Reprint from the Progress Times - October 26, 2007
©Progress Times 2007 - All Rights Reserved

New Agua Special Utility, District Board faces challenges

 

By Kathy Olivarez

Several proposed members of the board being appointed to run the Agua Special Utility District (ASUD), met with community members, Thursday, October 18, to answer questions about when the transition will take place. The ASUD is being formed to replace La Joya Water Supply Corporation, which has been placed in receivership.
Efren Garza, Reymundo Rodriguez, and Daniel Flores met with community members to answer questions.
The audience was told that the board would take over as soon as possible. That would occur when Judge Aida Salinas-Flores said the board members had been approved and trained.
The members have to be approved by the Texas Water Development Board (TWDB) and by the agencies that are currently lending money to the LJWSC.
Although the people to serve on the board have been selected by their respective cities, the TWDB has requested resolutions showing the cities or county appointed these people to the board. The three county members and the representative from Mission did not attend the meeting because they were told they were not yet officially on the board.
Hidalgo County is expected to pass a resolution at their next meeting. Although the Mission Council approved their representative, they did not do it in resolution form.
Marilou Prudencio who attended the meeting was concerned about rumors flying about the community that Frank Flores, who has been running the water plant since the takeover, would be replaced by a friend of one of the proposed new board members. Rumors were also flourishing that other staff replacements would be made.
"We are not going to hang anybody out; we are not going to recreate the system," Efren Garza told those present.
"We want to make sure that Flores is not replaced," said Prudencio. "Why change the staff? We could keep David Mendez as our lawyer and Pablo Vela as our accountant.
Prudencio told the Progress Times that the residents she represents are afraid that if Flores leaves, they will start having problems with their bills again. Since he began operating the plant, their bills have been accurate and on time. They feel that it has taken over two years to get things straightened out and running right. They are afraid that if Mendez and Vela leave there will be future problems.
Ricardo Perez, who helped write Senate Bill 3, which formed the receivership said that when the Agua Special Utility District takes over, it will be up to them to make decisions on who will act as attorney and CPA and who will run the plant.
Vela told the group that on Tuesday, the judge had called a meeting with State Senator Juan Hinojosa, Representatives Kino Flores, Veronica Gonzalez and Aaron Pena. There were also representatives from the State Attorney General’s office, the TWDB, the Texas Commission on Environmental Quality (TCEQ), The United States Department of Agriculture (USDA) and the banks that have lent the corporation money. In all, 16 people attended.
Until all of the entities involved were satisfied with who was running the corporation, the board would not officially be approved.
During the course of the meeting the current schedule for transitioning to a Special Utility District (SUD) was rejected. Instead of the current water supply organization ending in December, it is expected to go into the beginning of next year. Once the board is officially selected, a training period will begin where the state Attorney General’s Office will take the lead in training board members on what they have to do to operate the corporation. There are over 25 projects that are ongoing they will be responsible for seeing continue.
Efren Garza told the audience that future board members had not been included in this meeting.
"We have been left out in the cold so far," he stated. "We don’t feel like we are part of the solution."

