Update as of October 17, 2024
In the Woodstock Aqueduct Company Q&A article in the Oct. 10 issue of the Standard, Woodstock Water Working Group Facilitator Charlie Kimbell stated that the Blake Hill Community maintains its own water supply and is its own Water District. What Kimbell incorrectly stated was that Blake Hill had removed their on-site pool. Blake Hill does have a Community pool located on-site.
The Standard conducted a Q&A about Woodstock’s purchase of the water company
By Tom Ayres, Senior Staff Writer
Woodstock has been abuzz in recent weeks with discussions about the town’s potential acquisition of the Woodstock Aqueduct Company (WAC). At public forums, on listservs and social media, in cafes and restaurants, and in the pages of this newspaper, people have been weighing in in advance of a vote scheduled for Oct. 29 with questions about the potential purchase of the private utility. The Standard met for a Q&A session on Monday afternoon with Woodstock Municipal Manager Eric Duffy and Charlie Kimbell, the facilitator of the Water Working Group that has been assessing the acquisition issue for more than a year. Neither Duffy nor Kimbell were informed of the questions ahead of time.
Q: Why does the acquisition have to be considered in such a short time frame, via a floor vote at a Special Town Meeting floor on Oct. 29? Why can’t the vote be by Australian ballot to ensure a larger turnout and better representation?
Eric Duffy: It’s the current rules of the town of Woodstock. Anything that is not a bond or a petition article has to be a floor vote. Some of the confusion comes because the [select]board last year used the COVID rules to have all Australian ballots at Town Meeting last March. That’s where some confusion came from, but those rules are no longer in place.
Charlie Kimbell: Let’s talk about timing, though, aside from the format of the vote itself, the timing is important because the grants that were given to both the town and the WAC were made out of a fund that was from ARPA funds – the American Rescue Plan Act funds, which have to be fully committed by December of 2024 and spent by 2026. Without those funds – without a vote, a positive vote – the state was in a position of saying, “We need to reallocate those funds for a project that is shovel-ready and approved.” Or else they would have to send it back to the federal government.
Q: Initially, the state was requiring that those funds needed to be committed by the end of September, but Woodstock was able to extend that through Oct. 30. That applies to both the funds that the town got and the funds that the WAC got that they’re passing on to the town through the purchase agreement?
Kimbell: Yes, that’s correct: to show good faith that it would be voted upon.
Q: Will the purchase price, which has been reported as equivalent to the amount of the WAC’s existing debt, be used to pay down the debt in full so that Woodstock won’t owe it after the sale? Or, as some have contended, does Woodstock actually take on that debt and still owe it after the sale is finalized?
Kimbell: It’s just like when you buy a house and there’s a mortgage on it: you make sure that when you are paying for the house and the mortgage gets paid off and released. It’s the same thing here. That debt will go away. Some people have used the term “assuming” the Aqueduct’s debt. No – the town is paying off the WAC’s debt so that it will be debt-free.
Q: Why the separate vote on Vondell in December, rather than incorporating the reservoir property into the Oct. 29 vote to authorize the purchase of the WAC and its assets? Isn’t Vondell just another asset of the WAC?
Duffy: The second vote in December is by Australian ballot. It is an Australian ballot because we’re bonding for it. So it has to legally be by Australian ballot.
To Charlie’s point earlier, we had a short timeframe to use up the ARPA grant money, so we had to vote by October 31. The selectboard did not feel it was appropriate to have a month’s timeframe of conversation around this and then have a vote for Vondell, capital projects, and the acquisition before October 31, so they split the votes up to give time for the conversation we’re having now in the community about the Vondell. What’s the benefit of the Vondell? And then what capital projects do we want to include in the bond and how are going to pay for it going forward?
Q: So it’s not two floor votes then: you’ve just addressed why there’s a separate vote on Vondell and the bonding, and why it will be conducted by Australian ballot. The next question then is, why, specifically, is Woodstock seeking to purchase the Vondell, taking it off the tax rolls? Is it essential to the continued operation of the water company or is it a “must-have” versus “nice-to-have” situation?
Duffy: We receive about $13,000 in taxes each year from the Vondell and about $38,000 total in tax revenue from the WAC. In this acquisition, we will lose that revenue. However, by acquiring the Aqueduct, we are going to wipe the debt off. So we currently pay the debt each year – somewhere between $30,000 and $50,000. That’s going to go away immediately. And we’ll no longer have to pay for the water readings we use for our sewer billing. That’s another $10,000 to $20,000. So overall, it’s a net positive for us to gain the Aqueduct when the money we’re going to save versus the money we’re going to lose [is considered].
