In corporate mergers, the deals sometimes include exchanges of stock, assumption of debt or cash paid by the acquiring company.
But in Holley-Navarre Water System’s proposed acquisition of Navarre Beach Water System, the small county-owned utility would essentially be gifted to the mainland nonprofit.
“We won’t pay anything,” said Paul Gardner, Holley-Navarre’s general manager. In a phone interview with the Navarre Press this week, Gardner asserted that if Santa Rosa County demanded compensation in return for his utility taking over Navarre Beach Water’s operations, “It would be a deal breaker.”
If approved by county commissioners, the combination–described by County Engineer Roger Blaylock as a “transfer of water and sewer operations”- would put about 4,000 Navarre Beach customers under the control of a company that hit its 14,000 ratepayers with a 17.5 percent increase last December.
In contrast, Navarre Beach Water hasn’t increased rates since 2008.
Future benefits touted
Still, advocates of the deal assert that it will save money for Navarre Beach Water customers in the long run. That’s because HNWS plans to tear down the beach utility’s sewage treatment plant, which needs replacing at an estimated cost of $18 million.
Instead, HNWS plans to build a pipeline under the surface of Santa Rosa Sound that will carry raw sewage to its mainland treatment plant. The resulting effluent will be spread in various locations, some of it eventually on a remote section of Eglin Air Force Base under an agreement now being negotiated.
The cost of the Navarre Beach to Eglin project is estimated by Holley-Navarre at $18.5 million, which would be shared about equally by the two utilities.
The environmental boon of that undertaking appeals to supporters, who note that the treated wastewater from Navarre-Beach’s plant now ends up in Santa Rosa Sound. “It’s not a perfect solution. HNWS’s effluent ends up in bays and streams,” said District 2 Commissioner Bob Cole. Still, he said, “It gets us out of putting thousands of gallons of effluent a day right into the sound.”
But piping treated wastewater into Santa Rosa Sound isn’t unusual. That’s how Emerald Coast Utility Authority handles most of the sewage from its 1,600 customers on Pensacola Beach. Spokeswoman Nathalie Bowers said the company has a treatment plant on Santa Rosa Island at the edge of the sound, where about 80 percent of its effluent ends up after traveling through a 400-foot pipe.
Still, Cole reasoned, “I want to get government out of business. If Holley-Navarre Water can run this efficiently and not add to the cost for residents at the beach, I’m for it.”
That remains to be seen. When Daryl Lynchard, then Holley-Navarre Water System’s board president, learned last December of a new healthcare package agreed to by management that would lead to a 17.5 percent rate increase, he said, “Our (HNWS) costs are out of control.”
Raw sewage risks
Gardner acknowledged that the new pipe bringing sewage from Navarre Beach to the mainland for treatment would have to be “a pipe within a pipe” in case of leaks.
Blaylock listed the raw sewage factor among several “disadvantages” in a written analysis of the proposed utility merger.
In addition, Blaylock wrote, “The county and beach customers would no longer have control of the rates or special assessments. At this time, only nominal increases in water and sewer rates are anticipated to account for inflation and the cost of collection-system infrastructure to accommodate future growth. The NBU franchise has historically produced a positive cash flow, which is anticipated to continue.”
Navarre Beach residential customers currently pay a base rate minimum of $59.48 a month for combined water and sewer service -assuming a 3,000-gallon use minimum. For the same use amount, the HNWS monthly fee for water and sewer service is $86.19.
However, new beach residents pay more for water and sewer tap fees–$2,500 and $3,600 respectively – compared with $1,500 for water and $2,800 for sewer service from HNWS.
“I do think Holley-Navarre can do the job more efficiently in the long run,” said James Calkins, volunteer vice president of the company’s board – who also owns VIP Beach Services in Navarre.
But the main reason for advocating the combination, he said, “Is to stop putting effluent in Santa Rosa Sound.”
Read the full article in the Oct. 13 issue of Navarre Press. Click here to subscribe for as little as $38 per year.