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Lots of Water, Lots of Debt, Part One |
Bill Hudson | 7/16/08
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Earlier this year, the Town of Pagosa Springs began a series of quarterly public meetings to solicit ideas and input on a range of economic development issues. The Town Council invited representatives from other local entities — Archuleta County, Pagosa Area Water and Sanitation District (PAWSD), LPEA, Pagosa Fire District, San Juan Water Conservancy District (SJWCD) — to participate in the forums. The Council also asked the business community to attend and offer its input. Continued...
Realtor Mike Heraty addresses the Town Council and representatives of other agencies at Monday's "town hall" meeting. |
On Monday, a small crowd attended the third in these series of discussions, held at the Pagosa Springs Community Center. Members of a business community task force were given reserved seats facing the invited government entities, and most of the Town Council showed up to hear the suggestions, questions, complaints and general discussion of Pagosa’s current economic health.
Early on in the meeting, the subject of the controversial Dry Gulch Reservoir reared its head. Businessmen Mike Heraty and Steve Van Horn, the first two speakers to step up to the podium, thanked PAWSD for the recent reductions in its Water Resource Fee impact fees on commercial development. The water district shifted from using a “per Equivalent Unit” calculation to a calculation based on water meter size and number of fixtures; the new fee schedule appears to greatly reduce the amount of the fees PAWSD will charge a typical new business starting up in Pagosa Springs.
(For more on those numbers, see Glenn Walsh’s recent Post article.)
Van Horn wanted to go a bit deeper into the subject, however — specifically, into the amount of debt that PAWSD is accumulating as it tries to fund over $150 million in reservoirs, treatment plants and pipeline upgrades connected using its Water Resource Fee — and without, so far, any voter approval.
“It looks like PAWSD has about $25 million in revenue bonds, that we are going to have to pay back through revenues. Now, with very little revenue coming in — other than our water fees, actually, paid by our water bills — and if the revenue does not come in to take care of that debt, I’d like to know how much our fees are going to have to be increased in order to take care of that debt. What is the worst case scenario, if we have the same economic conditions going on two years from now?”
 Van Horn’s reference to “revenue bonds” highlights an interesting development going on in PAWSD's financial picture. As a quasi-governmental special district, the water district is allowed to borrow money in a couple of ways. One way is via “general obligation bonds” which must be approved by the voters — who, essentially, pledge their taxes to make the payments on the loan.
Another funding mechanism, available to a special district, involves “revenue bonds.”
A revenue bond needs no voter approval, because the special district — PAWSD, in this case — makes a promise to pay the loan back using revenues it expects to collect from its customers. In the case of revenue bonds for the Dry Gulch purchases, PAWSD did not need to ask voter approval, because it was able to justify its loans based on the fees it planned to collect from the rampant growth occurring in Pagosa Springs in 2004 and 2005.
Projecting that growth out for 30 years or so, PAWSD expected its revenues to easily pay for its revenue debt.
Four years ago, voters turned down a general obligation bond proposal to purchase the land in Dry Gulch for a future reservoir. Last year, PAWSD borrowed $8.6 million to purchase some of the Dry Gulch property it said it needed for a proposed reservoir. It planned to borrow another $12 million or so — using revenue bonds — to pay back that previous loan and to purchase even more Dry Gulch land.
With $12 million sunk into the deal, PAWSD would then have about half the land it would need for its reservoir.
As Van Horn was suggesting at Monday’s meeting, the revenues needed to pay back that $12 million loan were supposed to come mainly from the district’s new Water Resource Fee, a $7210-per-Equivalent-Unit impact fee levied against “new growth.”
But that projected new growth has, so far, failed to materialize. So far, during 2008, revenues from new growth have been about 10% of what PAWSD budgeted for this year — and less than 2% of what PAWSD projected when it put the Water Resource Fees in place.
“I saw in the newspaper, that it said PAWSD has $9.1 million in revenue bonds to pay off. But from what I see, looking at your figures, you have closer to $25 million in revenue bonds. Perhaps you can clarify that later on.”
As it turned out, it proved a bit of a struggle to get a clarification. PAWSD Manager Carrie Weiss stood up to make a short speech near the conclusion of the meeting, and finished without saying anything about revenue debt. As she started to leave the podium, I leaned forward from my seat in the front row and asked if she would address Steve Van Horn’s questions about revenue bonds.
Weiss said that she could not recall that number, but suggested that PAWSD Finance Director Shelley Tressler, “our financial guru,” might be able to share the number.
Tressler stepped up to the podium and started off with some seemingly extraneous comparisons.
“I guess I would address that concern in two ways. The amount of debt that General Motors has, would seem like an astronomical amount if you put it on the candy store down the street. So, in perspective is sort of where I wish to put the emphasis there.”
(For anyone watching the news lately, it appears that the amount of debt General Motors has, is astronomical even for General Motors.)
“There are a lot of things that have to be done, in order for a special district to issue revenue debt, which has been the subject of a lot of conversation lately. All of our existing revenue debt… well, first of all, revenue debt is debt that is paid back by user fees. Totally different from debt that is paid back by taxes…”
Tressler then continued explaining the finer points of special district revenue debt for over 10 minutes — without ever mentioning the number Van Horn had asked about: what is the amount of PAWSD revenue debt?
Finally, realtor Michael Little, sitting near the rear of the audience, called out and reiterated Van Horn’s question:
“Can you tell us how much PAWSD is indebted, on our behalf? Did we ever get a number?”
Tressler then gave the official figure: “$26.4 million. That amount includes the amount authorized by the CWCB loan.”
Is that a lot of money, for a water district in a small town? Would that amount of revenue debt affect the ability of such a water district to raise an additional $150 million or so needed for a 35,000 acre-foot reservoir — considering that the voters voted down a much smaller reservoir in 2004?
Part Two tomorrow... |
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