Washington - District of Columbia officials are considering creating a separate water and sewer authority to oversee customers rates and issue tax-exempt revenue bonds for capital needs, according to the district's top finance official.
The idea "has long been under discussion," but has taken on new life as the district and its water and sewer utility administration explore options for financing "substantially larger" capital spending needs over the next decade, said Ellen O'Connor, chief financial officer and deputy mayor for finance. The district is "in the preliminary stage" of developing a proposals, she said.
The current water and sewer program is self-sufficient and does not require a subsidy, unlike several others district enterprises funds. The program's capital expenditures are about $25 million a year, O'Connor said.
"They have got a pretty solid operation there," said Parry Young, a director in Standard & Poor's Corp.'s municipal finance department, after meeting with district official last week.
The program's operating funds are maintained on a pooled basis with district funds and do not create a strain on the general fund, O'Connor said. However, the utility administration wants to improve its ability to finance increasing capital needs, she said.
The program needs additional resources for complying with environmental regulations, O'Connor said. New processes for wastewater treatment and updated facilities are planned to meet growing local needs.
In addition, "we had a bad winter, which...showed some of our problems in terms of water mains busting," said an aide on the district council, which now regulates water and sewer rates and budgets debt service payments.
During the next six years, the water and sewer program, including the city's aqueduct, plans expenditures of $168 million in approriated funds from local sources, including the annual federal payment, and $52 million of nonapproriated funds, including federal grants, the aide said.
The program need more than what the district can provide through general obligation bond issuance O'Connor said. The district issues about $250 million of GO bonds every year and uses proceeds for schools, public works, roads, bridges, and other infrastructures projects, she said.
The district council aide said the council has not rejected the idea of creating a special authority to issue bonds, but it has never voted on a formal proposal. "I think there would be support for the concept of revenue bonds," the aide said.
However, the aide could not comment on moving the rate-setting function of the council to a new authority because he said the idea has not been debated before "In one regard, it would be politically convenient to have another body raise rates," but it would be "politically inconvenient" to have another body lower rates, the aide said.
