Kentucky Municipal Utilities Association Recommendations

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The Kentucky Municipal Utilities Association provides recommendations to address challenges in public water and wastewater systems, focusing on aging infrastructure, declining water use, increasing public scrutiny on water quality, emerging contaminants, tightening regulations, and affordability issues. Their suggestions include best management practices and keeping utility revenues within the utility for operation, maintenance, debt service, and planning purposes.

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KY Municipal Utilities Association Recommendations Public Water and Wastewater System Infrastructure Task Force Mike Gardner, BGMU October 14, 2020

Kentucky Municipal Utilities Association 40 City utilities providing water, wastewater, electric power, gas and telecommunications services. Serving million customers within the commonwealth. Coordinating utility services for over 40 years. 72 Associate Members representing consulting engineering, technical services and equipment suppliers to bring expertise and cutting edge solutions to our members. History of collaboration with state regulatory agencies, financial/planning agencies and other government and industry organizations.

The Challenge Before Us Aging Infrastructure Declining water use (and revenues) Increasing public scrutiny on water quality and water supply issues Emerging contaminants (PFAS, etc.) Tightening regulations (Lead and Copper, etc.) Affordability issues.

BEST MANAGEMENT PRACTICES October 23, 2019 Testimony. Qualifier Most utilities in the Commonwealth are well operated. So the glass is mostly full! Our focus relative to this Task Force are those utilities that are struggling.

Our New Reality Our New Reality Covid-19 Pandemic. KMUA has collaborated with other organizations to modify our recommendations. This approach is intended to begin programs until Covid-19 has passed. KLC has approved the following recommendations as a place holder until more resources are available.

RECOMMENDATIONS Keep utility revenues within the utility Prohibit the transfer, co-mingling or use of rate revenues for functions other than operation, maintenance, debt service or planning for the utility. Prohibit revenues to be diverted to the general fund or any other entity, except as provided by Kentucky law.

RECOMMENDATIONS: Start Key Best Management Practices that include: Asset Management /Capital Budget Plans. Economic based Non-Revenue Water Programs based on financially cost effective measures as established by the American Water Works Association (AWWA).

RECOMMENDATIONS Start Best Financial Management Practices that include: Rates should be cost based. Require rates to be adjusted annually for inflation. Assume a mindset of financial self-sufficiency. Establish a reserve account for the replacement of infrastructure.

RECOMMENDATIONS: Establish Financial Accountability: Undergo an annual independent financial audit. Establish audit advice and assistance. Develop simplified affordable audits similar to those conducted in the State of TN. Allow the Auditor of Public Accounts and/or KIA to identify utilities operating in a financial deficit. Refer any utility operating in a deficit to the KY Division of Water and to the PSC (if a PSC regulated utility).

RECOMMENDATIONS: For Distressed Systems: Authorize the KY Division of Water to declare a utility as distressed. Provide training assistance to water commissioners or board members of a distressed utility. DOW should develop or approve the training to insure best management practices are identified and implemented. As the Covid-19 pandemic passes, revisit measures to assist distressed systems with additional resources and greater accountability.