By Robbie Ward
TUPELO – Construction of new water tanks and wells planned by North Lee County Water Association could require raising customers’ rates by more than 40 percent, an analysis by Tupelo’s former chief financial officer found.
North Lee’s plans to proceed with an $8.9 million project backed by a U.S. Department of Agriculture Rural Development loan may result in increased debt that could threaten the water association’s financial future.
The water association and city have negotiated since late 2013 for Tupelo Water & Light to provide water service to 508 North Lee customers in annexed areas. The two sides appear to have reached an impasse as they negotiate the value of the annexed area served by the rural water association.
Despite Tupelo’s objections, North Lee got conditional approval in March from a state environmental permitting board to construct the six wells and six tanks. The nine-member Mississippi Department of Environmental Quality Permitting Board unanimously granted the request at a hearing.
Lynn Norris, former Tupelo CFO and the city’s current unpaid consultant, used data included in the water association’s Rural Development loan application for financial analysis.
“In my opinion, based on a reasonable degree of certainty and probability in the field of accounting and financial advising, the project contemplated by NLCWA will require the minimum addition of 1,060 new customers, or a minimum increase in rates of 40.39 percent, or a combination thereof,” Norris stated in an affidavit filed with MDEQ.
To avoid a rate increase based on information provided in North Lee’s federal loan application, it would require almost 25 percent more customers than the existing 4,352 documented in 2014 Mississippi Health Department Records.
Norris’ financial analysis of North Lee’s project focused solely on new debt and didn’t consider increases in operating or maintenance costs.
BancorpSouth and two other Mississippi-based banks have rejected interim financing required for North Lee’s project to begin. The water association’s board approved June 26 a financing agreement with a Colorado-based bank.
North Lee Board of Directors President Terry Anderson did not respond to Daily Journal emails and phone calls requesting comment.
The high-stakes water showdown seems likely to have an impact for decades.
Tupelo says the water association has strayed from the mission of providing water in rural areas, threatens to jeopardize required levels of the Eutaw-McShan aquifer and may bankrupt the North Lee association.
The two water providers will face round two at an Aug. 14 MDEQ evidentiary hearing requested by the city. This high-stakes water confrontation could impact for decades city residents annexed in 2012 who prefer Tupelo’s groundwater over the water association’s well water, which periodically has a rust discoloration and chemical smell. Tupelo also has lower rates than North Lee.
Environmental concerns raised by Tupelo involve the aquifer MDEQ has prohibited the city from using for more than a quarter century due to the region’s groundwater depleting at alarming rates.
Tupelo and other regional communities created access to groundwater funneled from the Tombigbee River.
North Lee board members have said the new water wells will not threaten the region’s underground water supply since Tupelo and other communities no longer drain high volumes of underground water. Tupelo, however, believes future development in the rural water association’s territory could lead to withdrawing too much water from the aquifer.
The expansion and improvement project would insulate North Lee from any city effort to acquire the desired territory, an area occupying 10 percent of the association’s customers but accounting for 20 percent of revenue. Federal law prevents municipalities from annexing territory served by water associations with Rural Development loan debt. The water association’s project initiated in mid-2012, just prior to Mississippi Supreme Court approving Tupelo’s annexation.