June 26, 2024, Board Meeting Open Session Q&A

Responses to questions submitted at the Board Meeting June 26, 2024.

Melissa M: I noticed in one of the emails the reason for the discoloration and the issues with the water is because of the flooding.  I understand flooding causes issues, but why is it other people, that also get water from CTWS and the same lakes are not having the same problems? I’ve talked to people from other areas that pull from the same lake, and they do not have any of the issues that we do.  I’m just curious as to why.  Why is it only Kempner this happens to? 

At the risk of sounding argumentative, every other water entity IS dealing with these same issues.  If you look at news articles from the surrounding areas, you will see the same complaints.  The turbidity of the lake water is creating significant issues that affect the color and odor of the water coming out of the treatment plants but once the lakes settle enough these issues should dissipate.

Kenneth S: Do you have a 5–15-year plan for renovation or modernization of the Kempner water facility or to build an additional facility to keep up with the ongoing demands? Thank you.

KWSC understands the importance of planning for the future. Management and the Board have been actively engaged in long-range planning discussions to ensure we are prepared to meet the evolving needs of our community while maintaining a financially sustainable approach. This includes projections for population growth, technological advancements and regulatory changes. We are incorporating that plan into our budget process to ensure we are looking forward in preparation for our future.  

Octavio Gaitan-Diaz: What is a non-profit? Profit companies seek to provide a product or service to consumers and make a profit by doing so. A nonprofit organization/ corporation's purpose is to provide a service or benefit to the community with no intention on earning a profit. Instead, they're fully focused on improving the social aspect of their community and not on making money. How does a non-profit get funding? Nonprofits, by contrast, seek donations rather than investments. Any individual, organization or institution that gives money to a nonprofit will not receive a share of profits. It's a pure donation rather than an investment. Are we still a nonprofit corporation?

KWSC is a member owned non-profit utility and all operational costs, loan payments, compliance upgrades, and repairs to aging infrastructure are funded by our members through the base rate and cost of water. We were originally incorporated in 1973 as a non-profit corporation and remain such today.

As a non-profit organization KWSC exists for the primary purpose of benefiting our members…To provide water. Any remaining profits after operational costs are funded are required to be put back into the system. The primary law applicable to KWSC is codified as Texas Water Code, Chapter 67. 

The above-mentioned law allows KWSC, as a non-profit, to distribute profit to its members but prohibits such distributions if the corporation has unpaid debts (TWC §67.008(c).  KWSC has been indebted since it was created, remains indebted, and will remain indebted for the foreseeable future, so KWSC has never paid dividends and is unlikely to do so in the future.

Is KWSC tax exempt from state or federal?

Yes, due to its non-profit status, KWSC is tax exempt.

"Members of a nonprofit corporation are typically not owners and are not issued stock." From Texas Secretary of State website BUT In KWSC Tariff, Section E, Rules and Regulations, #9 Membership, B: The membership shall entitle the member to (1) connection to the corporation's water utility service and (1) share of corporation stock. What corporation stock?

Your membership is your “stock.”  

Who governs this nonprofit corporation? Members, the board of directors, or both?

In accordance with the TEXAS WATER CODE § 67.0054, KWSC is controlled by the Board of Directors, who are elected by the members of the water supply corporation. We are governed by the Texas Commission of Environmental Quality (TCEQ) and the Public Utility Commission of Texas (PUCT).

How are we getting funding?

All operational costs, loan payments, compliance upgrades, and repairs to aging infrastructure are funded by our members through the base rate and cost of water. Other means of funding include contributions from developers or private financing. In addition, we also look at grants and other sources, but to date we have been unable to qualify for grants due to our legal structure and our members median income level.

As of 2021 & 2022 Audit: 7 Loans Total $36,584,662. Monthly payments: $443,350. Maturing dates Sept. 2024-Oct. 2056. Are there more loans taken out for 2023 & 2024? Where is all this money going?

Just under $30 million of these seven loans is the remaining balance of the two notes that were taken out in 2006 and 2009 to build the plant and purchase the 195-pump station from Central Texas Water Supply. $331,015 was the remaining balance of the loan that was taken out in 2016 for aerators at the plant for compliance reasons. $750,448 was the remaining balance of the loan that was taken out in 2017 for systemwide meter replacement. The remaining nearly $5 million is the balance of the most recent loans taken out by KWSC for compliance related projects in the North/Northeast portion of our system and for the Stone Oaks Tank throughout 2021 and 2022.

