Spartanburg Water System is owned by City residents.
Three-member Commission of Public Works governs the water system. The three commissioners are elected by City residents.
City residents built the water system over many decades, backing the system's growth through the construction of the two reservoirs, Lake Blalock and Lake Bowen, as well as water treatment plants and hundreds of miles of water mains.
This investment allowed Spartanburg Water System to grow into a regional water supplier, expand service into the unincorporated county, and fuel growth in places such as Boiling Springs.
In return for this ownership position and decades of investment, Spartanburg Water System pays a dividend to its owners in the form of a transfer payment to the City of Spartanburg. This money is used to help provide services and hold down taxes on City residents.
Other water systems and cities required annexation for new customers to tap onto the water system. The City of Spartanburg and Spartanburg Water System did not, instead choosing to return value to its owners in the form of the dividend payment.
Today, the dividend payment amounts to $1.4 million annually, which is equal to about 5% of Spartanburg Water System's annual revenues and represents just $0.65 per person served by SWS.
FAQs About The Dividend Payment
What could all this mean to the budget of the typical city household?
While we don't think either of these potential outcomes will fully come to pass, the following illustrates the economics:
If the City of Spartanburg Commission of Public Works (a.k.a. Spartanburg Water) had to increase revenues by $1.4 million, your water bill would go up 4.6% which is less than $12/year for the typical city household.
If the City of Spartanburg City Council had to increase revenue by $1.4 million, your property tax bill would go up 10.5 mills or $63/year on a owner-occupied home worth $150,000 .
The difference is significant and the stakes are even higher for commercial properties. Let us know if you would like an individual calculation specific to your property by using the Contact Us function at the bottom of this page.
Wasn’t this reduction expected for some time? Shouldn’t City Council have known that the Commission of Public Works (CPW) would seek to end or significantly reduce the dividend when the agreement expired?
Prior to the formal notice, the CPW had made no public or private statements to the City Council or its staff about either a shift in their priorities or a change in their financial condition. In fact, their official public disclosures include the following statement, “It is assumed that the transfer payment will remain fixed at $1,400,000 million throughout the forecast period” which in this case was through at least 2015. The contract renewal was, of course, expected and understood, but we had no basis whatsoever for anticipating a shift in the mission and priorities of the CPW.
Is the dividend rate too high and out of line with other similar payments throughout SC and elsewhere?
CPWs enhance the prosperity of the cities they serve in a variety of ways. Each CPW has a unique history and role in the enhancement and economic wellbeing of its city. The City believes its dividend payment should be the highest in SC because our CPW’s role in regional development has been unique in that it has both done less to facilitate expansion of the city limits than many other CPWs and facilitated growth in unincorporated areas to a far greater degree than many other CPWs. In other words, the City of Spartanburg did not leverage the water system to expand its tax base through annexation over the years, like many other cities did. Dividend payments are therefore all the more important — indeed, they are essential — to ensuring a fair return on city resident investment. We should always have one of the highest CPW dividend payments in SC.
SWS says it can’t afford the dividend payment. Is this true?
First, we should make clear that City Council is committed to doing its part to ensure that Spartanburg Water System is financially stable. If we believed that continuing dividend payments would threaten SWS’s ability to provide reliable water service at a competitive price for the foreseeable future, we would pursue another route. However, we believe Spartanburg Water can continue the dividend payment.
Spartanburg Water’s revenues have grown in recent years. Their official documents indicate a plan to continue periodic rate increases, which would further enhance their revenue. They are stable.
Although we don’t believe it is necessary, the CPW has the option of accelerating or increasing its planned rate increases. Even while doing so, the CPW could maintain a rate structure that compares favorably with other communities in the region. Dividend cuts have a much greater impact on city residents than a small across-the-board rate increase.
If the CPW implements its current plan, city residents – their constituents – would lose the benefit of the dividend payment while those residing outside the city limits would lose nothing.
We encourage citizens to evaluate the CPW’s challenges and options for themselves. Unfortunately, we don’t know all we would like to know about Spartanburg Water’s fiscal outlook. The City Council has no desire to watchdog over the CPW’s affairs, and we recognize City Council holds no authority over the CPW. However, as citizens ourselves and as policymakers directly affected by their decisions, have the right to understand what is occurring and why, particularly when the result will affect the pocketbooks of all city residents.
Shouldn’t SWS customers outside the city have a vote in CPW elections?
There have always been multiple routes for addressing this concern. First, folks can choose to move into the city. Second, folks can petition for annexation into the city. Third, folks in unincorporated Spartanburg County can organize themselves to pursue purchasing some or all of the Spartanburg Water System assets.
City Council recognizes the current structure (city voters owning a system that serves a land area 10 times its size and a population four and half times larger) challenges the CPW to balance the elements of its complex mission. If the CPW and the system customers sought to pursue a permanent fix, City Council would likely support exploring a fair market value sale of the system to its customers.
In short, we are open to either continuing the dividend payments to get a fair return on this city asset or assessing the value of the system for a fair market value sale to all its customers. Aside from simply giving it away, we are open to exploring all options.
What does City Council think should happen now?
