By Vernon Robison
Moapa Valley Progress
The Overton Power District (OPD) Board of Directors got an update on the status of the district’s 2008 bond issue during a meeting held Wednesday in Mesquite. Newly appointed Mesquite board member James Pugh had requested that the item be placed on the agenda, with specific discussion on how the monies had been spent in improvements to the OPD infrastructure.
The $15 million bond was prepared and issued at a time when economic forecasters were projecting continued growth in the region; especially for the city of Mesquite. In the meeting, OPD General Manager Delmar Leatham explained that, given those perceived growth demands, the board had hired an engineer to look at the scope of the OPD system and determine what growth needs would be out into the foreseeable future.
“Those projections, done back then, is what drove the requirements of what we needed in the bonds,” Leatham said. “We also felt that there were monies available from general funds that could be used to pay for system improvements; which were called capital improvements in the bond document.”
Documents posted on the OPD website show in some detail just when and how the bond money was drawn and spent by the district. Out of the $15 million bond, just short of $1 million has been left unspent in the fund, according to these documents.
A portion of the bond was spent on administrative projects. Just under $2 million was used to construct a new engineering office at the Mesquite OPD location.
But the documents show that the larger share of the bond expenditures went toward electrical infrastructure. This infrastructure included $3 million in needed updates to the Tortoise Substation in Moapa, the entry point to the entire OPD system. Just under a million dollars more was spent on expanded transmission lines from Tortoise Substation over the Mormon Mesa to Mesquite. These tied into a new million dollar Dinosaur substation in northern Mesquite which was funded by bond dollars.
Other large projects included major transmission lines needed in the lower Moapa Valley and smaller segments in Mesquite.
Also included in the bond expenditures was the partial funding of a new Falcon Ridge substation in Mesquite. The document specified that about $25,000 in bond funds had been spent to begin construction on the station.
Leatham received some criticism during the public comment period that Falcon Ridge, which was specifically delineated in the bond documents, had not been completed. What’s more, not enough bond money was left to complete the project.
Leatham explained that the bond document specifies Falcon Ridge as one of the latest projects to be completed. In fact the bond did not project its completion until around 2015, he said.
“It also specifies that we would use a combination of bond funds and general funds to complete it,” Leatham said. “We will do that on an as-we-go basis.”
A multitude of other more minor improvements to the system were also specified in the accounting documents. As aging system components have malfunctioned or received damage over the bond term, staff had taken the opportunity to, not only replace, but upgrade them with more modernized equipment, Leatham said.
Again, during public comment, concerns were expressed that bond funds which are restricted to use in capital improvements had been used in projects which might be considered regular maintenance on the system.
“If it improves our system; if you are replacing broken poles and you go to taller poles or a bigger conductor or something like that; it is clearly a capital improvement,” Leatham said. “But yes, if you are just replacing a fallen-down pole, that would just be characterized as a maintenance-type project.”
OPD Engineering Manager, Mendis Cooper explained that often a valid capital improvement project can be born from a maintenance item.
“When a maintenance item; for example, if a single pole, or some component of a pole, is damaged, those would be replaced as a maintenance item,” Cooper said. “But if you are replacing a number of poles and the entire [electrical] units along with them, that becomes a capital project. That’s because you are removing items from the OPD plant account and putting new items back in, and improving the system.”
Board member Pugh asked if there was any review or oversight from independent authorities over how the bond funds had been spent.
Leatham responded that the bond document had listed very specific uses that were acceptable for use of bond funds, as capital improvements.
The bond document also names a bond trustee, Leatham explained. In this case the trustee is Wells Fargo Bank. The bank holds the bulk of the bond funds in an account until the district submits draws on that money based on the work being done to the system, Leatham said.
Leatham explained that, initially, the work is completed with money from the OPD General Fund. Then, OPD staff must submit the documentation to the trustee on how the money was appropriately spent. Only then is the money reimbursed from the bond fund and is finally put back into the OPD general fund, Leatham said.
Leatham added that it is not abnormal to receive site visits from representatives of the trustee to verify that projects have been completed, though he admitted that no such site visits regarding the 2008 bond had taken place.
“Periodically, you’ll have someone from Wells Fargo come out and actually see what was done with that money,” Leatham said. “We will take them around and show them: ‘Okay, here is the tranformer we put in’. They will have a list of all those items and can specify to us what they want to see.”
Finally, Leatham explained that the district’s annual audit regularly looks at the administrative systems that are in place to ensure that money is spent appropriately at the district.