Part two: the Vondell is 358 acres of land in Woodstock with a reservoir. First, it could be used for future water use. There are some things we have to do to it, but in 50 or 100 years, we may need that water. Second, a lot of residents currently use the Vondell trails. WAMBA, (the Woodstock Area Mountain Bike Association), uses them all the time; the snowmobile club as well. The third is that it’s 358 acres of land in Woodstock. Do you want the town to have control over what happens there? Or do you want a private company, a private developer, or someone else who has control over it? The selectboard views it as imperative to have control over it to make sure they do what’s best for Woodstock. We think in the past there has been this aversion to spending money in the present day without thinking of the future. We don’t know what Woodstock is going to need in 50 years, so having that property allows Woodstock more latitude in making better decisions for the future.
Q: Historically, was the Vondell Reservoir used by the WAC for a water supply?
Kimbell: It was for a water supply, but not since the 1980s. This was a backup water supply. So there used to be the three reservoirs. The one on Carlton Hill is no longer active [and] has been disconnected for a long time. There’s the one on Cox District Road, which is included with the purchase, and then the Vondell Reservoir, which was built, I think in the 70s — I’m not sure exactly when.
But there’s another important part here too. It’s two things. One is that [the Vondell] is an important backup water source, in case something happens to the existing water source that supplies the entire system. That water source is in the Prosper Valley and it’s in aquifers — two wells going down into aquifers. What happens if some cataclysmic event ruins the aquifer for whatever reason? Then the Vondell is a great backup water supply, which you need to have in terms of securing your water future. So that’s a real added benefit. The other thing is that the water coming out of the existing water supply is really clean. It doesn’t need a lot of treatment. So there’s a very instant treatment that gets applied to it before it goes in the system. But if you take surface water and use that, then you have to put it through a more complete treatment program, so that would be a lot more expensive. There’s a higher standard today as to what the water quality needs to be than what it was in the 70s.
Q: If there were some kind of catastrophic failure of those two wells in Prosper Valley — pollution of those aquifers or whatever it might be — what would be required to re-up the Vondel Reservoir? Is there infrastructure that needs to be put in place to make Vondell accessible again?
Kimbell: I’m not sure — I don’t know about the condition of the actual connection. The system is there to take place in the case of a major fire event —for instance the entire Village burned and the Fire Department used all of the water in the [existing] 960,000-gallon tank. Is that feasible? Could that happen? It’s highly unlikely, but it could — and so then you could have water flowing from the Vondell through the system. It would not be treated, correct? So you couldn’t drink it until the tank was recharged with water coming from the existing water source.
Q: Are the shareholders of the WAC going to reap any financial rewards or windfall from either the purchase of the water company and its assets, if approved by the voters on Oct. 29, and especially from the subsequent purchase of the Vondell Reservoir, if that is okayed in December? In other words, will the proceeds of the $1.6 million sale of the Vondell property be distributed among the present shareholders of the WAC?
Duffy: That money will go towards the WAC [shareholders]. My assumption is it’ll be split between the shareholders, but it’s up to them to decide how they want to distribute that money afterward. If they want to donate that money back to the town, we’d certainly take it as well. There’s always that opportunity, right? But yes, the money from the sale of the Vondell will go towards the shareholders.
Kimbell: But from the purchase of the WAC itself, though, they don’t get any extra money from that sale. That’s just the debt, right? Paying off the debt. Nobody gets any money from there. The money [for the Vondell and the bond] is dependent upon the purchase of the Aqueduct. It’s (a question of) what is the real estate worth and what is it worth to the town.
Q: I’d like to have you address the issues surrounding the fire hydrants in the community in the context of the proposed purchase of the WAC. People have asked why the Town is involved in the potential purchase of the water company. The primary, 990-plus users of the WAC system are within the Village boundaries. What is the number or percentage of the total hydrant count that serves residents of the Town outside of the Village? Why not just create a water district consisting solely of the Village water users, comparable to the sewer district?
Kimbell: There are a lot of responses to that. As part of the Woodstock Water Working Group, we looked at different ownership structures as possibilities. One was a fire district; one was a cooperative. And the fire district ended up with an extra layer of bureaucracy so that the town is still a customer at that point, but you’d have to have a separate board of directors. Everything else is not transparent. And the question then became this: Who has borrowing authority? So that became more complicated, and in most cases, when speaking with the state, they said that most fire districts are moving towards municipal ownership instead. So there’s not a whole lot of new fire districts being established for the purposes of providing a communal water system.
