Frequently Asked Questions (FAQs) for the LKSUD rate increase
December 05, 2024
Q: I’ve seen on both Facebook and NextDoor that there will be a 33% rate increase year over year, for the next three years. Effectively doubling the water rates in three years. Is this true?
A: No, this is blatantly false.
Q: How is the LKSUD related to the Lake Kiowa POA?
A: Easy answer. We are not related. This has at times created confusion for our members, but they are two distinctly different entities. We work closely together and can sometimes seem like one entity when our responsibilities seem to overlap but we are not.
Q: What bonds have already been issued for the water line replacement project?
A: 2014 $3.695 MM 20 yrs 2.68%
2017 $2.125 MM 20 yrs 2.81%
2021 $5.470 MM 30 yrs 2.17%
Note that some funds were spent from LKSUD’s cash reserves prior to the 2014 bond issue.
Q: What are the terms for the phase 5 bond?
A: The package is for $6.2 MM but terms are still to be decided. GTUA does the estimates for us for planning purposes. At their presentation to us, 4.75 % was the interest rate used in the calculations which comes to approximately $390K per year of additional debt service. We are certainly hoping for a reduction in these rates by the time we actually commit.
Q: Why can’t the water line replacement project be done in smaller phases?
A: This is exactly what we have done. The project was started in 2013 and broken down into 6 phases. We have completed four phases. Breaking down into even smaller phases incurs more cost because of mobilization and demobilization of equipment. There is also an economy of scale that is adversely affected by going to smaller projects.
Q: Why now? Couldn’t we have deferred the next phase until later?
A: Yes, we could have deferred. Which is what the plan was through much of 2024. But after the dry summer/fall we had, the increase in water line breaks we experienced caused us to rethink this position and ultimately shift gears and decide to move forward with phase 5 now.
Q: Okay, so circumstances caused you to change course on timing of Phase 5. Why such short notice? The construction won’t start for months to a year from now?
A: Unfortunately, to get a bond issuance through the Texas Water Development Board (TWDB) via the Greater Texoma Utility Authority (GTUA), the application has to be submitted in December. You can apply for the bond through GTUA at any time of the year. But TWDB only processes the applications once a year. They are charged with looking at these requests from all water districts across the state. There are numerous grants and low interest bonds available through them and they rank the districts statewide to determine who qualifies for what type of bond, and/or grant. We could also obtain a bond through the GTUA but outside of TWDB through the “open” market. These are generally commercial bonds and receive no subsidizations from any government entities, thus resulting in higher interest rates. Sometimes significantly higher. So, we were put in a position of having to quickly set the stage for a December application. After the application is made, there is an approval process that takes several months. Part of this approval process is determining our credit worthiness and appropriate bond rating. We have to show that we are capable of making the debt service payments to get the best interest rate. We also need the increased rates to be in place when the bond is approved. Once the bond is approved, and we accept the bond conditions, the bond payments start. Even if construction hasn’t started.
Q: Okay, we complete phase 5. What about phase 6 and the new water well that has been discussed. How will we afford that?
A: Good question. While phase 6 has just as old of lines as phase 5, we have had less breaks in that area. There could be several reasons for this, but it makes us optimistic that we can defer phase 6 until such time as economic conditions improve. As far as a new well, while that has been discussed heavily since our well failure in summer of ’23, we feel comfortable that we will not be required to drill a new well for the foreseeable future. During this past year, we authorized a comprehensive engineering study of our system. The result of that study has illustrated to us that we have much more of a distribution and storage issue than a capacity issue. We are currently increasing the storage at the well site located by the dam which also helps with a distribution issue we have on the east side. We are absorbing these costs with our cash reserves. No bonds. We are also looking at other possible options to improve our storage and distribution system but have not progressed these possibilities enough to share at this time.
Q: So, in phase 4 completed last year on the west side, I noticed lots of damage done to our roads and some individual’s properties. Was this due to poor supervision of the contract? I assume this caused the project to overrun its budget. How are we assured that this won’t happen with phase 5? Are we using the same contractor?
