PANAMA CITY — Only 80 households are using a sewer plant Bay County commissioners bought seven years ago for more than $21 million.
And that, county officials said, is the major reason many people in unincorporated Bay County are seeing drastic increases in their water rates.
Customers of the county’s retail utility system serviced by a sewer plant off Tyndall Parkway are seeing their rates skyrocket to pay the debt on the North Bay Wastewater Treatment Facility that they aren’t hooked into.
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County officials say it’s a county retail system, so the costs of buying the North Bay sewer plant on Edwards Road needed to be shared by everyone in the retail system, not just the 80 households being served by the plant.
“Anyone on the retail system is paying off the debt,” said County Utilities Services Director Paul Lackemacher.
But Cedar Grove and Cherokee Heights residents, who in some cases have seen their utility bills double in the last year, are irate to be paying for a plant they aren’t using.
“It’s outrageous,” said Jeff Womak of Cherokee Heights. “It’s extortion.”
Growth didn’t come: When commissioners approved of buying the North Bay plant in 2008, there were a wide range of approved subdivisions planned in the area, including 2,556 proposed new dwelling units in the general vicinity of Deer Point Lake, which provides the county’s drinking water. After The Great Recession, only 19 homes actually had been built.
“All these projects were in the pipeline to go, and then they vaporized,” Lackemacher said.
In December, the county’s unincorporated retail service billed 5,281 customers, with 2,966 having central sewer. In the Deer Point Lake area, the county’s retail system has 1,866 customers, with only 80 having central sewer service. Overall, in the total retail system, about 56 percent have sewer, and in the Deer Point Lake area, less than 5 percent of the customers are on central sewer.
Of the 2,966 customers connected to sewer in the county’s retail sewer system, 1,786 connections are treated at the Tyndall Parkway plant; the remaining 80 customers are connected to the North Bay plant.
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All of these county retail customers are paying the debt on a $29.8 million SunTrust loan — $21.2 million of which paid for the purchase of the North Bay sewer plant that the county bought in 2008 from Gulf Coast Electric Cooperative. The loan also funded $3.2 million in Cedar Grove bonds, $2.7 million property on U.S. 231 for the utility system and $2.3 million for North Bay water system revenue bonds.
Search for solutions: County officials said they are exploring all options to lower rates for retail customers. One could be to refinance the SunTrust loan and extend the payments out longer than 20 years, which could reduce the annual payment but require the county to pay more interest, officials said. This move could give the county more time to get customers hooked into the North Bay sewer plant to help pay off the debt, county officials said.
“Actually, we’ve looked at a lot of things and we’re still pursuing it,” Lackemacher said. “I think that there may be some financing options. We are in a favorable environment for low interest, which is an advantage, and we may be able to get ourselves in a better position by restructuring our debt.”
County commissioners said another possible option is to seek out funds from the oil-spill settlement to help pay for the costs of hooking Southport residents into the sewer system. But the cost of hooking people into the system is expensive.
For example, the county was recently awarded a $1 million grant from the Department of Environmental Protection to pay for lateral sewer lines that eventually could allow 220 residents in the Southport area who now have septic tanks to hook into the system. But, Lackemacher said, the total cost of hooking the 220 homes into the system would be another $1.2 to $1.3 million, so it’s not going to happen overnight.
Another option is to encourage or even force residents in the Southport area to hook into the North Bay sewer plant. However, Southport residents in general have been outspoken in their opposition to being forced to hook up to central sewer.
Feasibility concerns: County Commissioner Mike Thomas said that before the county bought the North Bay plant, commissioners had to work with the facts as presented in 2008, and at that time buying the North Bay sewer plant on Edwards Road seemed like the logical option for providing central sewer service to the new residents.
“There were so many promised developments there,” he said. “We were being pushed to make sure we had services up there.”
He added that the Department of Environmental Protection wanted the county to get a central sewer system in the area because of concerns that septic tanks could contaminate the drinking water supply.
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“And Lynn Haven was wanting to get utility service around it,” Thomas said. “We were fixing to be fighting each other.”
Thomas said consultants at the time warned the county about the consequences of taking on the debt of the plant without forcing residents to hook up to the sewer plant, a move commissioners did not approve.
