UMRB Dismisses DUD Ratepayers Petition

April 4, 2013
by: 
Dwayne Page
Dewey Branstetter, Jr.
Bill Purcell
DUD Ratepayer Randy Rhody

After a hearing which lasted all day and into the night, the state's Utility Management Review Board Thursday dismissed a petition filed by a group of DeKalb Utility District ratepayers who were hoping to halt DUD plans to build a 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.

"I do not believe that the petitioners presented a case for water rates," said one member of the UMRB board. "They presented a case for not wanting Smithville to lose DeKalb Utility District as a customer. What the petitioner proved was that Smithville didn't want to lose a customer, not that the rates were improper," he said.

Barring an appeal or any other review, the DUD apparently may now proceed with its plans to construct a water treatment plant.

Nashville attorney Dewey Branstetter, Jr, who represented the DeKalb Utility District, told WJLE after the hearing that he hopes the issue can now be put to rest. "I believe it was a good day for the DeKalb Utility District. The hearing, I believe showed that the petition was not well founded. There was no evidence that the DeKalb Utility District had not established sufficient rates. The district has basically done nothing wrong. I think that came out during the course of this hearing. I think it also became apparent during this hearing that even though they may have gotten the ten percent of the ratepayers to sign the petition (a requirement for forcing the UMRB hearing) that this is all really about Smithville not wanting to lose DeKalb Utility District as a customer. Fortunately, the board found that the petitioners had not met their burden of proof and dismissed the petition and we hope that this matter will now be at an end," said Branstetter.

As to whether the board could have chosen to intervene in the DUD's decision to proceed with plans to build the water treatment plant, Branstetter said "One of the issues was whether they (UMRB Board) would address a DUD business judgment. In this particular case, the statute says they are to review the rates and services so I guess they possibly could have said we're going to look specifically at just the water treatment plant as a service. But overall what they ultimately said was there was insufficient proof on the part of the petitioners and the City of Smithville to show that the rates and services that the DeKalb Utility District offers were not reasonable. They didn't meet their burden of proof to show that DUD rates and services were unreasonable. My opinion is that this matter is now at an end. I would hope and believe that based on what happened here today that the wise decision would be for (petitioners) to not take this matter any further. They have had their day in court. They have lost and I hope that is the end of it," said Branstetter.

Nashville attorney and former Metro Nashville Mayor Bill Purcell, who represented the DUD ratepayers or petitioners told WJLE after the hearing that he is still hopeful the parties can come to some agreement "I think the ratepayers had a very important day in court before this board today. I think they wanted from the beginning the opportunity to tell the state, their neighbors, and all who are interested what is happening and what they felt needed to be done. So that the fact that they were able to present all that they wanted to present I think was an important part of this process. Obviously there are decisions to be made about where this leads. There are opportunities for review and all those have to be considered. In the long run, what we all hope is that the lowest possible rates can be obtained and the highest level of cooperation between everybody can occur. Who knows. I think this board wanted that to happen and maybe it yet will," said Purcell.

The City of Smithville, which stands to lose its largest water customer if DUD goes through with its plan to build its own water treatment plant, hired a public relations firm last April, the Calvert Street Group, to launch a grassroots campaign to try to stop the project. A petition drive was started and at least ten percent of DUD customers signed it, triggering a review by the UMRB.

But some members of the UMRB were less than impressed with Smithville's PR firm, suggesting Thursday that the petition drive was not initiated by ratepayers themselves but by the Calvert Street Group, which has a self interest because it is working for and getting paid by the city. "I believe there was major bias demonstrated throughout this hearing today where the public relations firm actually drummed up the people to sign the petition and even offered them prizes if they got a lot of people signed up," said one of the UMRB board members.

The same board member also said he had a concern that the City of Smithville would offer to make a deal on a new water contract with the DUD only two days before the UMRB board meeting, when the city could have done that months ago.

Several witnesses were called to testify in the case including DUD ratepayer Randy Rhody, the DUD's CPA Tom Janney, the DUD's utility engineer Buddy Koonce, the City of Smithville's utility engineer J.R. Wauford, Smithville Secretary Treasurer Hunter Hendrixson, DUD manager Jon Foutch, and DUD board member Hugh Washer, among others.

