Town Council Weighs Pros, Cons Of Selling Water And Sewer Systems

Vienna would need to sell its water and sewer systems for at least $28 million to be compensated for its costs, consultants told Town Council in a work session Monday night that revived a discussion about whether the town should still be in the water business.

To stay in, the town could need to invest at least $12 million in improvements over the next 10 years. In either scenario, water and sewer rate hikes are likely.

The town is wrestling with the issue as water becomes more expensive and many underground pipes need to be repaired or replaced.

"We can't get cheap water," Council Member Howard Springsteen said. "Water prices put us right behind the eight ball all the time."

Other communities are facing the same issues, said Edward J. Shea of Wiley Wilson, the town's engineering firm. His company, as well as the environmental engineering firm GHD Inc., conducted a pipe-by-pipe evaluation of the town’s current system and an overview of potential capital improvement projects to give Council members an idea of its value and future funding needs.

“This is happening everywhere. This is not just happening in Vienna. It’s a buzz around the industry,” Shea said.

Nationwide, about 15 percent of utilities are investor-owned, and municipalities own 85 percent, GHD’s Mert B. Muftugil said.

The town would need to sell the systems for $28 million to recover costs, existing debt and shared services, the consultants said. An investor-owned option would allow the town to negotiate about $6.5 million.

The town’s current systems – which, combined, include 215 miles of pipe — is in average condition for its age and location in the mid-Atlantic region, GHD’s Gage Muckleroy said.

Because the majority of the system consists of the same material and was installed around the same time — as early as 1946 but concentrated in the '60s and '70s — it’s likely to reach the end of its life at the same time.

“This is about what we might see for a lot of systems in this area,” Muckleroy said.

According to the studies, selling the system would allow the town:

• to get out of a business that can be provided by others
• a one-time revenue boost
• and would direct rates, CIPs, regulations and complaints to an outside party

The consultants said that losing the systems could:

• affect other departments and town cost recovery
• would give the town less control over the quality and level of service
• and wouldn’t help the rising rates likely.

If Vienna were to keep the systems, a proposed capital improvement plan would tackle shorter-term rehabilitation and replacement projects. Longer-term goals include better data collection that could reduce annual maintenance commitments over time.

Based on that data, the town would spend an average of $1.3 million to $1.9 million a year on improvements and maintenance.

The CIP would raise the water and sewer rates to $4.09 per thousand gallons and $5.93 per thousand gallons, respectively, in FY 12-13, according to the consultants' projections, and to as much as $5.16 and $6.73 five years from now. Those figures do not include the price of water, consultants said.

“The single biggest component to look at is how to get cheap water to keep rate the same,” Muftugil said. “Water is a big component of your cost.”

Council members will discuss options at a work session in September.