MSD to strike deal with Oldham County

The Metropolitan Sewer District (MSD) is likely to become the new owner of Oldham County’s sewer system.

During their Aug. 20 meeting, the Oldham County Fiscal Court approved a memorandum of understanding with MSD outlining MSD’s proposed purchase of the Oldham County Environmental Authority’s (OCEA) wastewater collection and treatment system.

“The entire purpose of trying to do something with MSD and Oldham County is to try and get a better rate for our customers,” Judge-Executive David Voegele said.

While the memorandum is not a legally binding agreement to sell the sewer system to MSD, it assumes a finalized interlocal cooperative agreement is forthcoming.

Wes Sydnor, who manages intergovernmental relations for MSD, said the MSD board authorized MSD Executive Director James Parrott to sign the memorandum during its Aug. 26 meeting, and to negotiate the terms of the interlocal agreement.

That agreement would still need approval from the Department of Local Government and the Attorney General.

Under the preliminary proposal, MSD would assume OCEA’s duties and responsibilities on Nov. 1. The preliminary agreement only deals with wastewater treatment and not any of MSD’s other services, such as stormwater.

The desire to have MSD take over the OCEA system comes down to one thing: lower rates. But under the proposed deal, lower rates would be several years down the road.

As outlined in the memorandum of understanding, if the fiscal court and MSD come to a final deal, MSD would not be able to lower monthly sewage rates until after March 2022. This has to do with OCEA’s contract with Veolia Water.

Veolia Water operates OCEA, which in turn provides sewer service in 12 areas outside La Grange and Crestwood. OCEA has eight sewer treatment facilities across the county and services approximately 6,100 customers.

OCEA’s contract with Veolia Water doesn’t allow OCEA to terminate the contract for convenience before March 2022, and, according to MSD’s letter of due diligence to the fiscal court, an early buy-out of the contract “could not be successfully negotiated.”

“Originally we were operating under the assumption the Veolia contract would not be a part of the memorandum,” Parrott told the fiscal court.

Unless the Veolia contract is terminated, or an early buy-out occurs, MSD would freeze OCEA rates at the monthly average of $86.93 for fiscal years 2020, 2021 and 2022.

The current residential rate for OCEA customers is $7.80 per 1,000 gallons and a monthly meter charge of $47.92. Stan Clark, the county’s chief financial officer, said an average customer uses 5,000 gallons a month, making monthly residential sewer bills often in the range of $86 to $100.

Horace Harrod, chairman of the OCEA board, told the fiscal court had negotiations with MSD not been occurring, they likely would’ve requested a rate increase for customers this year.

“Candidly, given our 6,100 customers, there’s virtually nothing we can do to match or at least hold our rates where they are for potentially six, seven years without an increase,” he said.

When OCEA’s contract with Veolia expires, MSD would adjust average monthly rates to $76.92 a month, a $10 decrease, on Aug. 1, 2022, according to the memorandum.

From fiscal year 2023 onward, MSD would be allowed to raise existing OCEA customer rates no more than 5% per year until rates equalize with the rates of MSD’s other customers.

Parrott said the average MSD customer pays around $50 a month for wastewater treatment. The current residential wastewater volume rate for MSD customers is $4.60 per 1,000 gallons.

However, Parrott also said that rate equalization would probably take more than 10 years to occur.

Sydnor said assuming MSD continues to raise their rates at 6.9%, as they have since 2016, then it wouldn’t be so much that OCEA customers would see $50 per month bills but that MSD would rise to a closer rate OCEA customers currently have.

“The expectation is if our board continues to approve 6.9% rate increases, which there’s no guarantee of, that increase will grow faster than the 5% OCEA is seeing,” he said.

An interlocal agreement would not affect the City of Crestwood, which agreed to sell their sewer system to MSD in May after having it managed by the company for over 20 years.

Sydnor said Glen Oaks and Moser Farms, which already have their sewage treated by MSD but pay a surcharge to OCEA would have to be looked at to determine whether or not they would still pay a surcharge.

Aside from sewer bills, if an agreement is reached, MSD’s purchase and maintenance of the OCEA system will also mean MSD assuming approximately $16 million of OCEA’s debt.

The memorandum also states that customers in the former OCEA service area won’t be responsible for sharing costs related to enforcement actions in other areas served by MSD, or vice versa.

Essentially meaning that former OCEA customers won’t be on the hook for infrastructure projects undertaken in Jefferson County that don’t benefit Oldham County.

“We have tried here to build a firewall in here, we don’t want to pay for civil infrastructure in downtown Louisville, and we’re not going to,” Voegele said. “We’re just going to pay for problems that are in Oldham County.”

Another part of the memorandum states that MSD will commit $8 million in capital infrastructure projects in Oldham County over the next 5 years.

One of the first projects MSD is planning for the OCEA system is the decommissioning of the Ash Avenue Wastewater Treatment Plant. The treatment plant is 30-years-old and was intended to operate for only 20 years.

“We will be able to replace this outdated plant with a more cost-effective gravity solution, improving the sewer service reliability in the area and improving the health of local waterways,” Parrott said in a subsequent press release.

County and MSD officials are pushing for a quick, finalized interlocal agreement to be completed in the coming months.

View online at The Oldham Era

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