City and DUD at Odds Over Water Cost Study

February 5, 2013
Dwayne Page
Smithville Mayor and Aldermen (older photo)

The City of Smithville and the DeKalb Utility District are at odds again. This issue is over which company should conduct a cost study of the city's water system.

City officials have already contracted with Warren & Associates of Lebanon but the DeKalb Utility District wants the Jackson Thornton firm to perform the study.


During Monday night's council meeting, city officials said they are disappointed because DUD officials had said, in a contract proposal, that DUD would share in the cost of the study with the city.

In a letter to Mayor Jimmy Poss, the aldermen, and City Attorney Vester Parsley, DUD manager Jon Foutch wrote on January 29 that "DeKalb Utility is not agreeable with sharing the expense of a cost study performed by Warren & Associates as you had proposed. We have been provided no information as to the qualifications, experience, or background of this entity especially in the area of a cost study such as this. I am sure both DUD and Smithville want an accurate and qualified cost study especially when Smithville has never had one performed before," wrote Foutch

"In an effort to get this process initiated, I would propose using the Jackson Thornton firm who has a very solid reputation and experience in performing this type of study. DUD would be agreeable in sharing the expense of a study performed by them. I look forward to hearing from you as to whether that is agreeable. We can discuss other possible entities to perform the study if necessary," wrote Foutch.

City secretary-treasurer Hunter Hendrixson, during Monday night's meeting, said the study is already underway. "They (Warren & Associates) are already probably three weeks into it (cost study) and we hope to have the results within the next three to four weeks by the end of February," said Hendrixson.

"The two gentlemen who are actually doing this rate study for Warren & Associates are Jerry Warren and David Pine. I have given you a list of their experience and education. They have done rate studies before. They have done one for the Smith Utility District, which has about 2,500 customers roughly about the same as the City of Smithville. They have also done a rate review for the Cordell Hull Utility District. They are civil engineers. They do all kinds of water line extensions and other water and sewer projects. They did a water line extension for the Town of Alexandria and a water rate analysis as well. Mr. Warren, who owns the company, has twenty nine years of engineering experience for site planning and design, water and sewer design, water booster pump, and sewer lift stations. I see no problem with their experience. We have already got them on (the job). The total cost is going to be $7,500 which I assumed DUD would pay half of but they don't approve of who we are using to figure out what it costs to make our water," said Hendrixson.

City officials said an effort was made to contact Jackson Thornton before the decision to go with Warren & Associates. "We tried to contact that company," said Mayor Jimmy Poss. "They never did return our calls," he said

Hendrixson added, "well they (Jackson Thorton) finally did (return our calls) but we had already (chosen Warren & Associates)".

City Attorney Vester Parsley said DUD officials, in saying they would share in a cost study with the city, never put conditions on who was to do the study."They never asked for nor did we provide them the credentials of anyone. They (DUD) had no preference until we chose someone," he said.

"In the writing where they (DUD) agreed to pay half the costs, they didn't stipulate it was depending on who did the cost study," said Alderman Gayla Hendrix.

"They absolutely did not," answered City attorney Parsley."No mention was made of giving prior approval of whoever we chose to hire," he said.

"I think enough publicity was made of this that we certainly had a gentleman's agreement," said Alderman Shawn Jacobs. " It may not have been a contract per se but it was certainly in black and white and this board was under the full faith of believing they (DUD) would do what they said. We had no knowledge to the contrary that there were any other stipulations. I am very disappointed," said Alderman Jacobs.

"In my opinion, this is the city's water plant and the city's water that's being sold so I don't know why we would need a customer telling us who we need to use," said Hendrixson.

"Especially when they didn't specify any prerequisites or any lists of individuals or companies that they wanted us to consider," added City Attorney Parsley.

Alderman Hendrix asked "upon providing DUD with these credentials (of Warren & Associates) do you think they will change (their position)"?

