The Coldwater Spring bubbles up from deep down in the earth, sloshing forth to satisfy thirsty customers and their lawns, and fuel the growth of a big chunk of the region.
It is the source of 99 percent of the Anniston Water Works' only commodity, and, as water supplies go, it is about as pure as they come. The clean, cool stuff isn't selling very well these days though. The water business it seems, locally and in many other places, is going through some changes that are not only uncomfortable for the Anniston Water Works but for customers, too.
Not to oversimplify the situation, but can you say rate increases?
That might not come to pass, but, according to Jim Miller, the general manager of the Anniston Water Works, it is a possibility. The trouble is, water consumption has fallen off about 10 percent at AWW. The why is a little complicated. Put the question to Miller: Is it the soft economy, the recent drought or increased conservation by consumers? And you'll get: "I would say all of the above." Additionally, he said, a rainy spring has meant fewer people are filling their swimming pools and watering their lawns. But primarily, the economy seems to account for a big part of the decline. A stark example is AWW's loss of several big customers of late, including Werner Aluminum. "Also, because of the recession, people are being more careful, not only with clothes and cars, but with utilities as well," he said. Finally, he agrees that especially among the younger generation people have started to conserve because of their concern over the environment.
All of this, of course, has worked to drive down revenue. "It's not just us," Miller said. "Other big systems around the state, including Montgomery and Mobile, have seen anywhere from a 10 to 15 percent fall-off in consumption."
Oxford Water Works General Manager Wayne Livingston says he is seeing a decline as well. "We're about in the same boat as Anniston," he said. Livingston, who attributes the fall in demand to the economy, says rate increases may be in the future but that it is not something the Oxford Water Works is considering at this time.
The brutal truth governing possible rate hikes is as follows: All water works have to plan long-term, with big infrastructure projects and mandated improvements dominating. Some 80 percent to 90 percent of budgets, according to Miller, are fixed costs. The prices of some key treatments and chemicals have escalated recently as well, putting more pressure on the bottom line. Fluoride, for example, has gone up four times in the last two years, he explained.
In other industries, you can go on cost-cutting for a while at least, but not in this one. In the water distribution business, there are few places to trim, except labor. The AWW has already gone to that well, several times. In 1996, the utility had 89 employees. Today, even though it is a much bigger entity, it has 57 workers, a reduction of about 30 percent.
But surely there is money to be saved, some way to avert rate increases?
What about, for example, the renovation of the AWW's office on Noble Street? That decision was part of one of those long-term plans cemented years ago, and it accounts for even though it is running close to $1 million about 1/40th of the capital expenditures of the Water Works in the last 10 years, Miller said. To keep that number in context, he said, it is worth knowing that the AWW has spent $18 million on the Choccolocco Water Treatment Plant in the last 10 years, a project that was "100 percent regulatory driven."
So how bad is it? The AWW has lost money three out of the last four months, despite the fact that an 8 percent increase was introduced in January. That increase, Miller said, came about because of earlier studies that predicted the hike would put the utility in the black in short order. But the continuing drop-off in consumption has brought on the possibility of additional increases. Although it is too early to know for sure, Miller says another 8 percent increase in January and 6 percent increases in the coming years is possible. This would not only enable the AWW to keep up with continuing costs and capital improvements but would meet bondholders' requirements.
Unfortunately, this complicated business of municipal bonds, Miller said, also is driving the conversation. "This end of it is not very well understood by the public," he said. "The people we borrowed money from, well they require that we collect a minimum of one and one half times what our debt is, and if we don't do that, then we are required to raise rates." In other words, if the AWW had $1 million in debt, bondholders would require that it net $1.5 million. This alone, he says, means rate increases may come up again and again.
All is not gloom and doom, however. Summer is in full swing, the weather is astonishingly hot, people need to keep their pools filled and their lawns watered. In the words, Mr. Miller said, "rate increases aren't a certainty. I am an optimist and I think a hot, dry summer is going to help us."
