Home News Local news COST CONCERNS EMERGE IN WAPA LAND PURCHASE

COST CONCERNS EMERGE IN WAPA LAND PURCHASE

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March 19, 2003 – The Water and Power Authority lost about $3 million in connection with its purchase three years ago of the so-called Devcon property adjacent to the utility's Richmond power plant in Christiansted, according to the utility's executive director, Alberto Bruno Vega.
Bruno told the WAPA board at its meeting Wednesday on St. Croix that the land, for which the utility paid $2.275 million, has been appraised at about $950,000. That, he said, means the authority overpaid $1.325 million.
And, Bruno said, it will cost WAPA an estimated $997,000 to demolish the structures now on the site and and clean the property up, bringing the losses to about $2.325 million.
The land was bought in 2000 from stateside-based Devcon, to be used for the expansion of the Richmond plant. Last summer, board members began raising questions about the purchase, which was paid for out of 1998 bond proceeds although the approved uses for the money did not include such an acquisition. Board approval is required for any expenditure above $75,000, but board members say they have no record or recollection of approving the transaction.
But Bruno told the board on Wednesday that the bad news does not stop there. An addendum to the purchase deal allowed Devcon to buy 1.5 acres of its choice out of about 20 acres that WAPA owns on St. Croix's South Shore, for $120,000, he said. That land, Bruno said, was actually valued at more than $470,000, meaning the utility lost over $350,000 on that part of the deal, upping its overall losses to $2.675 million.
This transaction also is being questioned. The board chair, Carol Burke, has said that WAPA land may not be sold without board approval. A legal opinion on the matter, requested in January of board attorney Arturo Watlington, was to have been presented at the board's February meeting but was not ready then. It was again expected Wednesday but again was not available, as Watlington was not at the meeting.
Further, Bruno told the board, WAPA agreed to lease part of the Devcon property back to the company for $10 a month for five years, with an option to renew the lease for another five years. That would mean revenues of $600 for the first five years. However, Bruno said the market rental value of the property amounts to $217,000 for five years, so here WAPA is losing over $216,000 more, bringing its losses to some $2.891 million.
Finally, Bruno said, that same deal includes a provision that the dock at the South Shore property be shared with Devcon in perpetuity. "It's one of the main attractions there that is very critical to WAPA's operation, and it has to be shared with Devcon for all time," Bruno said. "The value of that is unknown."
Board member Andrew Rutnik, commissioner of Licensing and Consumer Affairs, expressed concern that word of the Devcon purchase could threaten the utility's bond rating, which was up for approval Tuesday. WAPA's chief financial officer, Robert Vodzack, agreed. "If they read about it in the paper, it's going to have an effect," he said.
But Rutnik expressed optimism that the bond rating will be favorable, saying that the authority could for the first time see a positive bond rating from three issuers. "Then we will be a utility to be proud of," he said.
Talks ongoing with waste-to-energy firm
In other business, the board was told that negotiations are continuing with Caribe Waste Technologies, the company chosen by the Turnbull administration to develop a means of disposing of the territory's long-term solid waste. The company has proposed to turn waste into energy through a non-combustion gasification process and to sell that energy to WAPA.
"By law, we are required to negotiate in good faith," Bruno reminded the board, which in November 2001 turned thumbs down on buying electricity that WAPA itself is capable of generating.
An appeal of the Public Services Commission's classification of CWT as a qualified utility has been filed in Territorial Court.
The board also called on WAPA administrators to improve their responses to customer complaints so as to avoid having them referred to the PSC — which can be costly, as the utility must pay for consultants brought in or investigations launched by the PSC in response to complaints.
In an update for the board on the status of utility payments by the government, Vodzack said some agencies have fallen behind recently. He said the Public Works Department owes $1.5 million, the Education Department owes $1.2 million and Juan F. Luis Hospital is $2.7 million behind in its electricity and water payments.
That situation and the rising costs of fuel have the utility strapped for cash right now, Vodzack said. "Oil is $33 a barrel," he said. "We're losing over $500,000 a month on the Levelized Energy Adjustment Clause."
The LEAC allows WAPA to impose a surcharge on customers' bills based on projected increases in the cost of fuel for six months. Rising market prices have left WAPA about $7.5 million short, Vodzack said, because the LEAC has not changed.

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