DUD Applies for TRLP Funding to Build Water Plant

January 7, 2014
by: 
Dwayne Page
DeKalb Utility District

The DeKalb Utility District, having already secured loans and grants through USDA Rural Development and the Appalachian Regional Commission to help fund the construction of its own water treatment plant is now seeking additional help through the Tennessee Revolving Loan Program rather than the bond market.

The DUD board held a public hearing Thursday night, January 2 at its office in Smithville. "The purpose of the public hearing was to solicit comments from the public for the state revolving loan fund which will partially fund the water treatment plant project instead of going to the private bond market. This is a much better deal. The interest rates are much less than what they are on the private bond market and the district would get $500,000 in debt forgiveness (grant) money. This loan program, if approved, would fund basically half of the project so from a financial point of view it's a great deal for the district," said Buddy Koonce, the DUD's utility engineer in an interview with WJLE after the hearing.

DeKalb Utility District plans to construct a water treatment plant near Holmes Creek Road with a storage capacity of three million gallons a day. The DUD has initially been approved for storage of two million gallons a day.

Over the last two years the DUD has lined up several million dollars in loan/grant funding for building the water plant and related infrastructure including a USDA Rural Development $5,000,000 loan/ $1,250,000 grant and a $500,000 grant from the Appalachian Regional Commission.

In May 2012, the DUD board adopted a bond resolution for the authorization and issuance of waterworks revenue refunding and improvement bonds not to exceed $9-million 250-thousand dollars in an aggregate principal amount for the water treatment plant project. But if the DUD is approved for funding through the Tennessee Revolving Loan Program, bonds will not be necessary. "With this money, we will not have to visit the bond market. That is taken completely out of the picture, " said DUD Manager Jon Foutch.

The State Revolving Fund Loan Program, through the Tennessee Department of Environment and Conservation, provides low-interest loans to cities, counties, utility districts, and water/wastewater authorities for the planning, design, and construction of drinking water facilities.

"The project consists of a two million gallon a day water treatment plant, raw water intake, transmission lines from the intake up to the water plant, and transmission lines out to the distribution system. As part of the project, we've got lines in basically the southern part of DeKalb County to tie in some parts of the distribution system," said Koonce during the public hearing.

"As soon as funds are released from Rural Development and as soon as we get approval from the State Revolving Loan, we expect to bid that job sometime in early spring. I expect a fourteen to eighteen month construction period. It should be finished by the end of 2015," added Koonce.

Meanwhile, the City of Smithville and DUD ratepayers are continuing their legal fight to keep the DeKalb Utility District from building the plant. An appeal remains pending in Davidson County Chancery Court. If the city is not successful with the appeal, the DUD will most likely be free to begin construction.

A robo call, apparently ordered by the city's public relations firm the Calvert Street Group, was placed to DUD customers on Thursday reminding them of the public hearing. Only one DUD customer showed up for the hearing and he did not speak.

DUD Chairman Roger Turney suggested that the robo call was misleading in that it said the meeting was going to affect rates. "Nothing that we are doing tonight in this meeting has anything to do with rates," said Turney. "In fact, with this loan and grant, the hope is that in the future its going to keep rates lower if anything. The state has already ruled that the things (rate adjustments) we have in place so far are sufficient to cover our costs and that everything is in good shape. This meeting tonight in no way is going to cause rates to go up," he said.

In anticipation of building the water plant, the DUD has already raised water rates twice, by seven percent each year in 2012 and 2013. Original plans were to raise rates again in 2014 by another seven percent.

Turney suggested if an adjustment in rates is needed anytime soon it could be blamed on the City of Smithville for drastically inflating DUD's water rates, as of January 1st. "We have received a 144% increase in the cost of our water starting this month from the City of Smithville. There may have to be some rate adjustments because of that but it would have nothing to do with this grant in anyway. The only increase that may be coming is as a result of the 144% increase from $2.05 to $5.00 per thousand gallons from the City of Smithville. That will be addressed later," he said.

In a statement released to WJLE Friday morning on behalf of DUD ratepayers, Darden Copeland, Managing Director of the Calvert Street Group said the DUD's stated purposes for the funding at the public hearing may not be the proper use of the State Revolving Loan Fund.

“The State Revolving Loan Fund’s ‘Intended Use Plan’ clearly states that these monies are not to be used for ‘Future Growth’ nor ‘Economic Development’. Yet these are some of the exact reasons given by the DUD in explaining this project to the public.” “Further, the ‘Intended Use Plan’ says that the Fund should not be used for ‘Water Rights’ issues. In some ways, this is a struggle between Smithville and the DUD over the water rights in Center Hill Lake and who should have the right to serve the customers of DeKalb county."

“We doubt the state wants to chose sides in this local matter, especially when there is no evidence the new DUD water treatment plant will substantially increase the service area for water customers. In fact, there is evidence the water rates will go up for both city of Smithville residents, as well as DUD customers, which seems run counter to the intent of the SRF.”

“It is unclear whether the state believes this project is necessary. On a scale of 20 to 100 ‘Priority Points’, the DUD project received a low score of 25. It is unclear if or when this project will get funded," wrote Copeland.

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