Water District No. 1, Louisville Water Co. acquire Fort Knox water contract

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Approval comes roughly three years after initial proposal was submitted

By Marty Finley

After more than three years and three proposals, Hardin County Water District No. 1 and Louisville Water Co. secured a contract to assume ownership and manage Fort Knox’s water system.

The U.S. Department of Defense awarded the two companies the contract through the Defense Logistics Agency/Energy, granting them ownership of a water system that serves roughly 40,000 customers, includes two pre-World War II water treatment plants and 154 miles of water mains. The system also contains elevated storage tanks, fire hydrants and pumping stations and produces roughly 2 million gallons of drinking water daily, according to a joint statement issued Monday by the two companies.

The contract is effective Feb. 1.

“We are excited about this opportunity to partner with Louisville Water in meeting the water supply needs of Fort Knox,” Hardin County Judge-Executive Harry Berry said in the statement. “The collaborative effort with HCWD No. 1 and Louisville Water to improve, maintain and operate Fort Knox’s water system in a cost efficient manner will allow the military to focus on its core missions while utilizing civilian expertise to provide utility services.”

The announcement comes after a lengthy bid process that started in 2008 and led to numerous revisions of a proposal at the request of the Defense Department, said Jim Bruce, general manager of HCWD No. 1.

The two companies are partners in the project, and employees affected by the privatization of water services will be hired on in positions with HCWD No. 1 or Louisville Water Co., Bruce added. HCWD No. 1 will manage the distribution systems and will contract with Louisville to run the post’s two water treatment plants, according to the statement. The government, however, will retain ownership of the post’s water sources, which include a well field in West Point and McCracken Spring near Otter Creek.

The contract stipulates a four-month transition, which will include the purchase and mobilization of equipment, tools, chemicals and materials needed for the companies to assume ownership, Bruce added. He said the roughly $600,000 in transition costs will be paid for by the federal government.

The contract will not affect the rates for customers of either company, Bruce added. The Public Service Commission is “sensitive” to such contracts and will not allow customers to absorb the costs of managing the Fort Knox system, he said
“All of the accounting has to be kept separate,” Bruce said.

Bruce said some fixed administrative costs, such as salaries, were rolled into the contract because staff members’ roles will be expanded to tackle the new responsibilities of managing the system.

As part of the contract, HCWD No. 1 and Louisville Water Co. also are expected to complete more than $28 million in system improvements within a five-year period, he said. The improvements, funded by the DoD, will include water pipe upgrades, water treatment roof replacements, painting and replacing water tanks, mapping the entire water system, identification and log of water leaks and creation of a computer monitoring system.

“We look forward to assisting HCWD No. 1 in providing a reliable, abundant supply of safe drinking water to the growing Fort Knox and Hardin County area,” Greg Heitzman, president and CEO of Louisville Water, said in a statement. “We have developed a strong partnership with HCWD No. 1 that will serve this region for decades to come.”

Kelley Dearing Smith, a spokeswoman for Louisville Water Co., said the partnership is mutually beneficial because HCWD No. 1 brings its familiarity with Fort Knox to the table while Louisville Water Co. offers its expertise in water treatment operations and water quality. She said Louisville Water Co. also can benefit the Hardin County and Fort Knox area because of its abundant supply of water from the Ohio River and a treatment capacity that has not yet been reached.

Fort Knox had been preparing to hand over its water services to local communities for years, but the DoD required a bidding process, Bruce said. Louisville Water Co. learned of the bid and approached HCWD No. 1 about a regional partnership to gain the contract. Bruce said the support of a larger supplier like Louisville Water, which serves more than 850,000 people, was needed because HCWD No. 1 does not have the funding or resources to manage the system alone.

The costs wrapped up in drafting the proposals were paid by Louisville Water, Bruce added.

“All the speculative risk was taken by Louisville Water,” he said.

Marty Finley can be reached at (270) 505-1762 or mfinley@thenewsenterprise.com.