GONZALES — Ascension Parish government has reached an agreement in principle with Peoples Water Service Co. to buy its water operations in Donaldsonville for $5.9 million.
If the deal goes through, the parish plans to inject another $5 million in upgrades to the water system, parish officials said.
After months of negotiations, Ascension Parish President Tommy Martinez said Friday, company and parish officials were able to agree on a number between the parish’s earlier offer of $5 million and Peoples Water’s most recent price of $7.5 million.
Many steps need to happen for the deal to go through, including state Public Service Commission review of the sale and Parish Council approval of it.
But the proposed purchase would allow the parish to combine the 3,100-customer water system serving Donaldsonville with a parish-owned system of 700 customers that exists on the city’s periphery and extends far afield to the upriver community of Modeste.
The parish system, known as Ascension Consolidated Utilities District No. 1, has not been able to turn a profit, and recently, tests revealed that the brain-eating amoeba Naegleria fowleri was in the water.
After discovery of the amoeba July 28, the state Department of Health and Hospitals ordered the district to conduct a chlorine burn, in which chlorine levels are increased and maintained at that level for a 60-day period to kill the amoeba. State officials said the system hit the required chlorine levels Aug. 17 to start the 60-day clock on the burn.
The Peoples Water purchase would give the parish a centrally located, 3 million-gallon-per-day water plant and disinfection system on the Mississippi River with excess capacity and would allow the parish to stop buying and piping in water from neighboring parishes.
The deal’s financing also is projected to turn an annual profit for the now money-losing ACUD No. 1 system but would come with a 33 percent rate increase for current Peoples Water customers in Donaldsonville to help finance the Peoples Water system upgrades and for paying off the debt owed on ACUD, parish officials said.
“I think it’s a great deal for everyone concerned here, and I think it’ll work and it’s a step in the right direction,” Martinez told the Parish Council Utilities Committee Thursday night when he first announced the agreement.
As the purchase plan is envisioned, the parish would use $5.9 million in cash to buy the system and then would borrow $9.1 million, either with a low-interest loan through DHH or revenue bonds. The loan would provide $5 million in upgrades for the Peoples Water system, while the remaining $4.1 million would pay off the remaining debt for the ACUD No. 1 system, Martinez said.
Donaldsonville officials have aired their concerns about the parish’s proposed purchase and the possible rate hike, which they see as their city bailing out the debt-laiden ACUD system. Those worries have spurred anew long-standing interest in Donaldsonville to buy Peoples Water, but Mayor Leroy Sullivan has acknowledged the city also would have to raise rates to finance a purchase of Peoples Water.
Martinez pointed out, though, that while ACUD No. 1 customers would not see the water rate increase as Donaldsonville customers would, existing ACUD customers would continue to pay a 10-mill property tax adopted in 2006 to pay for the debt taken out for ACUD’s infrastructure. With all that taken together, he argued, overall water bills for city and existing ACUD No. 1 customers would end up about the same.
When and if the entire financing effort takes place, Martinez said, the ACUD system is projected to net $525,000 per year in profit. The system now must rely on the general fund and other parish sources because it runs at an annual loss with its existing revenue sources.
The council previously had authorized Martinez to offer up to $5 million to buy Peoples Water, but, at his request Thursday, the committee recommended the new offer price, plus other terms requested by Peoples Water.
The parish also must keep the 15 Peoples Water employees.
Martinez said Friday that the council could vote on the new offer as soon as Thursday evening in Donaldsonville.
Sherlock “Shockey” Gillet Jr., president of Peoples Water, confirmed Friday that the two sides had reached an agreement, but he was reluctant to offer many details due to confidentiality agreements his company has with the parish and Donaldsonville. He did say a lot of details must be worked out with the parish.
“It seems that it’s going, as both partners are interested in it, and we’ll just see if we get across the finish line,” Gillet said.
He declined to comment on the status of Donaldsonville’s purchase bid.
Peoples Water, which is based in Maryland, runs water systems in Bastrop and Pensacola, Florida, in addition to Donaldsonville. The company has been in the city since 1941.
Even if Martinez’s deal gains council backing Thursday, he said the council would have to come back and adopt an ordinance — a process that happens over two meetings with extensive public advertising in advance. He said the deal would not be wrapped up until early December, just before his term as parish president ends.
Follow David J. Mitchell on Twitter, @NewsieDave.