THE BEST RUN SYSTEM IN THE STATE Birmingham Water Works Board

 THE BEST RUN SYSTEM IN THE STATE
Birmingham Water Works Board

1.Management Team – Strong, Diverse and Professional
a.General Manager – Certified Public Accountant, 14 years water experience, 25 years management.
b.AGM Operations – Professional Engineer, 27 years water experience, 15 years management.
c.AGM Maintenance & Engineering – Professional Engineer, 12 years water experience, 20 plus  years management.
d.AGM Finance – Certified Public Accountant, 6 years water experience, 20 years management experience.
2.Financial Condition – Company’s financial position has improved every year for last 10 years.
a.Company budgeted to generate $13.1m PAYGO Funds and actually generated $15.7m.
3.Bond Rating – Company’s bond rating has improved significantly since 2005.
a.Bond ratings improved from single A (A) to double AA (AA) with a positive outlook
b.2015 Bond Ratings affirmed and both agencies indicated that system has strong financial policies and strong management team that continues to deliver positive results year after year.
b.2015 Bond Issue completed in approximately 5 hours.
4.Board Pay – board pay is properly managed. Minutes are drafted to support every day/meeting to support board members pay.
a.Board pay has decreased by 47% since 2009.
b.2014 average pay per board member is less than $20,000.

5.Consulting Cost – consulting cost decreased from $5m to $3.3m since 2007.
a.Industry average for consulting cost is 9% of a $100m operating budget.
b.BWWB operates with only 3% consulting cost.
6.Main Replacement Expenditures – main replacement projects have increased significantly since 2000.
a.Putting more money back into the water system.
7.Representation of Customers Outside of Jefferson County
a.95% of company revenue is generated from customers in Jefferson County.
b.91% of company customers are in Jefferson County.
c.BWWB has 195,000 water connections.
d.Walker County has 50 or fewer customers.
e.Blount County has 600 or fewer customers.
f.St. Clair County has 3,700 or fewer customers.
g.Shelby County has 16,000 or fewer customers.
h.Collectively 4 counties outside of Jefferson County have approximately 20,350 customers which is approximately 10% of system total connections.
i.Items above do not support the claim that Walker, Blount, St. Clair and Shelby County should have appointments on water system board.
8.Management – Company’s rules and regulations, financial and operational policies and procedures require employees to provide the same services to all customers, no matter which municipality or county they reside in.
a.Company has a strong management team that handle day-to-day operations in accordance with established policies and procedures.
9.Public Hearing on Budget and Rate Increase  
a.BWWB held 3 Town Hall meetings to provide detailed information on the system’s operations (January 6; April 17 and May 6, 2014).
b.BWWB held a public hearing on its 2015 proposed operating budget on November 6, 2014.
c.Management presented 2015 budget and discussed proposed 3.9% rate increase (average rate increase for similar utilities is 7.2%). Public and News Media asked no questions. Public hearing will be held on future budgets and rate increases.
10.BWWB Initiatives – strategic initiatives are underway to reduce cost and generate revenue.
a.Health Clinic – effective reducing healthcare cost the last two years.
b.HomeServe – over 16,000 customers signed up and $500,000 additional revenue.
c.Bottled Water – due diligence is under way to determine if it works.
11.Ethics Law – Board of Directors currently comply with State of Alabama Ethics Law.
12.Operational Reports to Local Official – BWWB will commit to providing municipalities it serves semi-annual or quarterly financial and operational updates designed to clearly communicate overall objectives and accomplishments. It should be noted that payments to municipalities for FY 2014 franchise fees exceeds $4m. The top five payments were as follows:
a.Birmingham        $ 1,876,000
b.Hoover         $    432,000
c.Vestavia        $    289,000
d.Homewood        $    227,000
e.Mountain Brook    $    215,000
 13.Employees
a.55% of our employees live in Jefferson County.
b.Employees live throughout our service area.
14.Awards and Recognition
a.Board recently ranked #24 in Training Magazine Top 125 Award.
b.Board previously ranked #95 year 1; #75 year 2; and #24 current years. BWWB ranks in top 20% of Training Magazine organizations.
Senate Bill 89 Specific Comments
15.Section 4 (c) of SB 89 requires a specific notice to be given to the public 30 days “prior to any vote on the rate increase.”   This section of SB 89 contemplates that water rates will be adjusted through the use of a traditional rate resolution.   In 2005, the BWWB adopted a rate stabilization and equalization formula (RSE). This is a formula that automatically adjusts water rates either up or down depending on various financial circumstances effecting the BWWB.  Since the implementation of the RSE, the BWWB has not taken any vote to increase rates.  The RSE has routinely been cited by the bond rating agencies as being one of the major initiatives by the BWWB that has led to the excellent bond ratings that the BWWB enjoys.  SB 89 seems to require the BWWB to abandon the RSE and move back to the traditional rate resolutions to alter water rates.  Such an action by the BWWB would have a negative impact on the BWWB’s bond rating.   (Note – RSE Model is very similar to Public Service Commission Model or formula for APCO, Alagasco and other organizations they regulate).
16. Section 2 of SB 89 requires the BWWB “to be reorganized and composed” of a total of 9 members on January 1, 2017.  One interpretation of this provision would be that on that date, all currently serving members’ terms would by law end and the Birmingham City council would appoint six new members, the Mayor’s Association would appoint one new member and Shelby County and Blount County would each appoint one new member.  This would effectively remove all of the institutional knowledge from the board of directors and replace it would novices.  Also, since SB 89 does not provide that the positions will have staggered terms of office, every four years, the board of directors is subject to losing all, or a majority, of its institutional knowledge. Continuity of Leadership is a key consideration for the bond rating agencies and may negatively affect the BWWB’s current bond rating.
17. Section 2(3) of SB 89 only requires a board member that is appointed by Shelby County and Blount County to be a resident of that county and not a customer of the Water Works Board.  The BWWB can have various interests that are in direct conflicted with the interests of Shelby County and Blount County.   For example, Blount County has been trying for years to force the BWWB to pay an annual fee ($2,000,000) for the right to withdraw water from Inland Lake.  By not requiring these board members to be a customer, they will have no incentive to try and protect the interests of the Water Works Board, its customers and its bond holders and every incentive to try and protect the interests of their individual counties.