The City of Smithville will begin charging the DeKalb Utility District $5.00 per thousand gallons for the water it purchases beginning January 1.
The Mayor and Aldermen met in special session Thursday night at city hall to set a new rate for the DUD once the current contract expires December 31. The new rate of $5.00 per thousand gallons established for DUD is the same rate that city customers pay for water.
For the last decade, the DUD has been under contract with the city to purchase water at a rate which has increased by five cents per thousand gallons each year. The DUD currently pays $2.05 per thousand.
Proposals for a new deal have been presented by both sides recently but the parties could not reach an agreement.
In the latest proposal, DUD commissioners offered to enter into a new ten year contract with the city and pay $2.67 per thousand gallons for the first five years and $2.80 per thousand gallons for the remaining five years. But they are unwilling to give up plans to build a DUD water treatment plant and agree to minimum purchase amounts from the city for the next ten years.
The aldermen were not impressed with DUD’s offer.
“I personally don’t think it’s reasonable at all. I don’t think we would be loyal to our customers to consider something like this,” said Alderman Josh Miller.
Several months ago the city hired Warren and Associates to do a water cost study. Their findings were that it cost the city $2.67 per thousand gallons to produce water. That’s the same rate as the DUD proposed to pay in the first five years of a new contract with the city.
However, the city’s financial consultant, Janice Plemmons-Jackson advised against locking in the rate for five years with costs likely to rise. “Every year your cost is going to continue to go up. To lock in one rate for five years, unless you’re getting a high rate on the front end doesn’t make sense,” she said.
Jackson added that the results of Warren’s cost study, done months ago, may already be out of date. “Those were probably 2012 numbers and we’re already at the end of 2013 going into 2014. You have had some cost increases so the rate that was good at the time of the cost study is probably not the rate you’re now spending to produce the water. That’s an old number,” she said.
Alderman Jason Murphy raised the possibility of setting the rate somewhere between $5.00 per thousand, which is what city customers pay, and $7.50 per thousand, which is the rate city customers who live outside the city pay for water. “This is how I feel. I’m a water customer. I don’t have to agree to buy a minimum. I pay $5.00. I think that should be our bottom dollar. We don’t charge anybody more than $7.50 so I don’t think we should charge them (DUD) more than $7.50. In my opinion, I think we should be somewhere in that range so that we know we cover our costs,” he said.
“I have had comments from lots of city customers saying they think it’s unfair that we sell (DUD) at a price less than we provide to our own city customers. I understand the wholesale concept. In a wholesale situation you do sell cheaper. I understand that but a lot of our customers don’t understand it or don’t agree with it,” said Alderman Shawn Jacobs.
Alderman Danny Washer made a motion to set the rate for DUD at $7.50 per thousand gallons. ” They are not willing to work with us. Next year (expense of producing water) is going to cost more so we need to be prepared for it,” he said.
“I think if we set this too high, we’re not punishing DUD, we’re punishing DUD’s customers,” said Alderman Murphy.
“I would hate for this board to be accused of trying to gouge anybody out of vindictiveness,” added Alderman Jacobs.
“I don’t disagree with $7.50 but I had rather drop it on down because I think what we’ll do if we get it at $7.50, it’s going to make it hard on a lot of people, older people in the county that uses water,” said Mayor Jimmy Poss.
“I don’t want to put a burden on them but we’ve got to look at the big picture. If everything (costs) wasn’t going to go up and everything was going to stay the same, I’d be willing to come down (on the price),” said Alderman Washer.
Alderman Tim Stribling said he too thought the $7.50 rate was too much. “The citizens of Smithville have the financial responsibility of the water plant and we as a board represent those citizens. But my personal opinion is that charging $7.50 is too high for the volume that they’re using. My opinion is that it shouldn’t be more than what our inside customers pay which is $5.00 because of the volume they (DUD) do purchase,” he said.
Alderman Murphy said he might be willing to go along with a discount for DUD if they would agree to minimum purchase amounts. “In my business, we’ll come out and do a service for you at a certain rate but if you agree to do a set amount of services, we’ll give you a discounted rate. I think this is no different really. If you want a $2.67 rate then guarantee me 24 million gallons a month. But I won’t vote for anything that is going to cost the city money,” he said.
“Where I came up with $5.00 is that is what city customers pay and they are not required to purchase a specific amount of water. That’s what DUD wants (no minimum purchase requirement) so I think we should give them what they want. We could set it at $7.50. There are people who pay $7.50 so I think $5.00 is definitely not unreasonable. They (DUD) charge some customers $8.50 and are buying it at $2.05 per thousand gallons,” added Alderman Murphy.
Alderman Washer, sensing no support for the $7.50 rate, withdrew his motion.
In a letter to City Attorney Vester Parsley, Jr., DUD’s lawyer Dewey Branstetter wrote that a move by the city to charge $7.50 would be unrealistic for a wholesale customer such as DUD and suggested that it might be in violation of state law.
During Thursday night’s special meeting, Parsley said state law does not dictate what the city can charge. “TCA (Tennessee Code Annotated) does say that the city and any distributor should make the rates reasonable but there is nothing in the code that says we have got to set a certain amount for them,” said Parsley.
All five aldermen voted in favor of a motion to set the new DUD rate at $5.00 per thousand gallons.
The rate takes effect January 1 and will be re-evaluated by the mayor and aldermen next summer during budget preparations for the 2014-15 fiscal year, which begins July 1. “The rate will be established in the budget by ordinance and it can be re-evaluated with the new budget July 1. Instead of doing a contract, the rate may now be voted on each year by the board in the budget ordinance,” said City Secretary-Treasurer Hunter Hendrixson.

