The City of Smithville was poised to raise the water rate it assesses the DeKalb Utility District with passage of the new 2016-17 fiscal year budget. But due to an existing Chancery Court order, the city can’t move forward on that proposed increase.
With only a few months remaining before the DUD opens its new water treatment plant, the city had planned to charge the DUD $3.00 per thousand gallons for the water it buys from the municipality starting July 1. That is up from the $2.67 per thousand gallons the city currently charges. Once DUD breaks ties, the city will lose its largest water customer and hundreds of thousands of dollars in revenue. In the budget, the city has reduced projected revenues from the sale of water to the DUD from $765,000 for the year ending June 30, 2016 down to $400,000 for half the year in 2016-17. City officials say such a loss of income may eventually force the city to look at ways of cutting spending or raising new revenues to make up the difference.
The proposed new rate to the DUD was included in the 2016-17 budget ordinance adopted on first reading by the aldermen Monday night, June 6. The vote was 3 to 0. Two aldermen were absent.
But city officials later learned that any increase in the rate without providing proper justification would violate the court’s order. During Monday night’s special meeting (June 28) to adopt the new budget on second and final reading, the aldermen removed the proposed increase to the DUD from the spending plan.
In February, 2014 Chancellor Ronald Thurman ordered the City to reduce its water rate to the DUD from $5.00 down to $2.67 per thousand gallons, which a water study found in 2013 was the city’s actual cost to produce water at the time.
Following a two hour hearing in Cookeville, Chancellor Thurman granted a DUD motion for a temporary injunction barring the city from continuing to impose its $5.00 rate until the city gave proper notice to DUD and justification for raising the rate above $2.67 per thousand gallons.
During that hearing, the Court found that the city violated Section 18-502 of the Smithville City Code, which required the City of Smithville to give the DeKalb Utility District 30 days notice in advance of a rate change. The City of Smithville gave the DUD only 16 days actual notice in advance of the rate change. The Chancellor also found that the city had not given proper justification for arriving at the $5.00 rate.
In an effort to remedy the notification issue in the future, the aldermen voted in March 2014 to abolish the 1980 ordinance, which set the rate to the DUD at that time and also provided that a 30 day notice would be given the DUD if the city were to modify the rate. But the city’s justification for raising the rate based upon an updated water cost study has apparently not been addressed.
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