DUD Ready to Deal with City on New Water Purchase Agreement

May 21, 2013
by: 
Dwayne Page

The DeKalb Utility District is apparently ready to accept the City of Smithville's latest offer on a new water purchase agreement with some conditions.

In April, city officials offered to sell water to the DeKalb Utility District in a new ten year contract at the rate of $2.20 per thousand for the first five years and $2.40 per thousand for the last five years of the agreement. The proposal, subject to approval by the aldermen, would take affect at the end of the city's current contract with the DUD which expires in early 2014. The terms of the deal apparently call for the DUD to purchase a minimum amount of water (approximately 22 million gallons) per month.

While the DUD still plans to build its own water treatment plant, it will apparently have to continue buying water from the city, at least until the plant is completed. With the current agreement between the city and DUD set to expire in seven months, a new contract must be in place by the first of the year.

The DUD is apparently prepared to pay the new rate as proposed by the city under a new contract, but doesn't want to be held to purchasing a minimum quantity. City Attorney Vester Parsley, during Monday night's city council meeting advised that the city stick to its minimum purchase requirement. "We had a requirement in that contract that they (DUD) had to purchase a minimum amount of water from us. They want to obviously not do that. Those rates were strictly contingent upon them purchasing that minimum quantity of water. It's up to the board (Aldermen), but under their (DUD) revision, if you went with that, they (DUD) would not have to purchase a certain amount of water which would not be in the best interest of the City of Smithville," said Parsley.

During Monday night's meeting, Secretary-Treasurer Hunter Hendrixson read a letter from Jon Foutch, manager of the DeKalb Utility dated May 8.

In the letter, Foutch wrote that "The Board of Commissioners of DUD has asked me to respond to your letter of April 2, 2013, and the proposed Water Purchase Agreement provided with your letter. I write to advise that DUD is agreeable with the rates referenced in the proposed agreement which specifically are $2.20 per 1,000 gallons for the first five years of the contract and then $2.40 per 1,000 gallons for the next five years of the contract. However, this agreement on the rates is contingent upon their being no minimum purchase requirements of DUD," wrote Foutch.

"As for the remaining issues of your proposed agreement, DUD believes that paragraph 9 should remain the same as was included in our proposed agreement which provides that DUD will be provided a chemical analysis from Smithville upon reasonable request. Also, DUD would recommend that paragraph 12 as included in our proposed agreement remain which would provide the basis for payment by the city should there ever be a need for the city to purchase water from DUD in an emergency situation. We believe that it would be prudent to include a provision that would specifically set forth the rate to be charged by DUD to Smithville in the event of an emergency," wrote Foutch

"Otherwise, the terms appear reasonable and, in fact, were as earlier proposed by DUD in their original proposed agreement. If you could please advise as to whether the Board of Aldermen have ever agreed to the proposed rates as mentioned, it would be most appreciated," wrote Foutch.

"I will ask Keith Blair (DUD attorney) to forward a copy of this letter to Vester Parsley (city attorney) and will await further communication on whether this is agreeable," concluded Foutch.

"Is this something we're going to need to have a workshop on to discuss?," asked Alderman Gayla Hendrix

"That depends on what the board (aldermen) decides to do at some future date," responded Parsley.

The city still has the option of appealing to the Davidson County Chancery Court the Utility Management Review board's recent dismissal of a DUD ratepayers petition once an order dismissing the petition has been entered. "I talked to the Nashville attorneys last week. The order has never been presented to the (UMRB) board. Until that order is submitted to the (UMRB) board and signed, we (City) have got up to sixty days after that to decide what we want to do," said Parsley.

After a day long hearing last month, the state's Utility Management Review Board dismissed a petition filed by a group of DeKalb Utility District ratepayers who were hoping to halt DUD plans to build the proposed water treatment plant. Board members said the petitioners had failed to meet their burden of proof that DUD rates or services provided were unreasonable. The hearing was held in Smithville at the DeKalb County Complex auditorium.

"Are you saying then that we should wait until we get the order before we make a decision?," asked Alderman Hendrix.

"I think it (order)will be forthcoming in June," said Parsley. "They (UMRB) meet again in June. As I understand it, the attorney for the comptroller's office requested the entire proceedings (from the April hearing) be transcribed before she drafted the order. In checking with them last week, that had not been completed but they anticipate it being done within a week or so. My guess is they will probably try to have that ready for the June meeting and submitted to their board for approval. Then our sixty days (within which to appeal) starts," said Parsley.

"At that time then we can decide whether to appeal the order and if we want to renegotiate a contract," added Hendrix.

Secretary-Treasurer Hendrixson said he would send a letter to Foutch letting him know that the city won't be making any decisions on a new water purchase agreement while it awaits the order from the April UMRB proceeding.

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