To be fiscally responsible, in 2020 KWSC refinanced all Texas Water Board loans to take advantage of the lower interest rates at the time. In addition, KWSC receives an interest “rebate” from CoBank as part of the relationship. This saved the corporation over a million dollars per year.

There have been no other loans taken out to date. During 2023 and 2024, KWSC funded all $6+ million worth of projects and our operational costs from within.

Where are the financials for 2023?

The 2023 audited financial statements are located on KWSC’s website under Customer Service/KWSC Policies. (www.kempnerwsc.com)

Why aren't the financials posted on the website from past years?

Due to limited space in the website template used by KWSC and for ease of organization and use, KWSC maintains only the most recent audited financial statements on the website. However, financial reports are given at each monthly Board meeting and past years financial statements can be requested through a formal open records request 

Why Isn't KWSC asking for help?

Fortunately, KWSC is in a good financial position for maintaining our current system, but without exponentially raising rates or taking on more debt, that does not leave a lot of wiggle room or funding for big projects, such as infrastructure replacement programs.

Help comes in the form of more debt, which in turn equals higher rates. KWSC has attempted to apply for grants when we had projects that could be covered within the scope of grant specifications. State and Federal grants are extremely project specific and typically very competitive. For instance, there are currently grants that can be applied for regarding agricultural water conservation, lead service line replacement, flood mitigation assistance, and drinking water system resilience and sustainability program, to name a few. As was reiterated by the TCEQ/PUCT representative that spoke at a prior meeting, the vast majority of State and Federal funded grants are specifically designated for underserved or disadvantaged communities and others are only available for water districts, not water supply corporations. The median household income of our members is nearly double the allowable income to receive these grants.

PAUL MCKINNEY: We all pay $75.00 a month just to use your meter and then on top of that we have to pay for water.  Gentleman you guys over here that work in the field, outstanding work.  With the pipes and stuff that you guys have out there, I understand why you guys are working so hard.  Let’s talk about the piping system here. How long has Kempner water been here? How long have we known about the pipe structure that we have here?  Why hasn’t KWSC gone into some sort of discussion about replacing some pipes. Let’s do some new infrastructure so we don’t have to have every single week two or three times that we have a timelapse of water.  I understand when a backhoe hits a line that’s unavoidable, but the pipes that we have are not.  That needs to change.  Where’s our money going? I know there’s been some lawsuits and all. We don’t want that. We want answers, and we want some stuff that needs to happen now. 

KWSC was incorporated in 1973, which was 51 years ago. We are a member owned non-profit utility and all operational costs, loan payments, compliance upgrades, and repairs to aging infrastructure are funded by our members through the base rate and cost of water. Our rates must be high enough to maintain operations, fund improvements and deliver water to all our members. The costs associated with transmitting millions of gallons of water through over 400 miles of aging pipe is not cheap but the cost to replace those pipes would be in the billions.

This boil water notice we have going on right now, why did that not happen the first-time you guys said something to all of us here?  Why didn’t we need a boil notice then when we were changing treatment? Why did TCEQ have to get involved for us to get a boil water notice? 

TCEQ has certain criteria that require implementing a boil water notice and change of treatment process is not one of them. The notice was issued when it was necessary to remain compliant with TCEQ’s requirements. TCEQ was not yet involved when KWSC issued the boil water notice. Their involvement began the day after the notice was issued.

JERRY SEWARD: Who here that does not live on CR 3430 lost their water yesterday?  So, I presume if you didn’t live on 3430 you got water yesterday.  I want to know why you turned our water off and allowed that tank to be drained for the city of Lampasas?  We were without water all day yesterday!  Why? 

KWSC is contractually obligated to supply the City of Lampasas with water. We did not “allow” them to drain our tank. Due to the low residuals coming from CTWSC we shut them off to save the quality of our water. We knew our plant alone could not provide enough water to keep up with the demand without some conservation on the part of our members. We sent out an alert to the members requesting temporary, voluntary conservation until we could get the situation under control. The majority of the membership chose not to comply with our request, therefore causing the tank to go dry resulting in loss of water on CR 3430.  KWSC’s crew was out past 10:00 P.M. ensuring you had water before they went home for the day.  We apologize for the inconvenience this caused you and your neighbors, but we always strive to do the best we can with what we’ve got.