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2-19-14

City floats idea of selling
sewer system
Revenue from sale
would go to NID debt

by Alan McArthur
Landmark reporter

The City of Parkville is pursuing a plan that would help it head off potentially rocky financial times in regard to some Neighborhood Improvement District (NID) debt the city faces.

Parkville is in the middle of negotiations with the Platte County Regional Sewer District, city officials acknowledged Tuesday night.

The potential deal would involve the city selling its entire sewer system to the regional sewer district to pay off more than $4.9 million in debt by June 1.

On Tuesday night, the city's board of aldermen approved a memorandum of understanding to begin negotiations for the possible sale. According to a staff report by Lauren Palmer, city administrator, the sewer district approached the city about the possible purchase.

The sale is being seriously considered by Parkville largely because it could allow the city to pay off a large portion of debt from the construction of the Brush Creek Drainage Area Neighborhood Improvement District (NID).

The NID was established in 2006 to provide sewer service to the area along Interstate 435 near the intersection with Highway 45. The construction of the sewer line was through a cooperative agreement between the city and the sewer district.

According to the original agreement, the city took on the debt for construction of the sewer lines and when the cost is paid, then the Brush Creek sewer line will become the property of the sewer district.

Of the properties in the NID, only one has developed--that’s the convenience store at 45 Highway and Brink-Myers Road. The remaining properties are owned by banks after development stalled and owners defaulted on notes.
This situation has left the city with $4,935,000 in debt from the construction.

On Tuesday night, the city also authorized the sale of general obligation bonds for the amount to be finalized by August 2014. This would cause the city to face its first bond payment in March 2015.

During the recent budgeting sessions for the city, some projects were defunded with the money going into the city's emergency reserve fund in anticipation of these NID bond payments.

In 2013 the city transferred $450,000 to the emergency fund and in 2014 the city is budgeted to transfer another $317,000.

According to the memorandum of understanding, the city will pay for a cost-benefit analysis of any possible transaction for the city's sewer system. The cost of the analysis is $13,500 and if the city and sewer district make a deal, then the cost of the analysis would be split evenly.

Before a final sale can be approved, several items are listed for consideration in the memorandum of understanding.

The city and sewer district would have to agree on a fair purchase price, establish a method to pay existing sewer debt, and complete sewer improvements listed in the city's Capital Improvement Program.

The city is also requesting representation on the sewer district's board of directors.

Another issue would be the possible adjustment of sewer rates for existing Parkville customers.

According to the sewer district's 2014 budget, the current base rate for sewer service is $26.22 with a charge of $3.75 per 1,000 gallons of water used. The district takes the water usage average during the months of January, February, and March to estimate usage throughout the year.

In January, Parkville approved a rate increase for its sewer customers. The increase established a charge of $0.56 per 100 gallons of water used and a base rate of $11.86 per month. The city receives actual water usage information from Missouri American Water for billing purposes.

Based on an average monthly usage of 4,000 gallons of water, customers in the sewer district would pay $40.22 per month and customers in Parkville pay $34.26.

A legal analysis of the possible transfer will also be conducted with the work completed by March 15 and a decision on whether to move forward with the sale.

The possible sale would be for the entirety of the city's sewer system, leaving no part of the system for Parkville to control.

“At the end of the day, Parkville would be out of the business of providing sewer services,” said Palmer.

According to the 2014 budget, the regional sewer district was established in 1992 to provide sewerage treatment for customers in unincorporated Platte County. The district currently serves more than 4100 customers with its largest customer areas being around or adjacent to Parkville's city limits. The regional sewer district operates 63 miles of sewer lines and has four treatment facilities.

The 2010 census shows the population of Parkville at 5,554 people. The 2013 annual report says the city operates 30 miles of sewer lines and has one sewer treatment plant.

The board of aldermen approved the memorandum of understanding with a vote of 7-0.

The board also established a committee to oversee the negotiations. That committee includes Aldermen Nan Johnston, Marc Sportsman, and Jim Werner along with Mayor Jim Brooks and Palmer.