Steve Rodriguez, representative to the TWDB said he was there to provide feedback to Austin rather than educate board members as to their duties. Seeing that only three members of the future board were present, he said that it could be important to have a quorum in the future to handle the issues that arise.
Garza said the others had not come because they had not officially been told they were part of the board.
The three people currently under consideration who attended the meeting were Efren Garza, former mayor and city administrator of Penitas; Reymundo Rodriguez of Palmview, who works for the Texas Lottery Commission, and Daniel Flores of Sullivan City, who works for the Mission Consolidated Independent School District in the Transportation Department.
The three proposed Hidalgo County commissioners’ appointments are Joe Metz, a local farmer, Rick Perez, who manages the La Joya Branch of Rio National Bank, and Oscar Longoria, who works in the law office of Ramon Garcia. The proposed Mission representative is Eloy D. Gonzalez, manager of City Financial.
Pablo Vela, who manages the receivership, said there were several issues the new board would have to face. LJWSC is currently involved in two major lawsuits. Most of the smaller suits have been resolved.
Vela said the first lawsuit is with Dannenbaum Engineering. The firm states LJWSC failed to pay $1.7 million in payments due to them for services.
The second lawsuit is with Daniac Corporation and other developers who believe they did not get the services they were promised. The corporation paid LJWSC $700,000 for water meters and infrastructure a week before the corporation folded.
When developers asked for their money back, they were told it was gone. LJWSC employees had used the money to pay other bills. That lawsuit has grown to several million because the corporation sold the property at a loss.
Vela said that most of the developers whose assets were tied up with the failure of LJWSC had held their land. They are happy because of the way land values have risen; they were able to more than recoup their losses by selling land at higher prices.
Vela also said the board would have to know what has to be done to pay the current debt of LJWSC that will be transferred to ASUD when it takes over. Right now the debt stands at $16.6 million. Of that, $4.6 million is owed to the USDA, $9.8 million is owed to the TWDB and $2.1 million is owed to Lone Star Bank.
He went on to say that at this time LJWSC does not generate enough revenue to cover all of this debt because it is still paying off old debt and making up reserves.
The TWDB is making allowances for LJWSC to give them funds to make the needed improvements.
"They have been a lifesaver in this situation," Vela said. "Without their willingness to work with us, we would be in much worse shape than we are."
"The TCEQ is also helping in that they have not charged us fines on non-compliance issues we are working to correct," Vela added. "Before we took over, the former LJWSC administration paid fines on several non-compliance issues."
Still, there have been problems. Vela told the audience that LJWSC had been asked for $1 million to move a line in Sullivan City area. The receivership knew nothing about the need but they were told that former LJWSC officials had known about the problem for several years.
"Hidalgo County Precinct Three Commissioner Joe Flores really came through for us in helping to find the needed funding through the Urban County program," said Vela.
In another instance, LJWSC was trying to find funding to build a water tower required by the TCEQ on Mile 7 North Road. All the paperwork was submitted to the USDA but because of Hurricane Katrina depleting their resources, the agency could not find the promised funding. The problem was taken to the TWDB and funding was provided.
“Some good things have happened,” Vela said. "When the receivership took over, there were over 400 unmetered connections where persons or businesses were not getting billed for water received. Today all connections are being billed. It does not matter who they are. Everyone must pay for the water they receive."
The audience was told that TWDB had reserved about $38 million for the ASUD to use in providing sewer to western Hidalgo County. The entire project is estimated to cost $100 million. The state is pushing the project because the area has become so populated that over use of septic tanks is considered to be a health hazard.
"In the event of a catastrophe such as Hurricane Katrina where the river overflowed and flooded so that all those septic tanks overflowed, it would be a mammoth health problem that could lead to a lot of disease," Vela told the audience.
Vela said that on the November 6 Constitutional Amendment election, one of the amendments would give the state permission to issue up to $250 million in grants for projects. If that passes, the rest of the money to pay for the sewer system would be made available.
"We don’t get many opportunities to get grants like this," Vela said. "So far, the money LJWSC has received to do projects must be paid back," Vela told the audience.

When asked about how the board would take office, Vela said according to legislation the board could have an election in May, 2008 or wait until 2010. "It would make no sense to have an election just a couple of months after they took office so the first election will probably be in 2010.”
Members’ terms will be staggered so not all board members are elected at the same time. Only the original board can serve more than a two-year term. While members can serve two terms, they cannot succeed themselves. In order to serve two terms, they would have to go off the board and be re-ele-cted to the board at a future date.
When asked about his experience heading the receivership, Vela said that it had been interesting and challenging.
"We’ve fought a lot of alligators in this process but now we are getting to the place where the ASUD will be able to take over and run the new utility district in a business-like manner.”
When asked if he would stay on as many community members are asking, he said he would be there in an advisory position while the transition takes place. After that it is up to the SUD to decide who will give advice on how to run the corporation.