"I haven't responded to (Foutch's) letter because I wanted to meet with you (Aldermen) first. I can respond by saying here are the credentials and we feel like they are sufficient to meet the criteria of doing a rate study," said City Attorney Parsley.

"I am very pleased that we have begun the study and are moving forward to find out what it's going to cost to make our water so we'll know what the rates will be in the future. If you (Parsley) as our attorney could write a letter (to DUD) to see if they would be willing to pay half," said Alderman Tim Stribling. "Send them (DUD) these credentials that you have provided us tonight," he added.

"I'll get a letter out tomorrow," said City Attorney Parsley.

However, a proposed unsigned contract presented to the city by DUD recently indicates that the parties would need to agree on an unbiased entity to perform the study.

The proposed contract states. "The initial rate for water furnished by the seller (city) to the purchaser (DUD) shall be subject to and in accordance with a Cost of Service Study. The parties shall have prepared and jointly fund a Cost of Service Study that shall serve as the basis for seller's allocated revenue requirement on a per thousand gallons of water basis to the purchaser."

The proposed contract further states that "The parties shall agree on an entity to perform the Cost of Service Study so as to be unbiased as reasonably possible," Again, city and DUD officials have not yet approved this or any other water contract between the two parties.

Last month, city officials received a letter from Roger Turney, Chairman of the DUD board of directors addressing the city's request for a face to face meeting on proposed contract discussions for a long term water purchase agreement and he mentioned that DUD would be interested in sharing the cost of a study if an "independent" entity is selected.

Turney wrote "As we have earlier stated, DUD is interested in entering into a long term water purchase agreement with the City of Smithville. We have earlier provided to you a rather standard agreement for your review and consideration and have heard no response as to whether the terms set forth therein are agreeable or not or of any proposed changes to the agreement. As we had earlier set out, DUD is willing to share one-half of the cost of an independent entity to conduct a cost study of the city's water production operation but have received no input as to whether that offer is acceptable and if there is any action currently being taken to accomplish such a study. It would seem that there can be no meaningful discussion until such a study is performed since that would address the rate that would be included in any such contract for the purchase of water by DUD. We understand that cost studies are commonly recognized in this industry to establish an appropriate rate."

"Please be advised that DUD still intends on proceeding with the construction of a water treatment plant but will no doubt still need to purchase water or have the ability to purchase water from the City of Smithville. Therefore, we await word on the progression of a cost study so that we can then meaningfully sit down and further discuss the completion of an agreement between the DUD and the city," wrote Turney.

The City of Smithville currently sells water to the DeKalb Utility District for $2.05 per thousand gallons and under terms of the contract, the rate increases by five cents per thousand gallons in January of each year. The two parties entered into the contract in 2004 and it expires in 2014.

Meanwhile, the state's Utility Management Review Board has scheduled a meeting for April 4 in Smithville to conduct a DeKalb Utility District rate review.

In other business, Public Works Director Kevin Robinson said the city's rate of water loss has been increasing lately going from 25% per month to 31%. A search began for a water leak and one was found near Juniper Lane. The city's existing leak detector was not sufficient to locate the leak at Juniper Lane so someone had to be brought in with a more modern device to find it. Robinson said the city needs a new updated leak detector.

Glen Nichols, Jr. was named to replace Sandra Wall on the Smithville Planning Commission and the board of zoning appeals. Wall recently resigned.

The alderman also approved the list of officers and members of the Smithville Volunteer Fire Department for the year 2013, as presented by Chief Charlie Parker. The officers for the year are Chief Parker, Deputy Chief Hoyte Hale, Captain Jeff Wright, and Lieutenants Danny Poss, John Poss, Donnie Cantrell, and Anthony Wright. Other members are Cody Jenkins, Kevin Adcock, Cory Killian, Ronald Whitaker, Glen Lattimore, Stephanie Wright, James R. Hunt, Gary Johnson, Wallace Caldwell, Charles Young, William Brown, and Photographer Greg Bess,

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