A: Phase 4 utilized a new technology called pipe bursting versus the more traditional method of pipe boring. This method had been successfully employed in other areas of the state. After consultation with our engineering contractor and researching industry practices, we decided to go with this method which is generally cheaper than pipe boring. Unfortunately, it did not go as planned for the Lake Kiowa system. There was a disconnect between the installed drawings and reality of the current line status. In particular, the depth of burial. In some places, the lines were much more shallower than expected and why there was so much disturbance at the surface. As well as sometimes not totally located in the easement but encroaching onto the roadway. Any future projects will be pipe boring and not pipe bursting. Our previous areas done with pipe boring had very little extraneous damage.
Interesting enough, even with those hiccups, phase 4 did not overrun its budget. It actually came in within the contingencies of the bond issue and we were able to return some leftover monies to the bond
No contractor has been selected yet for phase 5. The process for phase 5 is just beginning with our application for the bond. Once we are approved, then the process of bidding and contract award will be finalized.
Q: This still seems like a lack of financial planning. What could have been done different?
A: In hindsight, we could have had one large bond issue and executed the project as one phase. The original estimate was in the neighborhood of $14 million. We currently have spent $14 million for just over 50% of the project with another $13+ million projected to finish the project completely. The LKSUD, like every one of you, has experienced unprecedented inflation costs these last several years. Not just in these construction costs, but in our day-to-day operations. Compare the square footage costs of new house construction today versus 2019 for example. No industry has been immune. But the board at that time, with the information they had at the time, made the best decision they could by electing to spread this project out over time.
Q: How can I help? If I want to get on the board of directors, what is that process? How can I be better informed?
A: We would love the help. As far as the board of directors, the board consists of 7 elected members, all Lake Kiowa residents like yourself. Each position is a 3-year term. Generally, two positions come open every year. A legal notice is posted at the LKSUD offices notifying the general public of an upcoming election. This notice usually happens in January. Following that is an open application period, generally Jan/Feb with the election happening in May. The last several years though, there has been no election due to lack of applicants. The applicants that have applied have run unopposed per/se. There have also been several interim appointments over the last few years. This happens when a board member resigns, usually because of moving out of the community but could also be for personal reasons. An interim appointment is voted on by the remaining board. These applicants are generally members who have let it be known to the LKSUD that they are interested in volunteering their time and expertise to the district. Once appointed, they serve out the remaining term of the board member who resigned, whether it be two months or two years.
Our board meetings are open and are held on the second Wednesday of each month at 10 AM and are a good source of information. We sometimes have to move the date of the board meeting for various reasons, but the new time and agenda can be found on our website. We publish a link to the upcoming board meeting agenda on the home page of our website 72 hours in advance and the last approved meeting minutes on the “News and Notices” page of the website.
Several residents remember when our meeting minutes were published in the POA’s Communique. Because we are a regulated public utility, we can only submit our minutes in an uneditable PDF format. This became a conflict with the needs of the Communique and we were removed from it’s printing.
Q: I know the LKSUD, like any other organization, goes through an independent financial audit each year. Can I see the district’s financials?
A: Yes, they are available but there is a formal process to get these. This is on the advice of our legal counsel due to our status as a regulated utility. Any individual who wants to get a copy of our yearly audit must make a formal request through a signed letter stating exactly what they would like. Much like a Freedom of Information Act (FOIA) request. The request can only be for one copy, not multiple copies.
Q: In the rate notice letter I received, it stated that the rate increase was necessary to fulfill our bond debt and conservation. How does this address conservation?
A: That terminology in the rate notice letter is a carryover from previous year’s notices, and we see how it could be misleading. Conservation is not the purpose of the rate increase but hopefully a byproduct. The terminology in the notice is referring to the rate increase affecting the tiered rates along with the base minimum charge. Had we only applied the rate increase to the base charge, it would have been like a regressive tax. Everyone would have had the exact same dollar impact. It wouldn’t have mattered if you were very frugal with your water usage or used excessive amounts of water. By applying the rate increase to the tiers also, we hope to spark some conservation with the higher usage customers.
Lake Kiowa SUD Board of Directors
