VOL. 130 | NO. 232 | Monday, November 30, 2015
Comptroller: Action Needed on MLGW Water Rates
By Bill Dries
Tennessee Comptroller Justin Wilson has warned city leaders that Memphis Light, Gas and Water’s water division could come under state control if action isn’t taken to make up a $2 million deficit in water revenue.
The Memphis City Council is scheduled to vote on MLGW’s proposed 22 percent water rate hike Tuesday, Dec. 1, a year after the council rejected a 2.3 percent hike proposed by the utility.
In a Nov. 25 letter to Memphis Mayor A C Wharton, Wilson said he is concerned that with no action by the council, the water division will have year-end financial statements that “reflect a significant monetary deficiency also known as a negative change in net position in the approximate amount of $2 million.”
The letter was made public Monday, Nov. 30, by council chairman Myron Lowery.
At a Monday committee session, several council members questioned MLGW president Jerry Collins closely on whether a smaller water rate hike of some sort could be combined with some budget cuts at the utility. Still others questioned whether the utility has done enough to make itself more efficient before seeking a rate hike.
View/download Wilson's letter to Memphis leaders (PDF, 776 KB)
Six of the 13 council members were present for the committee session. The committee did not take a vote Monday on a recommendation to the full council.
But there were enough council members present and expressing opinions to indicate there will probably be more debate before Tuesday's council decision on the matter.
Collins didn't refuse to consider the options suggested by council members. But he also defended the utility's financial decisions as necessary.
The $2 million figure mentioned by Wilson is the amount of revenue MLGW lost when the water division’s largest customer, Cargill Inc., closed its Memphis corn mill operation at the end of 2014.
MLGW is seeking a larger water rate increase to make up for the Cargill loss as well as legal fees in an ongoing court case over water rights with the state of Mississippi. The utility also cites a “continued overall decline in water sales,” according to the minutes of the October MLGW board meeting where the rate hike was approved by the utility board.
Wilson commended the water division for its AAA Standard and Poor’s bond rating on its Series 2014 bonds.
“I also want to emphasize that failure to address the above-noted financial deficiency could lead to a downgrade of this rating, and as you know, a lower bond rating could result in increased costs to your ratepayers,” Wilson wrote.
Wilson also raised the possibility of the state overseeing MLGW’s water division, including approval of any corrective action plan.
“If the Division is unable to resolve the situation in a timely manner, the (state Water and Wastewater Financing) board may investigate and outline its own corrective action plan,” he warned.
MLGW president Jerry Collins last year warned of the same possibility when the council rejected the water rate hike.
The specific concern is that MLGW would have a negative change in its net position for a second consecutive fiscal year, which could trigger state action and oversight.
MLGW’s fiscal year ends at the end of the calendar year 2015.