Agua SUD faces big financial problems – Progress Times

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The Agua Special Utilities District has been burning cash, racking up debt and running deficits in recent years, according to a financial report the utility board reviewed on Monday.

At a meeting on Monday afternoon, the utility board reviewed a report which showed that the amount of unrestricted cash in Agua SUD’s bank accounts – money available for all purposes – had fallen from around $4.7 million in 2016 to less than $232,000 in 2021.

The report also showed that Agua SUD did not collect enough operating income to cover expenses and debt payment from 2018 to 2021.

“I think we’re in a bad spot right now,” director Rick Perez said.

Perez, executive vice president of Rio Bank who joined the utility board in October 2021, requested the report after worrying about Agua SUD’s budget.

“This situation has been happening since 2016,” Perez said. “We lost money.”

In 2016, the utility district recorded nearly $9.4 million in operating revenue and nearly $6.8 million in expenses. This left Agua SUD with nearly $2.6 million – more than enough to cover $1.9 million in debt repayment.

Revenues, however, have not kept up with debt payments, which nearly doubled from 2016 to 2021.

In 2018, the utility district had nearly $9.4 million in operating revenue. Expenses reached $7.3 million. The $2.1 million profit, however, was not enough to cover the $2.2 million debt repayment.

Agua SUD also failed in 2019 and 2020.

In 2021, the utility district had $10.8 million in operating revenue. Expenses totaled $7.9 million, leaving Agua SUD $2.9 million to cover debt payments.

It wasn’t enough.

Debt payments due in 2021 totaled $3.7 million, which left Agua SUD with a deficit of $800,000.

Four years of deficits have weighed on Agua SUD’s bank accounts.

In 2016, the utility district had $4.7 million in unrestricted cash, according to the report. By 2021, that amount had fallen to less than $232,000.

“As far as debt, I think there are a lot of things that have had an impact over the years that we’re trying to address,” board chair Esmeralda H. Solis said. “And our staff, as well as the board, are trying to find solutions to be able to solve this as much as possible.”

Solis, who joined the board in November 2020, said the financial situation cannot be fixed overnight.

Agua SUD borrowed money to buy vehicles, build the Palmview sewer system and finance an energy conservation project.

To cover debt repayments and anticipate rising costs, the public utilities commission approved a five-year plan to raise water and sewer rates in 2019.

Whether or not Agua SUD should allow planned tariff increases to take effect has become a major point of contention in recent years.

Director Homer Tijerina, who voted against the five-year plan, pushed for not implementing the rate increases in 2021. Rather than imposing higher bills on customers, Tijerina advocated for Agua SUD to reduce the rates. costs and refinances the debt.

“We just can’t put it all on the taxpayers,” Tijerina said.

Higher rates are hurting customers on fixed incomes, Tijerina said, adding that he wanted to look at all possible ways to save money and carefully consider projected revenues before considering a rate increase.

The board authorized the planned rate increases to take effect in 2022.

“It’s not an easy problem to solve,” said Sen. Juan “Chuy” Hinojosa, D-McAllen.

Corrupt officials and businessmen have burdened Agua SUD with crippling debt in exchange for bribes over the energy-saving project, Hinojosa said. Several of them have pleaded guilty to corruption and conspiracy charges, but the debt remains on the books.

Hinojosa said he has discussed with the Texas Attorney General’s office and the Texas Water Development Board options for Agua SUD, including a state takeover. The utility district could also be forced into bankruptcy.

“The sad thing about this,” Hinojosa said, “is the taxpayers and the taxpayers who end up losing out.”

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