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PAWSD Gets Called on the Carpet, Part Six |
Bill Hudson | 3/17/10
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Read Part One
“I found, just within the last few days, a presentation that was dated 2007 by an auditor in the State Auditor’s Office.”
Financial advisor Al Bledsoe was sharing his thoughts about the relationship between Archuleta County and the Pagosa Area Water and Sanitation District in our telephone interview the other day. Last summer, Bledsoe had been asked by the Archuleta Board of County Commissioners, to look into PAWSD’s financial condition, and it was clear that his research was still continuing — considering that he’d uncovered new information “just within the last few days.”
“The subject of that presentation was what a neglected bunch of entities these special districts were,” Bledsoe told me.
In using the term “neglected” Bledsoe seemed to be referring to the fact that each special district is under the authority of an “approving local government” — but that the local oversight entity often pays little or no attention to the financial condition of the special district under its authority. In particular, county and town governments have allowed water districts, metro districts, and other special districts to encumber themselves, in many case, with untenable debt loads.
And it is precisely a closer look at PAWSD’s current and projected debt that has driven a large part of Bledsoe’s research.
Bledsoe’s information about “neglected special districts” had come from a June 2007 report by Dianne Ray, Deputy State Auditor in the Colorado Office of the State Auditor.
 As Ray explains the current situation, Colorado has been allowing the formation of “special districts” since 1963 — quasi-governmental entities, supported by taxes and fees, and charged with delivering local services not provided by County or Town governments. Special districts in Colorado include 653 metropolitan (“metro”) districts, 251 fire protection districts, 284 water and sanitation districts, 44 health districts, and 51 parks and recreation districts. (Those are 2004 numbers.)
Ray found that, within the seven-county Denver metropolitan area, 260 special districts had, between them, a total of $255 billion in “authorized but unissued debt.” That total does not include the amount of debt ALREADY ISSUED to those special districts — Ray is noting only the amount of ADDITIONAL debt these districts are currently authorized to set on the shoulders of their district taxpayers, to pay for various planned projects.
To put $255 billion in perspective, the total taxes and fees the City and County of Denver have spent on infrastructure since 1980 amounts to $7 billion.
Ray notes that in the Denver area, the approving local governments are not consistently requiring annual or five-year reports from special districts — and even when reports are submitted, the reports do not contain complete information nor are they reviewed thoroughly. In about half the reports Ray reviewed, no information about issued and unissued debt was included.
You can click here to download Ray’s report as a PDF file.
In the case of PAWSD, the “approving local government” is Archuleta County, which is of course under the leadership of its Board of County Commissioners. And one of the key issues raised in the BoCC’s March 8 letter to PAWSD is the amount of authorized but unissued debt already assigned to PAWSD, on top of PAWSD’s already issued debt — and the amount of additional debt that would be required to build a massive reservoir in the Dry Gulch valley.
In Ray’s report, she notes that special districts are required to make annual reports to the approving local government, upon request, providing progress reports on the implementation of the special district’s Service Plan. Special districts area also required to submit “five-year reports” including information on debt issuance and authorization.
Ray also writes that the approving local government has the authority to cancel “authorized but unissued debt.”
As Bledsoe indicated in our interview, the Archuleta BoCC has not been requiring annual or five-year reports from PAWSD, nor has the BoCC historically paid any attention to the debt load PAWSD carries. To speak about “implementation of the PAWSD Service Plan” is rather ridiculous, it appears, since the service plan has apparently not been updated or amended since 1977.
The simple fact is that the PAWSD special district has, over the past two or three decades, been treated — by the BoCC and by the whole community — as an independent entity, beholden to no one but their own board of directors.
Bledsoe’s research seems to be pointing to an historical, and perhaps startling, lack of special district oversight on the part of the Archuleta County government — the same lack of oversight noted by Deputy Auditor Dianne Ray’s 2007 report, when she focused mainly on the Denver metropolitan area.
The total debt load with which PAWSD has encumbered water district residents is not entirely clear at the moment, although I seem to recall PAWSD finance manager Shelley Tressler mentioning the number $28 million a couple of years ago. That number, as I recall, did not include any of the $357 million PAWSD is proposing to borrow to build the Dry Gulch Reservoir.
One thing we do know. Between 2003 to 2008, the fee charged for 12,000 gallons of monthly water usage has doubled, from $50.60 to $100.60. How much of that rate increase is now going to pay district debt obligations, I’m not sure.
Another thing we do know. When PAWSD borrowed $11 million in 2008 — to purchase about half the land needed for the proposed Dry Gulch Reservoir — they told the lender, the Colorado Water Conservation Board, that the PAWSD Water Resource Fee impact fees would fund the debt payments on that loan.
In other words, PAWSD assured CWCB that over the next few decades, newly arriving residents and business owners, building new homes and commercial structures, would contribute the WRF fees necessary to repay not only the $11 million Dry Gulch land purchase loan, but also a large portion of the future reservoir construction costs.
But if those impact fees failed to come in as expected, PAWSD told CWCB, no problem. PAWSD would simply raise its fees on existing water users. You can view that wording on Page 5 of the CWCB Loan application; click here to download that 7-page document.
Those Water Resource Fees have indeed failed to come in as expected — and failed in a massive way. In its 2007 feasibility study for the CWCB loan, PAWSD told CWCB that they expected to collect $2.6 million during 2009 in WRF impact fees from new construction — based on an expectation of 372 new connections. Here's a section of the Feasibility Study chart submitted to CWCB:
PAWSD in fact collected $117,000 in impact fees during 2009.
Tomorrow, I plan to look more closely at the promises made to CWCB in that 2008 loan application — since that was the subject of Question Number Four in the BoCC’s March 8 letter.
Read Part Seven, tomorrow... |
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