We believe the public needs to be heard on this matter. Although City Council and the CPW answer to the same set of constituents, there is a divide over a serious public policy question. We believe every decision the city's CPW makes ought to come with an answer to this question, “How does this decision serve the interests of the people of the City of Spartanburg?” Members of the CPW, meanwhile, have privately expressed they are not accountable for the impact of a dividend cut on their constituents.
The final say belongs to the people. That’s why we have decided to open the doors on this process. We will be conducting neighborhood meetings throughout the city to more thoroughly explain this issue, the impact it could have on city services and taxes, and answer any questions you may have. We will invite the CPW to join us at each of those meetings so they may have equal time to do likewise.
Timeline of City & CPW interaction regarding Dividend Payment
Thursday, May 31, 2012: In a meeting at City Hall, Spartanburg Water General Manager Sue Schneider and Deputy General Manager of Finance & Administration Newt Pressley delivered a letter to City Manager Ed Memmott and Assistant City Manager Chris Story in which the water system detailed its intention to discontinue the dividend payment once the current agreement expires in June 2013. The meeting lasted for about an hour. Some of the questions raised by City staff in that meeting remain unanswered to this day. Download letter here.
Wednesday, June 6, 2012: Assistant City Manager Chris Story emailed Spartanburg Water Deputy General Manager of Finance & Administration Newt Pressley seeking clarification on a number of issues. Pressley did not respond. Instead, Spartanburg Water Genral manager Sue Schneider responded: “We will send over information covering the issues we discussed last week. It won’t match the list below...” Schneider also indicated in a voice mail that all future inquiries should be to her only. This surprised city staff as Mr. Pressley is well capable of answering any financial questions. Download email here.
Friday, June 15, 2012: City Manager Ed Memmott and Assistant City Manager Chris Story met again with Spartanburg Water General Manager Sue Schneider and Deputy General Manager of Finance & Administration Newt Pressley, this time at Spartanburg Water offices. Schneider shared a PowerPoint presentation that addressed a small portion of what city staff had indicated they wanted to understand about the water system’s financial situation and position. No additional documents were provided in the meeting. Download PowerPoint presentation here.
July 11, 2012: Commissioner John Montgomery met with Mayor Junie White in the Mayor's Office.
July 17, 2012: Commissioner Myles Whitlock met with Mayor Junie White in the Mayor's Office.
August 16, 2012: Spartanburg Water General Manager Sue Schneider, Commissioner Myles Whitlock, and Spartanburg Water Deputy General Manager of Finance & Administration Newt Pressley met with City Manager Ed Memmott, Mayor Junie White, and Council members Cate Ryba and Robert Reeder in the City Manager's conference room.
Friday, August 24, 2012: After another request, this time from the Mayor’s office, SWS sent to City Hall a partial copy of one year’s audited financial statements. It omitted the notes and narrative, so city staff requested that information again. Download email exchange here.
September 12, 2012: Spartanburg Water General Manager Sue Schneider met with Mayor Junie White, and Council members Cate Ryba and Robert Reeder in the City Manager's conference room.
September 25, 2012: City Council sent a letter to the Commission of Public Works describing their understanding of the issues and clarifying their expectations. Download letter here.
October 24, 2012: The Commission of Public Works responded with a letter admonishing City Council on the correct use of the word “city,” instructing City Council on which financial benefits it could and could not consider to be “return on investment,” and rejecting the City Council’s offer. Download letter here.
October 25, 2012: Commissioner John Montgomery met with Mayor Junie White in the Mayor's Office.
October 30, 2012: Still having not received the financial information originally requested five months prior, City Manager Ed Memmott hand-delivered a request for further information. Download letter here.
November 12, 2012: Assistant City Manager Chris Story met with Spartanburg Water Deputy General Manager of Finance & Administration Newt Pressley and General Manager Sue Schneider to collect requested documents. Many items were provided. Schneider indicated more time was needed to gather information regarding capital project expenditures – a point of inquiry included in the original request made in June. A one-page chart of capital spending was ultimately received many weeks later.
November 15, 2012: Water system representatives met with Mayor Junie White, Council members Cate Ryba and Robert Reeder, and City Manager Ed Memmott at Spartanburg Water offices.
December 19, 2012: Water system representatives met with City Manager Ed Memmott, Mayor Junie White, and Council members Cate Ryba and Sterling Anderson in the board room at Spartanburg Water.
January 23, 2013: City Council members Cate Ryba and Sterling Anderson met with water Commissioner John Montgomery to discuss the issue.
March 14, 2013: City Manager Ed Memmott met Spartanburg Water General Manager Sue Schneider to report that although no formal action had been taken on their proposed agreement, no City Council member had indicated a willingness to move toward approval and he therefore considered it dead. In that conversation, he shared a settlement offer that he was willing to recommend to City Council if Schneider would join him in a joint recommendation. Schneider refused to indicate whether she would or would not recommend the proposal.
Monday, March 18, 2013: City Manager Ed Memmott received an email from Spartanburg Water General Manager Sue Schneider indicating that the Commission of Public Works was awaiting a formal response to their proposed agreement passed in February. Download email exchange. The same day, City Council member Sterling Anderson met with water Commissioner John Montgomery to discuss the issue.
Tuesday, March 19, 2013: Water Commissioner Myles Whitlock met with Mayor Junie White in the Mayor's Office. Download letter here.
Tuesday, March 19, 2013: City Council and Staff began public efforts to raise awareness, launching this webpage.