Co-ops are, again, almost the same thing, They are 501(c)(3)s and they provide water. They don’t necessarily provide fire protection — it’s mostly around providing water to a neighborhood or, in some cases, a mobile home park or some other areas where it’s densely populated. [It’s the issue with the] Blake Hill [townhouse community in Woodstock], for instance. They have to maintain their own water system because it qualifies as a public water utility — they serve enough people that they qualify as a public utility, so they have to go through a certification process. They have to go through all of that right now, but they don’t have fire protection. So the question is: How are they going to have any kind of fire protection? They’re looking at how to address that, because there used to be a pool and the fire department said, “Yeah, we can use that to put out a fire there.” They took out the pool, so now they’re talking about putting a pond back in.
There’s always that balance between water and fire. There are 96 fire hydrants in the system. I’m not sure as to how many are actually in the Town and how many in the Village. There’s a map. We’ve got the map where you can see each one of the fire hydrants. That’s possible to get.
Q: Is that map on the town website now?
Duffy: No.
Kimbell: But it’s in the engineering report, which is on the website.
Q: Speaking of that, there seems to be some questions on the listserv and in social media about what is available in terms of educational materials on the town website. It’s been suggested that the information there is minimal and that there has been a lack of transparency from the town about the considerations that have brought us to this acquisition point. Is all the information that the Town Selectboard has consolidated in one place or not?
Duffy: On our website, we have a separate tab for the acquisition of the water system. We have the Harvard Business School report, the Water Working Group letter of recommendation, and the engineering report [from Otter Creek Engineering] to the state. We have the presentation I gave two weeks ago. We have about five or six different one-pagers, explaining the capital projects, explaining the deal, explaining the vote on the 29th, and more facts about the Aqueduct.
Additionally, we have held about 10 or 11 meetings so far in the last two weeks. We’re holding more anyplace where people want to talk to us. We’re being as public about this as possible. What we’re saying is we want people to have all the facts when they go to vote. We’re trying to be as transparent as possible with all the information we have. And if people are looking for something, they can reach out to us and we’re happy to provide it for them.
Kimbell: There was the [public] meeting we had with [representatives of] the Vermont Department of Environmental Conservation and with Craig Jewett from the engineering firm back in early May. The accounting firm, Gallagher Flynn, also presented the results of their due diligence. It’s all a matter of public record. There was an effort then to divulge everything without exposing what could be considered proprietary or confidential information [during negotiations]. All that information was certainly laid out for people to answer questions.
Q: A lot of the data that has been cited in listserv posts seems to be drawn from the engineering report. For example, there’s a figure that’s been cited that something like 31% of the water in the Aqueduct system is being lost because of leakage and so on. I remember Craig Jewett specifically addressing that at that very meeting you are referencing. Are the minutes of that meeting up on the website?
Duffy: Yes.
Q: What is the specific address of that website page? I know what the town website address is, but where is the link on the Aqueduct information page?
Duffy: It’s on a dropdown link on the home page under the “About” heading.
Editor’s Note: The specific information page about the proposed Aqueduct acquisition can be accessed at townofwoodstock.org/about/acquisition-of-the-woodstock-water-system.
Kimbell: The other part about this is that it’s important to note that the WAC has not withheld information. They’ve been willing to provide information that we’ve asked for. And when I say “we,” I mean the Water Working Group initially and then the town later. I’ve been a part of that. They provided the information we asked for: What’s the water usage by household? How many customers, how many connections are there? What are you submitting to the Public Utilities Commission? All that kind of stuff: it’s all there.
There are 992 connections to the system at present — and that’s the number of connections versus the number of units. One connection may serve four units, So the WAC is charging those connections by the number of units being served; there might be 720-ish [residential] connections, but of those there might be 900-and-however-many units.
Q: You’ve explained that it’s a complicated situation relative to fire districts, water districts, and sewer districts. But a question that people raise is this: Is it fair for the taxpayers of the entire town to take on the cost of a system that is only available to about half the population of the community?
Duffy: I think one, it’s a community asset. I think we have to stop viewing ourselves as individual people where our community [is concerned]. It benefits the entire community to own the water system, including Town Hall, the schools, and the Village, which is the economic driver of the entire town. It’s also fire safety. Our fire engines do fill up at the hydrants to go into the Town where people aren’t on the water system. That’s beneficial as well.
