The DeKalb Utility District is asking the Chancery Court to dismiss a counter claim by the City of Smithville seeking a judgment from the DUD of more than a million dollars for alleged "underpaid" water purchases from July 1, 2008 to December 31, 2013.
In the answer to the counter claim filed on Monday June 2, attorneys Dewey Branstetter, Jr. and Keith Blair for the DUD state that "the City of Smithville has failed to state a claim upon which relief can be granted."
Attorneys Kristen E. Berexa of Nashville and City Attorney Vester Parsley, Jr. filed the counter claim Thursday, March 27 in DeKalb County Chancery Court along with an answer to the DUD's lawsuit against the city over the $5.00 per thousand gallon water rate. Attorneys for the city claim the DUD underpaid for water purchases from July 1, 2008 to December 31, 2013 and owes the city more than one million dollars. As a result, the city is seeking a judgment against the DUD to recover the amount of the undercharges. "The total amount DUD underpaid the City for potable water during the period from July 1, 2008 to December 31, 2013 is $1,099,323 plus the underpayment for the period between July 1, 2012 and December 31, 2012," according to the counter claim.
Even though the city had a water purchase contract with the DUD from March 15, 2004 through December 31, 2013 establishing the amount the DUD would pay for water each year, city attorneys claim a 2013 water cost study found that the municipality had not charged the DUD enough to cover all of the actual costs of producing and distributing water to the DUD, and the City did not recover any of its capital costs from DUD during the period between July 1, 2008 and December 31, 2013.
In the answer, DUD attorneys contend that the water purchase contract governed the rate to be charged over the ten year period. "The 2004 Water Purchase Contract, an express contract, governed the water rate between the DeKalb Utility District and the City of Smithville for the applicable time period of the Contract. The Contract was reasonable and flexible and applied to these parties until its termination. The Contract did not freeze the water rate paid by the DeKalb Utility District or restrict the City's statutory duty of financial solvency. The DeKalb Utility District paid the contractual rates. There is no authority for the City of Smithville to claim that it should be paid more than the water rate that was mutually agreed upon in the 2004 Water Purchase Contract, which Contract has been fully performed by the parties. There has been no showing of increased costs imposed upon the citizens of the City of Smithville due to the terms of the Contract and therefore no authority for the terms of the Contract to be voided or adjusted by the Court in any respect."
Attorneys for the City assert that under state law, Smithville is entitled to recover from the DUD the amount by which DUD was undercharged in violation of Tennessee Code Annotated § 7-35-414 which states in part that...."Such rates and charges shall be adjusted so as to provide funds sufficient to pay all reasonable expenses of operation, repair, and maintenance, provide for a sinking fund for payment of principal and interest on bonds when due, and maintain an adequate depreciation account, and they may be readjusted as necessary from time to time by amendment to the ordinance establishing the rates then in force. Any upward adjustment of rates and charges for sewerage services shall not be granted solely on the basis of increases of rates and charges for water service, but shall be made only after a finding by the governing body that such an adjustment is reasonable and justified...."
According to the city's counter claim, "The provisions of Section 8 of the 2004 (water purchase) contract are void for the period beginning July 1, 2008 through the end of the 2004 contract because they violate Tennessee Code § 7-35-414(a) and the common law requiring DUD to pay just and equitable rates."
If the city had knowledge of under charges, DUD attorneys question why the city waited so long to address it. "As alleged in the Counterclaim of the City of Smithville, the City has had full knowledge of facts giving rise to the Counterclaim filed in this case since March of 2013. Nevertheless, the City waited a full year before bringing this claim against the DeKalb Utility District. In addition, in its Counterclaim, the City asserts that the 2004 Water Purchase Contract is void for the period beginning July 1, 2008-almost six years ago-through December 31, 2013. The DeKalb Utility District has been prejudiced by the City's lengthy delay because during the period of delay, the DeKalb Utility District has set water rates for its customers based on the water rate that it paid to the City of Smithville. Consequently, the City's Counterclaim is barred by the doctrine of laches," according to DUD's answer to the counter claim.
In the counter claim, the city is asking that a judgment be entered in favor of the City and against the DUD in the amount of $1,099,323 plus the amount by which DUD was undercharged for water during the period from July 1, 2012 to December 31, 2012; that DUD be denied all relief on its complaint against the City and same be dismissed with prejudice; that the City be granted such other and further relief as is just and proper in the premises; and that the City be awarded its reasonable costs in this action.
In the answer to the counter claim, the DUD states that "The City of Smithville is not entitled to relief because the City acted and reacted to the matters alleged in its Counterclaim with unclean hands."
"Wherefore, Plaintiff/Counter-Defendant (DUD) requests that the Defendant (City of Smithville) Counterclaim be dismissed and prays for judgment in its favor as follows:
That the Defendant (City) takes nothing by reason of its Counterclaim;
That the Plaintiff (DUD) be awarded its attorneys' fees for the defense of this action;
That the Plaintiff (DUD) recover the costs of this suit: and
That the Plaintiff (DUD) has such other and further relief as this Court deems just and proper"