City Poised to Make New Offer to DUD

November 15, 2013
by: 
Dwayne Page
J.R. Wauford (Older Photo)

The Smithville Mayor and Aldermen met in a workshop Monday night to begin discussions on offering a new water purchase agreement to the DeKalb Utility District.

The existing ten year agreement is set to expire as of December 31.

J.R. Wauford, the City's Utility Engineer since 1962, met with the mayor and aldermen to make a suggestion. If the DUD will sell the city the water lines and customers connected at four of its metering points, the city may be willing to negotiate on the price it charges the DUD. Without an agreement or new water contract of some kind, the city may charge the DUD as much $7.50 per thousand gallons, the same as it charges other customers outside the city. DUD currently pays $2.05 per thousand gallons.

Wauford said those metering points at Evins Mill Road, Midway on the Old Sparta Road, Hobson Street, and Highway 56 North would allow for expansion of the Smithville Water System into areas most difficult for DUD to serve and provide the city a water service area which in some places also has city sewer service.

According to Wauford, the percentage of water sales to the DUD from the city to serve these metering points for the fiscal year ending June 30, 2012 were as follows:
Evins Mill Road: 7.81%
Old Sparta Highway: 1.06%
Highway 56 North: 17.39%
Hobson Street: 4.82%

If the city loses DUD as a water customer with the construction of a new DUD water plant, Wauford said "our calculations indicate that water rates would have to be increased to city customers by a minimum of 20%".

By expanding the city's service area with these DUD metering points, Wauford said the city could possibly set an "incremental" water rate to DUD at a level so that rates for city customers would not have to rise. "We could look at what the incremental rate would be. In other words, what would it take if they (DUD) would sell you (city) those customers? What would your rate to them need to be to avoid having to raise rates on Smithville's customers,"asked Wauford?

A recent study by Warren and Associates, paid for by the city, revealed that the actual cost for Smithville to produce water is $2.67 per thousand gallons. In April city officials discussed offering DUD a new ten year deal which would include selling them water at $2.20 per thousand gallons for the first five years of the contract and raising it to $2.40 per thousand gallons for the last five years. No official vote was taken but city officials sent the offer in writing to DUD officials a couple of days prior to the Tennessee Utility Management Review Board hearing which was held in Smithville to review DUD's water rates. DUD officials later responded agreeing to accept the offer but without the minimum volume purchase requirement the city wanted as part of the proposal.

"The last contract that you submitted, we sent back a letter saying we would agree to it with certain modifications that didn't impact on the price. From our standpoint, we're waiting to hear back from you," said Nashville attorney Dewey Branstetter, Jr. who represents the DeKalb Utility District.

"We certainly want to enter into negotiations and enter into something that works for everyone," said Branstetter, who spoke during the workshop on behalf of the DUD.

In response, City attorney Vester Parsley said the city and DUD could have had a deal on a new water contract earlier, had the DUD not opposed a minimum purchase provision. "When we got the letter back, they (DUD) did say they liked our rate structure. However they didn't like the quantity that we were requiring. That was the big sticking point. There was no quantity listed that they would accept. That sort of left us high and dry. They liked the rates we proposed but they weren't willing to buy a certain quantity," said Parsley.

Branstetter defended the DUD's position on that point. "I think that is reasonable to expect. If we're going to enter into a long term contract with the anticipation of building our own water treatment plant, it would not be realistic for us or in the best interest of our customers to enter into a minimum purchase amount. We might be able to do that while the plant was being constructed. We will anticipate needing to continue to buy water even once our water treatment plant is completed. Its anticipated we would want to buy some water from the city of Smithville and there may be points where its smart for you to buy some water from us somewhere down the road. We want to work together for something that is in the best interest of everyone, recognizing that DUD's first obligation is to its own customers," said Branstetter.

"Of course we've got an obligation to our customers too and we're already charging them higher rates ($5.00 per thousand gallons) than we're charging DUD ($2.05 per thousand gallons) and have been for years," added City Attorney Parsley.

Plans for a new DUD water treatment plant are currently on hold because of a legal challenge in Davidson County Chancery Court by the City of Smithville and DUD ratepayers. No word yet on when the hearing will be held.

Since it was only a workshop, the aldermen could not act Monday night. City officials may forward a proposal based on Wauford's recommendation to DUD and then vote on any accepted agreement at a regular or special city council meeting.

DUD Chairman Roger Turney and board members Joe Foutch and Hugh Washer attended the workshop along with DUD manager Jon Foutch.

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