AUGUSTA – In a move described as “extraordinary,” the state granted Buckfield’s water district the go-ahead to temporarily increase water rates by 75 percent to prevent the water company from defaulting on a loan payment.
The town manager and two consultants for the water district testified at a public hearing at the Maine Public Utilities Commission on Tuesday to urge the state’s three utility commissioners to approve the emergency rate boost.
This past March, Buckfield Village Corp., the name of the water district, learned it did not have enough money to make a $25,815 loan payment to the United States Department of Agriculture’s Rural Development by an April 24 deadline.
Moreover, the water district had to find the funds to pay an additional $41,000 owed this year to Northeast Bank and Rural Development.
Scrambling in the past few weeks to find a solution to the looming financial nightmare, the town managed to procure a $65,000 bridge loan from Northeast Bank. But the loan was contingent on the state accepting the stopgap rake increase.
Although Commission Chairman Kurt Adams endorsed the rate increase, he said he did it reluctantly. “I am deeply troubled by this case,” he said, which he also described as “extraordinary.”
He said he felt uneasy that the 177 district customers were not adequately informed about Tuesday’s public hearing, and he was uncertain that the Buckfield Village Corp. had sufficiently overhauled its infrastructure to deal with future financial difficulties.
“My ambivalence is we’re going to raise rates and create new debt,” he said.
The three commissioners all endorsed the increase.
Adams also expressed concern that no one could clearly explain how the water district had wound up in such a mess. He pointed out that the Village Corp. has been running a deficit since 2002; yet in the past four years, it never requested a rate increase to deal with the widening gap.
The public hearing’s panel, which included two representatives from the Maine Rural Water Association and Buckfield Town Manager Glen Holmes, had a hard time explaining how the budget had gone awry.
Steven Levy, executive director for the Maine Rural Water Association, which has been hired by the Village Corp. to implement a permanent rate increase plan, explained that the water district has no full-time staff, but rather is managed by a volunteer board.
Holmes said, too, that a woman who ran the district for many years died in 2003, taking much of the institutional memory with her. Holmes became town manager in 2004, and when he met with the district board that year, he said he realized there were financial problems, but nothing of the magnitude that was revealed in March.
The Maine Rural Water Association discovered the money shortage last month as it structured a new rate design for the town. Its plan will propose a permanent increase of about 139 percent, and will be presented to the commissioners in 30 to 60 days. Rates will likely increase in the years to come as well.
The Village Corp. has taken on three different loans totaling $754,700 since the last rate increase before 2001. The district also received a $470,500 USDA loan in 1998.
“What is pushing this is new debt that the district picked up to do this project,” Levy said, referring to a 2005 project to replace old water mains. The district already had debt from a treatment facility installed earlier, he added.
Adams questioned how lenders could have loaned money to a struggling institution, and said he wished he could have heard testimonies from the district’s board members, its accountant and the banks.
Holmes also explained that townspeople will vote next fall on whether Buckfield should take over the water district. He said this will result in greater efficiencies because the town can use its resources to manage the water district.