Randy Rhody, a twenty five year customer of DeKalb Utility District and one of the petitioners opposed to the proposed DUD water plant, testified during the hearing. "We want the plant stopped. We want to keep things exactly the way they are. That's the only way to hold the rates the way they are. If we keep the rates exactly the same as they are then everybody will be happy. We don't need redundant services and pay more. It doesn't make good sense that we would raise everybody's rates. We already have good water. Why do we need two districts with one not getting along with the other wanting to raise rates and build another plant?. It seems like a silly thing to undertake. The water has always been great here. Rates have been okay. We don't need anything more than that. All we need is running water. Good quality water at reasonable rates. We've always had that. There's no need to raise the rates and do a redundant thing," said Rhody

Smithville was represented in the case by city attorney Vester Parsley along with Purcell and Jason Holleman of Nashville. Purcell and Holleman also represented the ratepayers opposed to the DUD water plant. In addition to Branstetter, the DeKalb Utility District was represented by it's own attorney Keith Blair

In his opening remarks, Purcell said there was no need to raise water rates to pay for another water plant in the county since the City of Smithville could supply the need without raising rates. "The City of Smithville built a water plant with enough capacity for its citizens and many more. In 1966, the DeKalb Utility District was formed. It became and remains the largest customer of Smithville. The DUD uses more than one half of all of the water that is produced by Smithville. And even with that amount of water being supplied to the DUD, Smithville has maintained capacity in a very conscientious and deliberate way. A capacity that is more than twice as what is currently used. Enough to meet all the needs of DeKalb County and Smithville forever. For half a century this county, this relationship has functioned together for the benefit of all the ratepayers. Specifically the ratepayers within the DUD. But then something changed. Ten months ago the DeKalb Utility District decided they wanted their own plant. They said we want our own supply lines. We want to buy our own bonds. We want to pay for our own maintenance. We want our own capital costs and our own overhead and we want our own much higher rates. We will end a fifty year relationship. We'll borrow millions of dollars. We will build our own plant and of course, we will raise our rates because we must. If we're going to do all that our rates must go up by a lot. There's only one place to get (that money) going forward over the decades that follow and that is from the ratepayers. The citizens of DeKalb County, many of whom have gathered and are represented here today, the petitioners, these ratepayers are here to ask you to stop this. To stop the construction of an unnecessary plant that will compel a mass expenditure of money but more particularly and directly to stop the resulting significant increase in the rates that will be borne by these people forever at a time when everyone is asked for more efficiency in government. For more cooperative and collaborative government action. The ratepayers have come as respectfully as they know how to the only place, the only people who can make this happen. So we ask the UMRB to stop the plant. To stop the waste. To stop this unnecessary expansion of government. Just say no. And in the process ask these folks to reflect on a half century of working together for all of the people of this county and all of the people served by these utility districts. At the end of this all, you (UMRB) are the only people who have the right and the power to provide another fifty years and I would hope many more (years) of smaller and more efficient government, more efficient utility service, lower costs, and better results for all of the people of DeKalb County who are in this utility district," said Purcell.

Parsley, in his opening statement, said the city is offering the DUD a new water contract that would cost less than building a new water plant over the next ten years. " The City of Smithville has the capacity to produce four million gallons of water per day. We're currently (using) a little less than half of that. We have over two million gallons per day capacity that we can use for growth in the city and DUD. The DUD, in the past on the average has purchased between 22 and 25 million gallons per month from the City of Smithville. The city recently used a grant and took some money it had and did a complete remodeling of the water plant whereby we installed new valves, new intakes, pumps, etc and two new generators to take care of the pumping station at the lake and at the water treatment plant. The cost of those improvements exceeded three million dollars. We have never had an interruption of services in all our years of business. We are ready and still able to provide all the water that DUD needs not only for present but for future expansion with having a capacity in excess of two million gallons that is not even being utilized. We have tried to set a rate and offer it to DUD for the next ten years, whereby we would sell them water at a rate of $2.20 per thousand gallons for the next five years and for the second five years at $2.40 per thousand gallons. That would be a fixed rate. I might point out that the DUD contracted with (CPA) Tom Janney who did a study for them regarding the construction of this plant and in that study, he projected a cost for producing water, if they constructed this plant. The prices I just quoted you are far below those which he said would be necessary in order to fund the plant. Who is going to pay for this plant? The ratepayers. DUD has already increased their rates seven percent and have projected a seven percent rate increase for the next two years. The opinions of Mr. Janney in his report were that the DUD could expect a three percent growth rate for the next twenty or more years when in fact DeKalb County and other surrounding counties in the district have never had much more than a one or one and a half percent growth rate. We think that their growth rate (projection) is unrealistic and that will put a heavier burden on the current and new members of DUD in serving those customers. The offer we have made could be expanded. We believe our board would be willing to offer additional rates in addition to those ten years we've planned for. However, we need cooperation from DUD's board. We feel like the building of a new plant for DUD would far exceed what the reasonable rate should be for their customers and that to build this plant is both unnecessary in that it puts an undue burden on the ratepayers and upon the DUD's financial situation itself. The goals they've set are overly optimistic and could place the DUD in a financial crisis in the future. We hope you will rule that this plant is not necessary and should not go forward," said Parsley.

