Pulling plug on Assabet
Water company’s clients to drill wells
The Assabet Water Co.’s bankruptcy filing last week brought a sense of resolution to customers in Stow, who had been anxious about the future of their drinking water. But the company’s demise also triggered hefty costs for customers and, potentially, for taxpayers throughout Massachusetts as well.
“Everyone looked like hell to find someone to buy Assabet,’’ said Jamie Monat, a resident of Harvard Acres, a Stow neighborhood of around 180 homes that is the Concord company’s entire client base. “No one could be found, because its financials stink. It’s impossible financially to make the company viable.’’
Because of expensive upgrades that failed to yield new customers, Assabet Water was deep in the red when its owner, Robert Maynard, died late last year, said Stow’s town administrator, William Wrigley. US Bankruptcy Court documents filed on Nov. 17 show that the company finally collapsed under the weight of almost $1.8 million in debt owed to the state and other creditors.
Now, as the federal court weighs how to liquidate the company under Chapter 7, the state is spending an additional $1.1 million in emergency cash arranged by local lawmakers last month to keep the business temporarily afloat. At the same time, the cash is financing low-cost loans to Harvard Acres residents so they can drill wells to pump their own water before the company dissolves.
The emergency funding was crucial because Stow doesn’t have a public water system and, under Chapter 7, judges don’t need to consider how customers might be harmed under bankruptcy, Wrigley said. Officials and residents feared that Assabet might be forced to shut off the water supply to Harvard Acres residents, which could lead to the homes losing their occupancy permits, he said.
“We just need to buy time,’’ said Wrigley, who added that the town could not afford to acquire the company and take over its water operations.
The emergency funding was a major relief for Harvard Acres residents, according to Rich Eckel, who said that he and his neighbors could have been in trouble if the state had chosen to do nothing.
“I was quite alarmed. It’s very frustrating,’’ said Eckel. “You don’t have a choice for water as you do for other utilities, like a TV or phone.’’
But Eckel and others also questioned why officials let the situation deteriorate to the point where Beacon Hill had to intervene.
They also wondered why the company received taxpayer dollars over the years when its balance sheet wasn’t improving.
Monat, who worked with state and local officials on the issue as a member of an unofficial committee of Harvard Aces residents, said the company failed because its owner died while grappling with state regulators who were working at cross purposes.
“It’s a case study in a combination of management incompetence, government lack of oversight and blind adherence to the letter of the law,’’ said Monat.
In 2007 and 2008, Maynard took out loans totaling around $1.7 million from the Massachusetts Water Pollution Abatement Trust to pay for upgrades demanded by the state Department of Environmental Protection after surface water contaminated the company’s wells, said Dave Kibbe, spokesman for the state entity.
Part of the state treasurer’s office, the trust has given $5 billion in loans to public and private water suppliers around the Massachusetts since 1993, said Kibbe.
Last year, as the economy tanked, the state’s Department of Public Utilities rejected Assabet Water’s request for rate increases that would have covered the loan payments, Kibbe said. The ruling spelled the beginning of the end for the company, but the department’s decision was right, said Monat. The company is charging him around $1,200 a year for water, he said, a figure that he said reflects how its debt service is out of control.
Now, however, the trust might never collect the debt. The Assabet Water Co. has around $920,000 in assets, including a new water filtration plant, storage tank, and wells. But its lawyer, Timothy McGee, said the company lacks water mains to other parts of Stow where new customers might be found, including the Lower Village neighborhood, where businesses are clamoring for water but are running into state limits on pumping from the local supply. McGee didn’t know whether the facilities could be moved elsewhere or dismantled.
Trust executive director David Riedell admitted that Assabet Water might have been a bad investment, but said he and his colleagues had little choice at the time.
“We recognized at the outset that it was a risky loan,’’ he said. “We the trust, the DEP as well, did not see a suitable alternative and needed to provide potable drinking water to these homes.’’
Riedell insisted the trust wasn’t lending irresponsibly. Officials rejected the company’s request last year for an additional $1.4 million to build water lines to the Lower Village, for example, because Stow officials decided they wouldn’t buy water from the company for town office buildings in the area, cutting off important revenue, he said.
As part of the $1.1 million in state emergency funding, the trust is providing $1 million for loans with 2 percent interest for residents to drill wells in the next few months, at a cost of around $10,000 per well, said Wrigley. The legislation also gave Assabet Water $100,000 to operate through April, he added.
Eckel found the solution to be ironic. After all, he said, the state could have avoided spending millions if someone from the start had studied whether the company’s hopes of running a profit were slim.
“From a taxpayer’s perspective, I’m completely annoyed,’’ he said.
In the meantime, Stow needs more water. On Nov. 8, Town Meeting members voted to allow local officials to explore developing a 13-acre parcel on Deerfield Lane for a new well that could serve the Lower Village.
John Dyer can be reached at email@example.com.