Cape Charles Town Hall Explores Potential Water and Sewer Utility Sale

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Virginia American Water Vice President of Operations Casey Allen addresses Cape Charles residents during a town hall about the company’s proposal to purchase the town’s water and sewer treatment facilities.

By Stefanie Jackson – The Cape Charles Town Council held two town hall meetings in February to allow citizens to comment and ask questions regarding the potential sale of the town’s water and sewer systems to a private company that would take over operations, billing, and customer service for both utilities.

About 18 months ago, Cape Charles received an unsolicited proposal from Aqua Virginia, the same company that sought to acquire Exmore’s sewer system before the town decided instead to partner with the public Hampton Roads Sanitation District.

Cape Charles advertised to allow other companies to submit proposals to acquire the town’s water and sewer systems. The town received a proposal from Virginia American Water (VAW), which the council preferred to the proposal made by Aqua Virginia.

In its decision-making process, Cape Charles is being advised by executive consultant Eric Collocchia from NewGen Strategies and Solutions, of Annapolis, Md.

No decision has been made to sell the water and sewer facilities, but if the Town Council decides to move forward with the sale, the buyer will be Virginia American Water.

Four representatives of Virginia American Water made their case at the town hall meetings: Vice President of Operations Casey Allen, Director of Engineering Kristina McGee, Eastern District Supervisor of Operations J.R. Fidler, and Water Quality Manager Christian Volk.

Allen opened the conversation by touting Virginia American Water’s more than 170-year history serving Virginia localities. VAW is the largest investor-owned water company in the state and serves around 339,000 people in seven counties and two cities, providing 72 million gallons of drinking water every day.

As a large company with more purchasing and investing power than the small town of Cape Charles, Virginia American Water would maintain or improve water quality, water and sewer infrastructure, and customer service while also maintaining or lowering rates, VAW representatives said.

Virginia American Water also supports the communities it serves through its environmental and firefighting support grant programs, the American Water Charitable Foundation, and presentations and hands-on activities for all ages.

Cape Charles’ water quality was a concern for several residents at the town hall. Dianne Davis asked why should people have to buy bottled water when they’re already paying for town water?

Volk acknowledged the complaints about water quality, which could be improved through technology used by VAW. Its treatment plants are fully automated and water quality is monitored online to provide treatment optimization, he said.

VAW can use ultraviolet or UV light to disinfect water, removing unpleasant odors and tastes. VAW can treat rusty water, which is caused by high levels of iron and manganese, Volk explained.

Virginia American Water also benefits from access to a central laboratory in Illinois, which belongs to its parent company, American Water. The state-of-the-art laboratory supports research and compliance through water testing and analysis.

Virginia American Water is a regulated utility, and beside answering to the U.S. Environmental Protection Agency, the Virginia Department of Environmental Quality (DEQ), and the Virginia Department of Health, its rates are set by Virginia’s State Corporation Commission (SCC).

VAW proposes its rates, but they must be approved by the SCC.

VAW’s customer service is available 24/7 for emergencies, and it offers five ways to pay a bill. VAW water meters are high-tech and monitor water flow in 15-minute increments, making it easier to detect and fix leaks.

Robert Mucha was skeptical about selling the town’s water and sewer systems to Virginia American Water and said, “bigger is not always better.”

For example, when Floyd Energy in Exmore was sold to a nationwide retail propane distributor, customer service became impersonal and difficult or impossible to reach, Mucha explained.

Allen pointed out that the locals on whom Cape Charles now relies for water and sewer-related customer service are the same employees who will respond to service calls through VAW.

Cape Charles’ water and sewer system operators would become employees of Virginia American Water, which can offer higher pay and provide training at its Prince William operations center. VAW has no plans to cut jobs but to keep the employees for the long term.

Mucha said VAW might be “good neighbors” but asked, “What does the town receive?” The town might get the opportunity to pay off water or sewer-related debt and have less responsibility for the utilities, but what do the people get? Residents might get better water quality and customer service and lower rates, but they won’t be able to complain directly to the town manager or Town Council when something goes wrong.

Town Manager John Hozey admitted that Cape Charles will “lose direct control” of its water and sewer systems, although it can provide input to the SCC when it sets rates.

However, “what we get is the expertise that we don’t have now,” which will save the town and residents money over time. For example, Cape Charles recently was fined $22,000 by DEQ, which could have been avoided if the town had the same access to experts as Virginia American Water.

“Guess where that $22,000 is going? Into your rates,” Hozey said.

He noted Cape Charles receives such fines periodically and explained that the problem isn’t the town’s water and wastewater operators, who are qualified for their jobs but don’t have expert knowledge of engineering, permitting, and regulations.

Cape Charles’ water and sewer rates will only continue to rise if the town takes no action.

A graph provided by Virginia American Water showed a 10-year forecast of the monthly cost of water and sewer service for a Cape Charles residence using 2,000 gallons of water per month. (Collocchia noted the average Cape Charles residence uses about 3,000 gallons per month.)

The monthly bill for those services currently is about $95. If Cape Charles maintains the “status quo,” the monthly charge will reach approximately $135 by 2031. However, if the town accepts Virginia American Water’s proposal, the monthly cost would fall to $80 by 2031, according to the graph.

Allen explained that if Cape Charles does nothing, water and sewer bills will go up because the town will be responsible for making capital investments in the utilities, which get passed along to customers, but the bills would go down with Virginia American Water, which can make more improvements for less money.

“The reality is we can put pipe in the ground cheaper than the town can, we can replace meters cheaper than the town can … and the reason for it is not because we’re better negotiators, it’s because we’re larger negotiators,” he said.

Bob Panek noted that according to the Annual Virginia Water and Wastewater Rate Report, a collaboration of the Virginia Association of Counties and Draper Aden Associates, Cape Charles’ water and sewer service rates are among the highest of all Virginia municipalities.

Diane D’Amico asked the tough question about how the developers of the Bay Creek community would be held accountable to help pay for the expansion of Cape Charles’ water and sewer facilities when the town outgrows the current facilities – a vaguely worded requirement in the annexation agreement that legally made the Bay Creek area part of the incorporated town.

Hozey said a three-party agreement must be made between Virginia American Water, Cape Charles, and Bay Creek’s developers. 

Even though the annexation agreement failed to provide specific dollar amounts or percentages, “it is accurate to say, at the moment, that the developer has a liability and the town has an asset,” he said.

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