Two, I think just the benefit of living in Woodstock and why people live here is the beauty of it, and that is partly from the Village and the resources the Village has. So people have a functioning and thriving downtown, even though they are not on the water system. Everyone does.
And the final thing I’ll say is that by buying the water company, the town can actually start planning to have smart development. With that smart development, we’re going to have more houses, which is a higher tax base, which is a higher grand list, so someone that’s off water system may see the benefit of their taxes going lower or staying steady, because we have water, and so we can have more housing. So they’ll all see a benefit there as well.
Q: What are the primary advantages to the Town of owning the water company, rather than it being owned by a private entity?
Kimbell: You have control over your future. You have a company right now that luckily is aligned with the interests of the town but has not always invested money to align with the future interests of the town. So the town can actually take that on, number one,
I’d say it’s still going to be cheaper for the town to operate this than for any other operator, and you’re going to see some operational savings. It is going to cost more when you start to put in all the improvements. But there are some real benefits down the line in terms of municipal ownership: access to grants at the federal and state level, which the WAC doesn’t have and another operator wouldn’t have. We’ve already seen some grants made available to this whole purchase – and there are other examples of where other communities have accessed those kinds of grants. So that’ll be a phenomenal source of reducing the total cost of what it means to provide water.
And one of the other points to also think about is that the largest user of this water system: the Woodstock Resort Corporation and its various entities. That is the largest employer and economic driver for the Town and not just the Village. So that has a big impact — and you want to be sure that you can support the existing operations. Also, the school system is a large customer. The Homestead and Woodstock Terrace are large customers, Mellishwood – housing for older folks that may not have the ability to live on their own.
We’re also talking about specific examples of where development isn’t occurring because you can’t get a water permit or a “will-serve letter,” as they call it. There is a lot that rides on your ability to deliver water in the future that you just can’t do now. So there’s that water security — it’s about social and economic vitality and then there’s also just the fire protection question. Public safety, water security, and economic vitality are the three things that really stand out right now.
Duffy: There’s also the important thing that Charlie said about transparency. The selectboard will create annual budgets. They’ll be voted on by the residents, including the water budgets. They’ll vote on the water rates in a public meeting. So [the board] will be held accountable by the residents for what they want in the water system, where right now that does not happen. People will have a say in how the water system is run and that will be an annual process.
Kimbell: One last thing on this question: the proposed rates from the WAC before the Public Utilities Commission. Remember, the increase on the town is out of the town’s control — and it went from $30,000 to $300,000 plus [for hydrant fees], which would be borne by all the taxpayers in the town and the users on top of that. To really gain control over what the town is going to pay, and what taxpayers and users are going to pay, you need to own it.
Q: How are the projected costs of needed capital infrastructure improvements to the system being identified and estimated? Is this primarily the consulting work of MSK Engineering?
Duffy: The sign point that the board is using is the engineering report that was done in 2023.
Q: And consulting engineer Craig Jewett and his colleagues have plugged in the potential cost numbers there?
Kimbell: Yes. That’s all in the 90% preliminary engineering report required by the state. It was officially done by Otter Creek Engineering when Craig Jewett was there, and he’s now over at MSK. But with him went the knowledge of the entire system and so it’s still valid. The numbers have also been validated by the Department of Environmental Conservation. Looking through the report, they were asked if they saw those as realistic numbers. And they said, “Yup.”
Q: Here’s a question that comes up in the community: What got us to this point — tropical storms, widespread flooding events, and other natural disasters or mismanagement of the WAC by its private owners and investors relative to maintenance and long-term infrastructure needs? Or is it a combination of the two?
Kimbell: (Chuckling) That’s a wide-open question!
Duffy: I think one of the issues — and this has been said publicly — is that the Aqueduct has kind of been run as a non-profit. They haven’t raised their rates in over eight years, maybe even nine years, so they did not have the capital reserves to do the infrastructure work they needed to do. So they had to go and borrow money, which obviously increased costs. They kept on having increased costs without increasing the revenue to a point where all they can do is borrow to get money, which passes more expenses on to the taxpayer. So this is a step to kind of alleviate that problem.
Q: To be clear, most of that roughly $900,000 in debt was accrued in the last eight to 10 years, correct? And the last rate increase was eight years ago?
Duffy: Yes on the debt. And in 2015 on the rate increase.
