The Arnold City Council voted 6-1 Thursday night (Aug. 14) to place an issue on the Nov. 4 ballot asking residents to approve the sale of the city’s sewer system to Missouri American Water, a company based in St. Louis County that provides water and sewer services to about 1.5 million customers throughout Missouri.
A simple majority vote would be required.
If voters approve the sale, Missouri American would pay $13.2 million for the sewer system. However, the city would still pay $8 million in bond debt it owes, bringing the net profit to $5.2 million.
The city, though, would keep an estimated $4 million that would remain in the sewer fund at the end of the sale, leaving the city with about $9.2 million available to use for general operations, Arnold City Administrator Bryan Richison said.
In addition, Missouri American will assume a $14 million debt the city owes
the Metropolitan St. Louis Sewer District, which treats the city’s sewage, Richison said.
According to the city’s agreement with MSD, it would share in the cost for future upgrades to the MSD treatment plant, but if the sale is approved, Missouri American will assume those costs, too, Richison said.
Missouri American also would cover the cost of the election and any marketing for the campaign, city officials said.
The company approached the city in 2011 about possibly buying the sewer system for $12 million, but city officials decided against pursuing the deal.
Arnold Mayor Counts said the sale looks better this time around because the city has tight finances right now and the sewer system is plagued with problems that will cost a lot to fix.
Missouri American, which is part of New Jersey-based American Water Corp., provides water to both Public Water District 1 that serves Arnold residents and C-1 Public Water District that serves residents in unincorporated Arnold, Imperial, Barnhart and Otto.
It also operates sewer systems in the state, including one in Cedar Hill, Missouri American spokeswoman Ann Dettmer said.
Counts said the sale of the sewer system could be a financial boon for the city, both in the short term and long term.
If voters OK the sale, then it could close by May 2015, providing much-needed money for the city, which currently is struggling to formulate a balanced budget that will run from Sept. 1 through Aug. 31, 2015, Counts said.
In addition, it could save the city a lot of money down the road, he said, because the city won’t have to spend money fixing the aging sewer system, which has many problems, according to a study the city commissioned to find where stormwater is infiltrating the sanitary sewers, Counts said.
Missouri American has agreed to invest $5 million in the sewer system over the next four years and would continue to invest in the system, Dettmer said.
Another benefit to the sale, Counts said, is that the city could eventually face steep fines with the Missouri Department of Natural Resources and the Environmental Protection Agency tightening regulations governing the operation of sewer systems.
“This (the sale) can get this albatross from around our neck,” he said.
Arnold Treasurer Dan Kroupa agreed.
“It’s a no-brainer financially,” he said.
Counts said the sale would benefit residents, too, because Missouri American is better equipped to fix and manage the aging sewer system.
Also, the company can operate the system more efficiently, which probably means lower sewer rates down the line, Counts said.
The city currently charges its approximately 7,100 customers about $24.33 a month, based on 5,000 gallons of water usage. To operate effectively, however, the city should be charging more, according to a study completed two years ago, and by 2016, the city should be charging $34.50, officials said.
Missouri American, on the other hand, would not be able to raise rates until 2016 at the earliest, and by then is projected to charge about $30, Dettmer said.
“We can offer residents a good deal, and it would be good for the city,” she said.
Ward 1 Councilman Jason Fulbright said the City Council can vote at any time to raise rates, but if Missouri American owns the sewer system, the Public Service Commission would have to approve any rate increases.
“There’s more protection,” he said.
Missouri American also has agreed to hire the city’s seven sewer department employees and provide them with pay and benefits at least equal to what they have with the city, officials said.
Counts said he hopes residents support the sale.
“I think it’s a win-win for residents,” he said. “It (the sewer system) will be taken care of by a professional (in the sewer business) and cheaper.”
Ward 3 Councilman Phil Amato voted against placing the issue on the November ballot, and Ward 1 Councilwoman Nancy Crisler was absent.
Amato said he heard about another agency that was interested in the city sewers and wanted to investigate that possibility.
Counts and Richison said the city needed to act now on the Missouri American offer because the November election isn’t far away.