Branstetter, in addressing the board, said the DUD's rates are reasonable. "There is a wrong that can be righted today and that's the filing of a petition to try to stop a water treatment plant that we will show is necessary for the customers of the DeKalb Utility District. We're here on a ratepayer's petition for you to review the services and rates of the DeKalb Utility District. In reality we're here because the City of Smithville simply does not want to lose the DeKalb Utility District as a customer. That's what it boils down to pure and simple. The proof is going to show that DeKalb Utility District's rates are reasonable and that the proposed rates in the future are reasonable. That their current services are reasonable and their proposed services to be offered are reasonable. And we're going to show that all the DeKalb Utility District intends to do has one purpose, to be in the best interest of the customers of the DeKalb Utility District. Its not the responsibility of the DeKalb Utility District to be concerned about what may happen if they quit purchasing water from the City of Smithville. They have one obligation. Serve their customers. Pure and simple. You're going to hear proof that the costs to build the plant are accurately reasonable. They are projections, just like all projections are. You're going to hear that the district will save money over the long run, maybe not in the first two, three or four years but over the long run there will be a significant cost savings to the district and in effect to the customers of the DeKalb Utility District if the water plant is built. We will show that it is in the best interest of the customers of the DeKalb Utility District, now and in the future for this water plant to be built. Contrary to what the petitioners with the City of Smithville may say, there are efficiencies that will be served by building this water treatment plant. You will hear from several outside experts including Tom Janney, the accountant for the district. He is going to show that based on his projections as an accountant who has performed work for utility districts, not just DUD, but for utility districts for years, that long term its in the best interest financially for this district to build its own water treatment plant. You'll hear from Buddy Koonce, the engineer for the district, who not only does work for this district, but dozens of districts across the state. He has been involved in probably thirty or forty water treatment plants, either building, upgrading, or renovating them. He will testify as to what the anticipated costs are. They are reasonable and appropriate and the projections are accurate. And his projections concerning the costs to operate the plant, we believe will be shown to be accurate. Finally, you're going to hear from Terry Mitchell. He is with the Jackson and Thornton Utility Consultants and he will opine as to why the DeKalb Utility District should build its water treatment plant. He will opine that their current rates are reasonable. That their future rates are reasonable and that they are sufficient in covering the costs of operations as well as the costs of bonds and interests with sufficient reserves as the statute requires in a rate review. At the end of the day, when all the proof is in, we're going to ask you to just say no to the rate payers petition. The burden is on the ratepayers to show that our rates and services are not reasonable. It's not on the district to prove that they are. We believe that when all the proof is in there is just one conclusion. The rates are appropriate. The services to be provided are appropriate and that the building of this water treatment plant is in the best interest of the customers of the DeKalb Utility District. We believe you will determine that the ratepayers petition is without merit," said Branstetter.

Members of the UMRB are Ann Butterworth, Chair; Tom Moss, Vice-Chair; S. Donnie Leggett, Charlie Anderson, Loyal Featherstone, Donald Stafford, Troy Roach, Jason West, and Rebecca Hunter. An adminstrative law judge oversaw the hearing.

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