A slip from a previously triple-A rating by an insurer of a Limestone County Water and Sewer Authority bond issue could have customers paying $2 a month for a year to build up a debt service reserves fund.

Interim General Manager Tammy Smith told the water board Thursday that Ambac, which holds the surety bond on the 1998 bond issue, had recently slipped below the triple-A rating required by Regions Trust, which issued the bonds.

According to a statement on its Web site, “Ambac Financial Group, Inc., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial services to clients in both the public and private sectors around the world. Ambac’s principal operating subsidiary, Ambac Assurance Corporation, a guarantor of public finance and structured finance obligations, has earned a Baa1 rating from Moody’s Investors Service, Inc. with a developing outlook and an AA rating from Standard & Poor’s Ratings Services with a negative outlook.”

Smith said that at the time the authority borrowed the money it was given the choice of insuring the debt service amount or of holding at least $4 million maximum debt service in reserves as a safeguard against defaulting on repayment. The authority chose to insure the issue.

Smith asked the board to authorize reallocating $922,000 from the 2007 bond proceeds in partial fulfillment of the $1.7 million Ambac surety requirement caused by the slip in ratings. The board had already approved reallocating $175,356.25 from a 2004 surety reimbursement to the 1998 issue.

That leaves $487,796.09 to be paid into reserves to meet Regions Trust requirements. Smith said Regions has given the authority 12 months to send that much to reserves at a cost of $40,649.67 per month.

“We are asking Regions to extend the period over the 12 months to pay,” Smith told the board. “Ambac is very large—we’re not alone. They insure a lot of people…If they (Regions) say no, we’ll have to make 12 equal payments. The only way we would have to do it would be through a $2 a month fee passed on to the customer.”

Smith said the $2 monthly fee would be lifted at the end of the year.

However, after the meeting, Smith amended her statement to say that the $2 monthly fee to customers is “just one of the things we’re looking at.” She said it all depends on whether Regions will grant the extension to the 12 months.

In other business, the board approved:

• Amending the vehicle policy to “minimus” use to eliminate the annual lease value method, under which authorized employees could drive authority vehicles home and use them for personal reasons if they kept a record of personal mileage. “We feel eliminating this method will lessen LCWSA’s liability and cost to operate this vehicle by reducing the amount of time this vehicle is used,” wrote Smith in her recommendation to the board.

• A new sanitary sewer pumper truck policy which will charge developers $150 each time the pumper truck provides sewer service to new subdivisions. Planning and Construction Manager Melissa Greene recommended the fee to encourage developers to hasten “off-site improvements.” Previously, the authority provided the service free of charge.

• Aid-to-construction for electrical connection to Johnson Elementary School’s new wastewater treatment plant of $8,135.22 to be paid to Athens Electric; and $8,891.31 for electrical connection fee for Creekside Elementary’s treatment plant.

• A discussion with Hethcoat & Davis engineering firm about being the designers and to oversee construction of the East Limestone Wastewater Treatment Facility. The board took no action on a contract and Smith said she would seek board approval at the December meeting.

• Going into executive session to discuss pending litigation with Wyngate LLC developers over a disputed fee to connect to the sewer system.