Tennessee board orders Ocoee utility to produce CIP, alternatives before debt moves forward

The Tennessee Board of Utility Regulation on June 26 directed Ocoee Utility District to pause any bond or grant actions until the district submits a detailed capital improvement plan (CIP) and at least two financing alternatives, after staff warned the board the utilityis pursuing borrowing that could sharply increase customer rates. The board accepted staffrecommendations and added a requirement that the district provide the CIP and alternatives for review before any debt proceeds or matching grants move forward.

Board staff flagged gaps between the district's engineering capital list and the rate studies presented to the board. Ross Colonna, the board's executive staff, told members an earlier study looked at roughly $51 million of projects while the districtwas seeking about $62.5 million in combined SRF and USDA financing and bonds. Colonna said staff was particularly concerned that the districthad two different advisers recommending different rate paths and that one municipal adviser fee proposal appeared far above market norms.

Board discussion focused on affordability and the proposed pace and scale of borrowing. Colonna told the board the municipal adviserfee proposals for the packages of interim and permanent financing were externally large compared with commonly observed market fees and that the district had already been billed significant advisory fees. "Board staff is genuinely concerned that the customers are not being adequately considered when looking at these capital plans," Colonna said.

Ocoee officials defended the outreach and planning. General Manager Tim Lawson told the board the projects reflect longstanding planning and that most of the proposed work addresses distribution and treatment needs. He described the districtwater loss problem as high and said customers currently receive substantial wholesale water to meet demand. "It is pretty high. I think it is about 50%," Lawson said of the districtwater loss.

Municipal adviser Larry Kidwell, representing Kidwell & Company, defended his firmcontract and said longstanding engagement and market experience shaped the proposed fee arrangements. Kidwell said his contract with the district predated current pricing comparisons and that different financing structures (including interim financing for USDA loans) affect total cost comparisons.

After questions about the scope, the rates required to support the debt and the magnitude of adviser fees, the board voted to accept staffrecommendations with an amendment: before proceeding further the district must supply a CIP and at least two alternatives for how the program could be financed and phased, and staff will withhold support for debt or grant matches until it can determine affordability for ratepayers.

Board action: The board approved staff recommendations and added a requirement that Ocoee submit a detailed CIP and at least two financing/implementation alternatives for review; staff may grant limited extensions for good cause. The board noted concerns about advisory fees and the potential customer-rate impacts of multi-year, double-digit increases.

Impact and next steps: The requirement will slow the district's debt timeline and instructs staff and the district to produce more complete documentation and alternatives — including lower-cost or phased approaches before any formal bond or grant actions occur.