“Even our feasibility people were giving us talks saying this was very risky if we didn’t require people to hook up,” Thomas said. “They were right. When that failed, and we didn’t make everyone else hook up, it made it very unfortunate for a lot of people.
“It is a bad situation,” he said. “The sensible thing to do from all the studies would be to require people to hook up when we put sewer in front of them. That’s the way to start collecting money.”
Not having central sewer in the area would have stifled development in the unincorporated area, Thomas said.
“Without central sewer, you’d be putting septic tanks in our drinking water,” he said. “By law, a lot [of homes] couldn’t have even built. The County Commission would have been negligent in our job to provide” central sewer. “I think it was the right thing to do. It just got caught in the horrible [economic] downturn like the rest of the United States.”
‘Untenable situation’: County Commissioner George Gainer said county officials felt they had to have central sewage because of all of the proposed development along the State 77 corridor and Deer Point Lake.
“We felt like with that many houses, septic tanks were bound to cause a problem with Deer Point Lake,” he said.
Not moving ahead with buying the plant would have “stopped development or complicated the situation,” Gainer said. “Any time you don’t take care of infrastructure, and have infrastructure to keep up with development, you have a problem.”
But Gainer said the current situation, with only about 5,300 residents paying off the debt on the plant through higher water and sewer fees, is unacceptable and that the costs should be spread out among all county residents, “even if it takes a change in statute to create some type of utility authority in Bay County.”
“This is an untenable situation at this time,” Gainer said. “I certainly feel terrible about the people having their water bills double. We’ve got to respond to that. If we have to take money out of the general fund, then we’ll have to do that. We cannot allow a few people on this system to have to have the responsibility of the whole debt. That can’t happen.”
Gainer said he could envision people not moving to the unincorporated area because of the high utility bills. “That would just complicate the whole situation further,” he said.
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Gainer said county attorneys are researching possible options.
“Hindsight is 20-20,” he said. “We wouldn’t have made that decision” to buy the plant “had we known. But growth didn’t come. It will eventually, but in the meantime, we can’t place this hardship on those 5,300 people who are paying the bills.”
Commissioners tentatively have scheduled a workshop for March 17 at 6 p.m. to discuss possible ways to bring down the bills.
Commission Chairman Guy Tunnell told residents at the Feb. 3 meeting that he understands their pain, as his own relatives aren’t happy about the higher utility bills and are letting him know it.
“Interlocal agreements [with cities] play into all of this, too,” he said. “As we all have kind of said all along, there is no one simple solution to this because you do one thing, it’s like dominoes, and another thing is impacted.”
County Commissioner Bill Dozier tried to temper expectations for the upcoming workshop.
“I don’t want you leaving here thinking that we’re going to be able to wave a magic wand” and rates are lowered “just like that,” he told residents in the commission chambers. “I believe that is our desire to do that, but I just want to be clear I don’t want you to be misled and go away from here thinking that on March 17 we’ll lower bills automatically.”
Other factors: Lackemacher said even though the sewer plant debt is a major factor in the recent rate increases, it is not the only reason for the hikes that kicked in in April.
“There are many factors that go on to retail rates going up,” he said. “Consumable costs go up; environmental regulations go up.”
He said even the unpaid bills at Tyndall Air Force Base are contributing to higher utility costs among retail customers. In August, a federal judge ruled in favor of Bay County over a water rate dispute with Tyndall. The disagreement stemmed from Tyndall’s purchase of water and sewer services from the county. It had refused to pay at higher levels when the county increased its rates, according to the ruling. The county argued Tyndall owes $850,000, dating back to the first rate increase in 2007. The unpaid fees are now over $1 million and Tyndall has appealed the judge’s ruling.
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Lackemacher said it could take some time to find ways to reduce the retail customers’ rates.
“We’re looking at all options right now to see what we can do,” he said. “But based on what I know, I don’t think there is any magic bullet out there that is going to say, ‘OK, if we do “X,” “Y” and “Z,” we can reduce the rate by “Y” next month or a year from now.’ It took awhile to get here. It’s going to take awhile to get out.
“And it’s unfortunate,” he added, “and it’s not the answer those people want to hear. I have a lot of empathy for them.”