Citing ‘gross mismanagement,’ Synovus Bank seeks receiver for Prichard water board

Utility attorney says if granted, receivership likely to result in substantial rate hikes
Published: Jun. 30, 2023 at 8:51 AM CDT|Updated: Jun. 30, 2023 at 10:53 PM CDT
Email This Link
Share on Pinterest
Share on LinkedIn

MOBILE, Ala. (WALA) - Declaring the Prichard water system in default, Synovus Bank has asked a judge to place the utility under the control of a receiver, a move that likely would result in rate hikes for customers in Prichard and Chickasaw.

A lawsuit filed this week in Mobile County Circuit Court alleges that the Prichard Water Works & Sewer Board owes nearly the entire $55.78 million in bonds it took out in 2019 and has not made payments to its debt service fund in March or April and has not provided an audit for the fiscal years ending in September 2021 and last September. It also did not pay “reasonable fees” to the bond trustee or its lawyer, or make a full interest payment due last month, according to the complaint.

“PWWSB’s defaults under the Indenture are not the only reason a receiver must be put in place,” the suit states. “PWWSB also is suffering from gross mismanagement, a lack of fiscal integrity, and endangering public safety by failing to maintain vital system infrastructure.”

Mobile County Circuit Judge Michael Youngpeter scheduled a hearing for July 13.

If the judge sides with the bank, a receiver would have wide latitude to ensure than the bondholders get paid. That includes the power to force rate hikes.

“I’m sure that rate hikes would be part of that. … The only revenue stream is largely from customers,” board attorney Jay Ross told FOX10 News. “So the rates will go up. How much is anybody’s guess. It’ll be measurable.”

Attorneys for the bank and the utility had been trying to negotiate a settlement, but Ross said those talks fell off awhile ago.

“They filed this yesterday,” he said. “It was a little surprising.”

The lawsuit details a number of the system’s well-publicized problems about the past couple of years:

  • The fact that the utility’s accounting firm, BMSS Advisors & CPAs, was unable to form an audit opinion because of deficient bookkeeping. The utility also was unable to provide records of capital expenses and credit card purchases.
  • A finding by the Alabama Department of Environmental Management that two wastewater treatment plants had malfunctioning equipment.
  • An ongoing lawsuit between the independent utility and the city of Prichard over allegations that the water board has failed to maintain more than 100 fire hydrants and allegations by some customers that the system dramatically overcharged them. A judge held a hearing in that case Friday, and the two sides announced a tentative settlement. Ross told FOX10 News that the Prichard City Council will discuss that at its regular meeting on Thursday. He said a company hired by the board is conducting an assessment of the roughly 1,000 hydrants in Prichard. He said it has found four or five nonworking hydrants out of the first 500 it has inspected.
  • Federal and state investigation into allegations of embezzlement by former operations manager Nia Malika Bradley and other employees.
  • Massive water loss due to disintegrating and leaking pipes. Waggoner Engineering calculated a 60 percent water loss in February, at an annualized cost of $3.2 million, according to the suit.

The lawsuit notes that the water system asked for $333 million in state grants but received nothing.

“In the face of myriad operational and financial difficulties, PWWSB’s board of directors is unable to develop a path forward,” the complaint states. “Indeed, PWWSB’s public board meetings are unproductive affairs that showcase general dysfunction. The board has on multiple occasions failed to address all items on the agenda before abruptly adjourning its meetings amidst accusations, shouting, and procedural disputes.”

Chickasaw residents Nancy Tuttle and Heather Byrd weren’t happy to hear the news that bills could be going up.

And felt it may be better for Chickasaw to split water from Prichard.

“Well my bill went from the following winter months to about $29 a month, not doing a lot of washing clothes or watering the plants, it has already gone up to about $60 a month and I’m like how?” Tuttle said. “We need to get away from Prichard water sewer system.”

“I feel like they’ve been not quite honest throughout the years with their pricing and to hear that it’s going up is very disturbing,” Byrd said. “Very frustrated because it is a monopoly. There’s nothing else that we can do, pay them or have water.”

FOX 10 News reached out to two of the board members, but they didn’t want to comment.

Updated at 10:44 a.m. to include more details from the lawsuit. Updated at 2;14 p.m. with reaction from water board attorney Jay Ross.