Despite help, Kentucky’s ‘worst water district’ still months away from collapse

One of the valves on one of the treatment tanks at the Martin County Water District water treatment plant on Turkey Creek Road in Inez, Ky., Wednesday, January 25, 2001.
One of the valves on one of the treatment tanks at the Martin County Water District water treatment plant on Turkey Creek Road in Inez, Ky., Wednesday, January 25, 2001.

Martin County officials announced a tentative lease agreement Wednesday with a nearby utility that could help delay a financial collapse of the county’s troubled water district.

Martin County Judge-Executive Kelly Callaham said the water district, now more than $877,000 in debt, will lease a water tank to the nearby city of Prestonsburg for $16,500 a month, creating a steady stream a revenue for a district that has previously said it was just weeks away from collapse.

The district also has begun to collect some of the estimated $600,000 in past-due bills that it had previously failed to collect, which means it can likely survive about four more months, officials said Wednesday.

“The next three to six months are clearly very critical,” said Greg Heitzman, president of BlueWater Kentucky, a management consulting firm that works with the district. “We’re attempting to avoid a cascading failure and a tailspin.”

The district has asked state regulators to approve a nearly 50 percent emergency rate increase to keep the water district afloat.

Officials from Martin County and Prestonsburg met and discussed the lease agreement during a lunch break Wednesday while attending a Kentucky Public Service Commission hearing about Martin County’s troubled water system. The agency regulates most utility companies in Kentucky.

Officials with Prestonsburg City’s Utilities Commission previously said they were reluctant to enter into a lease agreement because Martin County Water District has failed to pay for $63,000 of water provided by Prestonsburg to Martin County during the last three months.

The district entered the national spotlight after frigid weather in January froze service lines and an intake pump, leaving thousands of residents without running water for days, or, in some cases, weeks.

Many residents complain of poor water quality that they say causes everything from skin rashes to cancer.

Officials said Wednesday that the district is now in compliance with the federal Clean Water Act, and has been for five months.

The PSC hearing Friday was held to review the current status of the district, and to consider its bid for a 49.5 percent rate increase.

PSC Chairman Michael Schmitt said he sees “no alternative” to a rate increase.

The district has already been awarded about $5 million in grant money from the Appalachian Regional Commission and the Abandoned Mine Lands program, but that money can only be used for capital projects to improve water access and quality.

Money from the rate increase could be used to for general operating costs, such as salaries and paying off debt.

The PSC has not yet approved the increase.

“I don’t want to hurt anybody financially, I know we live in a poor area,” said Martin County Water Board treasurer James Kerr. “Everybody has to understand that we did not go into this lightly.”

Kerr said citizens are generally not supportive of the rate increase, but said he hopes they see that it is necessary.

Schmitt criticized the district at a hearing last month for poor managerial practices that he said have led to the current financial crisis, calling it the “worst water district” in Kentucky.

The agency is in debt to several businesses, including Zip Zone, a gas station chain owned by coal executive and University of Kentucky Board of Trustees member Jim Booth, who lives in Martin County.

Records show the district owed more than $166,000 to Zip Zone as of September 2017. The district has racked up Zip Zone debt nearly every day — often with multiple charges each day — since June 2014, with payments ranging from $10 to more than $150.

“It’s just so wide open and so ambiguous that I don’t think any person could say what these payments are for,” said Robert Cicero, the vice chairman of the PSC.

Board treasurer Kerr said he has seen “red flags” with that account.

The district’s relationship with Zip Zone has been used in previous PSC hearings as an example of the poor financial management practices that helped lead the district to its current crisis.

The district’s business manager, Joe Hammond, abruptly retired earlier this month. An interim manager started Monday.

“This is a county-wide, county-leader problem,” said Nina McCoy, chairwoman of the Martin County Concerned Citizens group, which advocates for improved water access and quality.

Will Wright is a corps member with Report for America, an initiative of The GroundTruth Project. Reach him at 859-270-9760, @​HLWright