Smithville Aldermen Seek Meeting with DUD Board to Discuss New Water Contract

November 6, 2012
Dwayne Page
Smithville Mayor and Aldermen (older photo)
DUD Board members Roger Turney, Joe Foutch, Jimmy Womack, Hugh Washer

With plans for a new DUD water treatment plant still in the making, officials of the DUD are asking city fathers to make them a proposal for a new thirty year contract.

The city aldermen, Monday night at the suggestion of Secretary-Treasurer Hunter Hendrixson, voted to send DUD board members a letter asking for a meeting between the city and DUD to begin face to face discussions.

"DUD has sent us a written proposal/contract asking us what we would like for the contract to be for a long term purchase program of our water," said Hendrixson. "Rather than just go back and forth by letters, I think the board (mayor and aldermen) should have a sit down with their board to just get down to it and figure out what they (DUD) want and if they really want it. I would like permission from the board (aldermen) to send a letter to each of their (DUD) board members asking for a sit down (meeting) to hopefully negotiate a long term contract," he said.

The City of Smithville currently sells water to the DeKalb Utility District for $2.00 per thousand gallons and under terms of the contract, the rate increases by five cents per thousand in January of each year. The two parties entered into the contract in 2004 and it expires in 2014.

On August 28, DUD manager Jon Foutch sent to Hendrixson, a rough draft of a proposed contract for water purchase by the DUD from the City of Smithville. The proposed contract was accompanied by a request for DUD officials to inspect and copy certain "public records". Foutch wrote, "In order to aid in the determination and discussion of a reasonable rate, we need certain information to review."

"We asked for these documents from the city so DUD can be prepared for any circumstances," Foutch told WJLE. "We just want as much information as possible available to us in order to make the best decision for our customers," he said.

On September 6, Hendrixson responded to Foutch's letter "The City of Smithville is more than willing to meet with the DeKalb Utility District about a long term water purchasing agreement

Foutch replied in a letter on September 19, "I would ask that you please advise as to the city's position on the proposed contract and or provide me with a proposed contract that the city would like to submit for DUD's consideration. I ask that you please address this issue as soon as possible and I appreciate your kind attention to this request," wrote Foutch.

So far, no contract offer has been made and no meeting between city aldermen and DUD board members has been held. "At this point, everything is stagnant right now," said Hendrixson during Monday night's city council meeting. "They (DUD) are not selling bonds to my knowledge at this moment to fund their (water treatment plant) project which is going to run anywhere from ten to fifteen million dollars. I believe the city should re-negotiate a contract with them at a decent price to continue working with DUD and to keep ratepayers on both sides of the utility districts from having to suffer any rate increases. So with your (aldermen's) permission I would like to invite them to sit down with us," said Hendrixson.

City Attorney Vester Parsley, Jr. said Monday night that if a meeting is held, he and the DUD attorney Keith Blair should also be there. "Their attorney has never contacted the city attorney about this. They did send us a proposal some months ago. However, that wasn't sent to the city attorney. It was sent to you (Hunter) and the mayor. It was a one sided contract. It wasn't a negotiated one. It was one they were proposing. Normally, the attorneys representing the various entities are involved. (In this case) at least they did not involve me. Now whether Keith Blair was involved as their attorney, I don't know. Maybe he wrote the contract. But irrespective at any meeting, I think it would be imperative that Keith and myself be there so that we understand what terms are trying to be negotiated and the prices and any escalator clauses and so forth. But to this date, I have never received anything from DUD asking me to re-negotiate or try to negotiate other than what you have received. I feel it is important that the attorneys be involved," said Parsley.

"Have we determined how much it costs (to produce water)?," asked Alderman Shawn Jacobs. "I think we cannot in good faith negotiate any kind of contract until we can determine how much it costs us to produce a gallon of water," he said.

"In their contract, I do like the fact that they are willing to split the costs 50/50 for a (cost) study on this and I'm willing to do that now if the board is," said Hendrixson.

"That's a very prudent thing to do," said Alderman Jacobs.

"I commented on that a couple of months ago," said Alderman Tim Stribling. " There are so many factors involved. Depreciation. Raw materials. It's not just the people at the plant," he said.

"That (cost study) will help us from our own standpoint in addition to this contract," added Alderman Jacobs.

"I make a motion that we give Hunter the authority to contact the DUD board for a sit down meeting to begin talks," said Alderman Stribling. "Not necessarily negotiations but to begin talks to find out what they really want to do," he said.

The DUD has already secured an ARC grant as well as loan and grant funding from USDA Rural Development for their proposed water plant, along with a bond resolution which has been approved for the authorization and issuance of waterworks revenue refunding and improvement bonds. But to date the bond sale has apparently not been finalized.

Even if the DUD proceeds with its plan to build a water plant, it will most likely need a new water contract with the City of Smithville, at least in the short term, since its current agreement with the city is due to expire by the first of 2014, before a water plant could be completed

DUD is also awaiting the outcome of a rate review hearing by the Tennessee Utility Management Review Board which has not yet been scheduled. Last Thursday, the DUD board met in regular monthly session and retained the services of C. Dewey Branstetter, Jr. of Branstetter, Stranch, and Jennings PLLC of Nashville. He will be joining DUD attorney Keith Blair in handling legal issues pertaining to the rate review hearing before the UMRB.

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