Kimbell: But to give a more holistic answer to that question: the water company was formed in 1885 and it’s been kind of handed down through generations of the Billings family and the other original founders. So it’s kind of been like, “Oy, who in the family is going to run it now?” And kind of coming down to the fact that they’re at the end of that line of people who are interested in running the water company. They don’t have a succession plan in place. That was one big issue.
The floods — after [Tropical Storm] Irene [in 2011] and then last summer — really did exacerbate the water main underneath Elm Street. Last July, it broke for a second time. People were without water again. They had another connection breakdown by Billings Farm. Obviously, something had to be done there. But an earlier preliminary engineering report and the pressure from the state about the fire pressure at the hydrants — all that was first identified in 2013. This is not a new subject.
In 2017, they did put in the new water connection feeding over College Hill, to try to improve some of that pressure along the system, but it didn’t do enough. So then the WAC is faced with the improvements that have to be made in order to increase the water pressure, and no access to capital to do it, and they don’t have the approval from or they wouldn’t get the approval from the Public Utilities Commission to actually borrow that much money anyway. So things are coming home to roost with the system not being able to be funded by the WAC. As Eric said, they could have raised rates years ago, but they were trying to deliver water at the cheapest possible price to all the users, thinking that that was their charge, that was their mission — not to make money.
Now let’s look at the future of development in Woodstock. The water company is just asking, “How are we going to service our existing users?” And then the rules changed. It used to be if there was a big fire event, they had muddy water for a few days afterward, right? And people would just accept the fact that they didn’t have any water pressure. But now, if you don’t have that minimum water pressure at not only fire hydrants, but also in the residences, you have to do something.
Q: And then what previously had been an issue of concern on the part of the state regulators became a mandate?
Kimbell: Yes, it was, “You have to do this.” That’s exactly right.
Q: What will happen if voters reject this purchase and no private buyer steps forward? And a related issue: Is it really conceivable that any private buyer would seek to purchase a stand-alone water company in an isolated rural location and in imminent need of significant investment for infrastructure? I’m not an equity capital investor, but it seems to me, looking at the situation of the water company, that no private investor would want to wade into that situation, pardon the pun. So what happens if the acquisition vote fails on October 29?
Duffy: The aqueduct retains control over the water system. They will still be in front of the PUC for their rate increase. They will have a rate increase, whether it’s what they ask for or not. They’ll get something. Woodstock will continue to not have control of its water. We will not be able to develop anytime soon and not have any new connections anytime soon. Costs for all taxpayers are going to go up significantly due to the water system and the Aqueduct will continue to raise rates probably every single year until they get enough capital to do the work they need to do. Meanwhile, we’ll be in a worse and worse situation as a town and village, without any control over what happens to our water.
When it comes to a private investor, anyone who comes in as a prime investor can get a 9% rate of return after taxes, so they can increase prices something like 27% if they want to. It may not look attractive to an individual, but if you have guaranteed control of water when people need water, and you have customers, and you can guarantee a certain rate of return, you are guaranteed to make money. And they can turn off the hydrants if they want to and we’d be at the behest of someone who’s running a water system to make money, not to provide water.
Q: This point about the hydrants was raised at the public meeting two weeks ago. If they can just turn the hydrants off — if they are not beholden to operate the hydrants, worst-case scenario, how would we provide fire protection? What would the state expect of us in terms of fire protection?
Kimbell: I was really careful during that meeting not to say that they could just shut off the hydrants. Because anybody coming in who wants to operate the water system has to be approved by the state as to what their operating plan is. Okay, even when the town buys it, the town has to submit an operating plan as to how it’s going to operate the water system. So it would be tough for someone just to come in and say, “We’re not going to do the hydrants.”
Could the WAC shut off a few? Yeah, they could do that, just to minimize the number. Ninety-six is a lot for a town this size. But the question is whether there is enough of a return to attract a private investor to do it, and is there somebody right now? There are examples of other water companies that have been purchased by private equity firms who roll up water companies in a portfolio. The Harvard Business School study told us in their report that it is certainly possible, and that it’s happening across the country and in other parts of the world. Vermont has some regulatory hurdles that may make it not as attractive, so it may not be an imminent threat, but it is a possibility. It could happen. I don’t think there’s anybody right now that’s got their checkbook out who’s ready to write a check for it, but it’s definitely possible.
One thing we know is that the WAC does not want to be in the business of operating the service anymore, so it’s going to find a way out. Is that the town or is that a private investor? Those are the two options they’ve got before us.