With failing infrastructure and $1M in debt, Martin County Water District raises rates

The Martin County Water District has failing infrastructure and $1.2 million in debt. On Friday, the water system was given permission to raise its rates to prevent it from falling into further distress.

Kentucky Public Service Commission approved an 11.68% interim emergency rate increase. The average Martin County residential customer will see an increase of $5.86 on their monthly bill beginning Aug. 1. The increase is temporary as the district looks for approval from the PSC for a permanent rate.

“Martin County cannot realistically be expected to financially support and adequately maintain an independently operated standalone water utility,” given the millions of dollars of investments needed for a water utility that serves a small customer base of about 3,500, PSC Chairman Michael Schmitt stated in the decision.

Martin County Concerned Citizens fought against the rate increase because customers would be paying the highest in the state and 34% of the water district’s residential customers live in poverty, the group said in a statement Friday.

In the past three years, water rates for Martin County residents have increased 69%.

“It seems strangely unfair in one of the poorest counties we would have one of the highest rates,” citizen advocate Nina McCoy said at PSC’s May 27 hearing.

Craig Miller, the division manager with Alliance Water Resources, the company that now manages the county’s water district, said at that hearing because the district is operating in the red monthly, it is a difficult task to operate the system without the financial means to do so.

Miller said without a rate increase, there is no hope the system will be sustainable from an operational or financial standpoint, which he estimates will require $55 million.

Miller said PSC approving the emergency rate increase is a relief.

“It’s definitely a big help and a step in the right direction to be a well-run utility,” he said in an interview Friday.

Martin County’s water system has been plagued with problems for years. The system lost about 65% of the water it cleans in April. Customers are wary of drinking the water, although the system is in compliance with the overall Environmental Protection Agency regulations. Despite receiving $8.5 million in grant funding in the past three years, it is insufficient to replace poor construction, repair infrastructure and become forward-thinking with capital improvement projects. The water treatment plan needs to be replaced, which will cost up to $20 million.

McCoy said she is concerned the rate increase will go to support the operating costs and not addressing the failing infrastructure.

“When Alliance Water Resources was given the contract to run the system we assumed that paying more would bring more accountability and transparency from a professional outside management company,” she said. “However, we seem to be paying Cadillac prices but still driving the 1968 Volkswagen Bug.”

Appalachian Citizens’ Law Center attorney Mary Cromer, who represented the concerned citizens’ group, told the PSC, “It is completely impractical to presume that the district’s 3,500 or so customers could ever foot the bill for the $40 million in immediate [infrastructure] needs that the district asserts are necessary to stabilize the system.”

The water district’s customer base is almost entirely residential and of those residential customers 34% live in poverty.

“The system was allowed to almost collapse before the PSC stepped in, Cromer said. “Now, it has to be rebuilt. That will take years. In the meantime, because the system is in such disrepair, it is incredibly expensive to run on a daily basis. That is why Martin Countians are now paying the highest minimum rates in Kentucky.”

Martin County Concerned Citizens argued the water district should concentrate on outside funding for infrastructure improvements. In June, Gov. Andy Beshear guaranteed about $411,000 for the county’s infrastructure. Congress is also working through an infrastructure package that may bring investments to the water district.

Miller said the water district is looking for grant funding for its meter replacement project, the second phase of its raw water intake improvement project and a generator for its primary booster station.

Cromer said Martin County Water District needs more customer assistance funding for families who are choosing between paying their water bills and buying food or medicine.

Miller said the water district is willing to help customers with assistance through the Community Action Program or CARES Act if they ask.

The Public Service Commission will rule on a permanent rate increase. No date has been set on the next hearing.