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Wednesday, 06 November 2013 00:00

Whittier sewer line on the slow road to bankruptcy

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A rural sewer system in Jackson County is headed toward bankruptcy unless it can drum up 200 customers in the sparsely populated Whittier area. 

It’s a tough sell though, witnessed by the paltry 40 customers along the sewer line now.

 

It’s operating at a loss of $100,000 a year, propped up for now by Jackson County taxpayers and the Eastern Band of Cherokee Indians. 

But the subsidies will dry up in two years, and the sewer system would have to shut down. County leaders must decide soon whether to keep plowing more money into it.

“I realize it is nothing this board put in place, but it is a tipping point for this system,” County Manager Chuck Wooten told commissioners Monday during a discussion of the quandary at a county meeting.

The sewer system was conceived eight years ago on two flawed assumptions: 

• That Whittier residents would forsake their septic tanks and hook on to the new sewer line.

• That the U.S. 411 corridor leading to Cherokee would explode with commercial development. 

Neither manifested. Monthly sewer bills from such a small handful of customers brings in only $28,000 a year — dramatically short of the $128,000 operating budget to keep the lights on at the plant. 

“I can’t say what the original business plan was for this particular system, but unfortunately, the system is not self-sustaining in its present situation,” said Wooten.

One thing everyone in the room seemed to agree on: the Whittier sewer line was a bad move from the start.

Commissioner Vicki Greene said she is the “only barnyard dog” still around who was involved during the project’s origin.

“I ended up thinking this was about ego, and not about the appropriateness of this project,” Greene said.

The financial viability of the Whittier Sanitary District, which operates the sewer system, was deemed “marginal at best” in an analysis by the engineering firm Martin-McGill last year.

“In order for this particular system to continue, we need some type of reliable financial support, or we are going to have to find a lot more customers,” Wooten said.

 

Throwing good money after bad?

Jackson County taxpayers have sunk $750,000 into the Whittier sewer system since its inception five years ago — first for its construction and then for an operating subsidy. The Eastern Band of Cherokee Indians chipped in about the same amount, seeing the sewer system as a plus for its new Sequoyah National Golf Course in the area.

The operating subsidies put up by Jackson County and the tribe were intended to tide the sewer system over until it could become self-sufficient. Now, there seems little hope of that happening.

Whittier Sanitary District needs another 200 residential customers to break even. Less if the sewer system could land some big commercial hook-ups, like fast-food restaurants or gas stations. Or even less if a large manufacturing industry that uses massive volumes of water moved in.

But the lines simply don’t go past enough doorsteps — even if everyone along the line hooked on — to get the paying customers it would need. The Whittier Sanitary District has periodically waived the hookup fees to lure people to hook on, but got few bites.

Greene said a decade ago, the main corridor leading to Cherokee seemed ripe for commercial development. And it might yet.

“I do believe that 441 corridor is going to be developing,” Greene said.

But it won’t happen in time to rescue the Whittier sewer system. 

Wooten said there’s no prospect of getting the tribe to put in additional subsidies. The tribe has put in all they want to put in.

“So that kind of leaves it back to the county,” Wooten said.

But some commissioners disagreed. Why should the county indefinitely subsidize the sewer bills of a small handful of residents, Commissioner Doug Cody asked.

“This $100,000 deficit, this goes on forever,” Cody said.

Commissioner Jack Debnam also questioned why they should keep pouring money into a losing proposition.

 

Hindsight is 20-20

Wooten agreed the county probably should have bowed out at some point along the way. But the county was roped in initially and stayed in even as the financial projections began to fall apart because an elementary school in the area desperately needed a sewage solution.

“It was basically down to a pump and haul basis,” Wooten said of the sewage woes at Smoky Mountain Elementary School. “For that school to stay in operation, we had to pump the tank several times a week.”

So the county bought in to the idea of a sewer plant for the area — but it was probably the wrong decision, Wooten said.

“We could have cut our losses and taken the investment we have in this and tried to do something different for the school,” Wooten said. “Hindsight is 20-20.”

But Wooten seemed to think it is too late for that now, however. Smokey Mountain Elementary School relies on the sewer system. 

“We obviously have an interest in making sure that sewer service is provided to the school,” Wooten said.

The school isn’t the only one that would be left in the lurch if the sewer system shut down. The 40 existing customers on the line — 32 homes, a few businesses, a church and Sequoyah National Golf Course — would have to go back to septic tanks.

Several homeowners now on the sewer system had been plagued by failing septic tanks before the line came along. Indeed, the sewer line was a savior to them.

Initially, it was supposed to be mandatory that those along the line connect to the system. But, it was cheaper for those with functioning septic systems to stick with what they had, and the board of directors for the Whittier Sanitary District decided not to force people to hook on.

The board missed the boat when it failed to at least make new construction hook on — which is a fairly standard practice in sewer service areas.

The Whittier Sanitary Board has had a change of heart, however, and are now willing to institute a mandatory hookup policy for new construction along its lines, Wooten said. Had that policy been in place the past five years, it would have more customers than it does.

In yet another misstep for the ill-fated enterprise, the line was initially supposed to be longer, going past more potential customers along the U.S. 441 corridor, but it was truncated due to higher-than-expected construction costs. As a result, it only goes about halfway down the U.S. 441 corridor.

 

Hot potato sewer lines

Some commissioners seemed perturbed the Whittier Sanitary District didn’t bother to show up at the meeting. 

“I am wondering why the Whittier Sanitary District is not here talking to us,” Debnam said.

The Whittier Sanitary District was criticized three years ago for being a less-than-stellar steward of public funds and violating standard governance protocols.

The State Treasurer warned following an audit in 2010 that the Whittier Sanitary District “has serious financial problems which the governing board must address immediately.”

State concerns included: no budget had been adopted; the district operated at a net loss; it was spending more than it budgeted to spend; an audit hadn’t been performed as required by state law; and the financial officer wasn’t bonded as the law stipulated.

Further, board members were reportedly receiving utility services free of charge as a perk. That practice, if it did exist, has now ceased. The other issues have been resolved as well, but the track record is a black mark nonetheless.

The Whittier sewer lines and sewer plant were supposed to be turned over upon completion five years ago to the Tuckaseigee Water and Sewer Authority, which operates most of the other water and sewer lines in Jackson County. But that never happened.

They’ve had a change of heart on that as well, however.

Now, the Whittier Sanitary District’s board has said it would agree to give the system to TWSA, Wooten said.

Some commissioner guffawed at that. Who wouldn’t want to unload a money-losing sewer system with virtually no hopes of a turnaround, Cody said.

For its part, TWSA doesn’t want the system unless it comes with a long-term subsidy. TWSA doesn’t want to be saddled with the annual operating losses, so someone — presumably the county — would have to chip in for that hand-off to happen.

The Eastern Band of Cherokee Indians potentially might be another candidate to take over the sewer system. It already has sewer lines of its own along a portion of the U.S. 441 corridor closest to the reservation.

But sources close to the issue say there is concern about turning over the system to the tribe, because whoever owns the system would control development along the corridor.

Turning the system over to the tribe wasn’t even included as an option in a feasibility analysis conducted by the consulting engineer firm last year.

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