a local government’s legal right to take the system and the final value of the system.”
Powelson urged residents to be skeptical of municipal studies that are now part of a state Public Service Commission case that started with an application for Kingsvale’s parent company, New York American Water Company, to be bought out for $608 million by Canadian-based Liberty Eastern.
Quigley, however, said most of the Kingsvale’s 220 customers need to look no further than the town’s municipal sewage treatment system to determine whether upgrades have been better under a private company or a public operation.
“This town (also) has three sewer districts, one of which is the Whittier Sewer District that it took over in 1957,” Quigley said. “The town has recently finished a reconstruction of the front end of the process sewage treatment plant and a replacement of the primary and secondary clarifiers without borrowing money and impacting taxpayers.”
Kingsvale system users in the town of Ulster are among more than 125,000 overall customers that are primarily on Long Island, where several communities also conducting takeover studies. Powelson argued that information that would come following a lawsuit would not ordinarily include infrastructure needs.
“This court-determined final value is typically much higher than the original projected estimate determined in the feasibility study,” he wrote.
Powelson added that a “recent study found that takeover advocates under
estimate acquisition costs by more than 100 percent on average,” which a company representative clarified to state that takeovers amounted to double the cost of estimates.
Quigley said the town expects to fully examine the costs Kingsvale has incurred, the problems that owners have yet to address and how much more money is needed to cover issues that are still not resolved. “What American ... is facing is a complete cratering of their transaction with Liberty because the municipalities in their service areas have all said (they) want the opportunity to evaluate what’s going on here and how is it going to impact our repairs,” he said.