Pennsylvania American Water is moving forward with taking over wastewater operations in Kane Borough.
The company, a subsidiary of American Water, announced Friday that it signed an agreement to acquire the wastewater assets of the Borough of Kane Authority for about $17.5 million.
The authority currently owns the assets, and the borough operates it for the authority, said Kane Borough Manager Don Payne.
Almost 2,100 residents of Kane Borough and Wetmore Township are served by the wastewater system, according to Pennsylvania American Water.
Payne noted the asset purchase agreement has been signed as of Nov. 4.
“We’re very excited about it. We’ve been working on it about 3 ½ years,” he said.
There are several steps that need to be taken before the transaction is finalized, according to Payne. He said there are six regulatory approval hurdles they need to go through first, including submission of a draft proposal and application review.
Pennsylvania American Water said the Public Utility Commission (PUC) and the Pennsylvania Department of Environmental Protection have to approve the changes.
Payne said the best case scenario could close the acquisition as soon as July 2020, but he noted it could be the end of 2020 or later.
According to Payne, the sale will have financial benefits for both the borough and its residents.
“It will give us some operating capital to perform on some core services here,” he explained, saying the borough will be able to catch up on projects that have been put off.
Payne believes that will help ward off real estate tax increases in the future, too, as the borough will have a reserve to generate revenue.
He explained that Pennsylvania American Water will continue with the current until the next time it files rates with the Public Utility Commission (PUC), the agency that regulates utility rates. At that time, he anticipates that rates could become lower.
“Their rate structures are more customer friendly,” Payne said. He explained the company can charge lower rates because, as a larger company, “These costs get spread over their wastewater customers.”
For residents who use very little water, “They’re going to be paying less,” Payne said.
This isn’t the borough’s first interaction with Pennsylvania American Water.
The Pennsylvania American Water company under different forms has been in charge of the borough’s water for well over a hundred years — since 1886, Payne believes.
During that time, “They’ve been very good to this community,” said Payne.
“We have been providing reliable water service to this area for more than 100 years and are deeply rooted in these communities,” said Pennsylvania American Water President Mike Doran. “The proceeds of the sale will support local infrastructure improvements and economic development activities that will be vital to supporting a high quality of living for residents.”
Doran indicated four borough sewer employees will retain their employment under the new company.
“We look forward to bringing our operational and engineering expertise, as well as our commitment to make necessary capital investments, to improve the wastewater system and ensure its compliance with environmental regulations,” Doran added. “We also plan to welcome Kane’s four wastewater treatment plant operators to the Pennsylvania American Water family.”
According to the press release, the sale is to be executed under the state’s Act 12 statute. The law lets municipalities sell wastewater systems, as well as water systems for a price based on the fair market value.
“Prior to the passage of Act 12, the valuation process was based on assessing the system’s original cost at the time of construction — which may be 50 years old or more — less depreciation and contributed property,” the release stated.
Doran noted, “The law enacted in 2016 now provides municipalities the opportunity to receive a purchase price that is more reflective of the current value of the system assets.
For more information on Pennsylvania American Water, visit amwater.com.