Xenia water district struggling

BOUTON, Iowa — Financial woes at the Xenia Rural Water District continue. The central Iowa water provider faces an $871,000 revenue shortfall so far this year while expenses have been $634,000 over budget. Together this represents a $1.5 million shortfall with a month left in the year.

As a result, the district’s bond rating was downgraded in August, which may result in higher interest payments.

To put the $1.5 million shortfall in perspective, the year-to-date revenue budget for the district is $8.4 million. The district has $143 million in debt. Compounding its problems, customers concerned about rate hikes are leaving the rural water district for other water sources.

Despite the shortfall, the Xenia board of directors this week approved $100 Christmas bonuses for each of the districts 42 employees plus Christmas Eve as a paid holiday.

“This should be an extra shot, especially for the hourly employees, who have done such an incredible job under such trying circumstances,” director Mark DeLong of Minburn said. “I think we need to do something to thank them for that hard work.”

The directors also approved a companywide potluck supper in lieu of a company Christmas party.

Legal expenses are soaring for the district, which has a buyout offer from the Des Moines Water Works. The offer to purchase Xenia’s infrastructure for $74.2 million is being considered. Des Moines Water Works, which supplies water to Xenia, gave Xenia until Jan. 30 to decide on its offer.

“We’ve had a number of legal expenses of late with regard to our current litigation with HD Supply,” general counsel Brian McCormac told the Xenia board this week. “There is some legal work going on with regard to the Des Moines Water Works buyout proposal, as well.”

In the meantime, Des Moines Water Works said the bulk purchase rate for the rural water district was going to increase significantly Jan. 1. Currently, the Xenia is paying $1.01 per 1,000 gallons of water, but Des Moines plans a 16-percent rate hike.

Because Xenia has used more than its purchased capacity this year, the district’s contract with Des Moines Water Works allows for an additional rate hike. Unless other arrangements can be made, Xenia will begin paying $1.71 per 1,000 gallons. On April 1, the rate jumps to $1.88 per 1,000 gallons.

Economic development manager Corey Iben said the excess water usage was a result of flushing a new service line on July 23, a task required to bring the line into service.

“We went considerably over that day,” he noted. “But, we notified Des Moines Water Works beforehand and did our best to comply with their request that we draw that water during non-peak periods.”

McCormac said he would be talking soon with Des Moines CEO Randy Beavers to seek concessions on the rate hike.

Xenia faces pending litigation alleging nonpayment by HD Supply, a pipe and fittings supplier, and the USDA Rural Development Office notified Xenia that the district is more than $355,000 past due on its loans. October and November payments were not made.

“Until such time as Xenia’s account is brought current, you will need to submit monthly internally prepared financial statements to USDA Rural Development,” a letter to the district stated. “Should Xenia’s account remain delinquent past Jan. 1, you will be asked to enter into a formal workout agreement.”

Standard & Poor’s Ratings Services lowered Xenia’s bond status from “BBB” to “BB” in late August, considered speculative status by Standard and Poor’s. “The downgrade reflects the district’s deteriorating financial position,” wrote S&P credit analyst Corey Friedman. “This necessitates the use of the district’s debt service reserve to sufficiently cover the system’s outstanding water debt.”

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