A fire this morning (Thursday) destroyed the residence of Jimmy Putty at 428 Carter Street.
Central dispatch received the call at 7:00 a.m.
The Smithville Volunteer Fire Department rushed to the scene but Chief Charlie Parker said the fire was well underway by the time it was reported and firefighters could not save the home.

Putty and his wife were at home and discovered the blaze coming from the garage. They escaped unharmed.
Two vehicles parked in the garage were destroyed and the family lost their pet dog in the fire,
Members of the Smithville Police Department and DeKalb EMS were also on the scene.
The cause of the blaze is undetermined.

A trial date has been set in the cases against former Upper Cumberland Development District officials Wendy Askins, Larry Webb, and former UCDD board chairman Mike Foster.
An order resetting the trial was filed Tuesday, December 10 in U.S. District Court in Nashville. The order states that “the case is reset for a jury trial on May 20, 2014 at 9:00 a.m. in courtroom 873, United States Courthouse, 801 Broadway, Nashville. As soon as it appears that the case will be tried, the parties shall notify U.S. District Judge Aleta A. Trauger’s courtroom deputy of the anticipated number of trial days that will be necessary.”
“Any plea agreement shall be consummated by noon on the Thursday before the trial, and the Courtroom Deputy notified thereof. Any proposed plea agreement shall be submitted to the court by noon on the Friday before the trial. No plea agreement will be entertained unless it is in compliance with this order.”
“In advance of any plea hearing, the United States Attorney shall submit to chambers a document that lists the elements of each offense to which the defendant is pleading guilty and the statutory penalty for each, including period of incarceration, fine, and period of supervised release applicable.”
“If the case is to be tried, the parties shall file the following by the close of business on the Tuesday before the trial:
A. an agreed set of jury instructions
2. Alternative versions of jury instructions on which there is not an agreement, with citations to supporting authorities.
3. an agreed verdict form or alternative versions; and
4. motions in limine
Responses to motions in limine shall be filed by 4:00 p.m. on the Friday before trial. Parties shall deliver to chambers a computer disc containing all proposed instructions and verdict forms that are filed.
The requirements set forth herein shall also apply to any continuances of this trial.”
Askins, former UCDD Executive Director and Webb, former Assistant Director are charged in a federal indictment with conspiracy, embezzlement, bank fraud, unlawful monetary transactions and making false statements stemming from the Living the Dream project.
Foster was also indicted along with Askins for making false statements to the agency’s board of directors.

The DeKalb Utility District has rejected the city’s latest proposals for a new water purchase agreement but is offering one of its own.
DUD attorney Dewey Branstetter, Jr., in a letter to City Attorney Vester Parsley, Jr. dated Monday December 9, wrote that “the DeKalb Utility District is willing to enter into a 10 year contract with the City of Smithville, with the rate for the first five years of the contract being $2.67 per thousand gallons, and with the rate for the second five years of the contract being $2.80 per thousand gallons. For reasons that I am sure you understand, DUD is not willing to enter into a contract that requires minimum purchase amounts.”
(CLICK PDF LINK BELOW TO VIEW LETTER FROM DEWEY BRANSTETTER TO VESTER PARSLEY)
DUD.pdf (136.62 KB)
The DUD currently pays $2.05 per thousand gallons for water it purchases from the city but the contract is due to expire on December 31.
Facing the deadline with no new agreement, the Mayor and Aldermen are scheduled to convene in special session Thursday, December 12 at 5:00 p.m. at city hall for the purpose of setting a new rate for the DUD.
The city’s proposals were sent by City Attorney Parsley in a letter to DUD Manager Jon Foutch on November 14. One of them provided for a new 10 year deal with the city to sell water to the DUD at $2.20 per thousand gallons for the first five years and $2.40 for the remaining five years. While these rates are below the city’s current cost of producing water, according to a recent study done by Warren and Associates, the city was willing to make this deal provided that the DUD abandon plans to build its own water plant and buy a certain amount of water over the next ten years from the city. In its second proposal, the city sought to negotiate a new rate based on the sale of three DUD metering points to the City of Smithville.
In his letter to Parsley, Branstetter wrote that the DUD Board of Commissioners has determined that it is in the best interest of DUD’s customers to build its own water treatment plant, and at this time is unwilling to consider abandoning those plans. But while the city’s proposals are unacceptable to the DUD Commissioners, Branstetter said they do want to work with the City of Smithville to reach an agreement. He said the proposed new rates offered by DUD are being extended in good faith and based upon the cost study performed by the engineer hired by the city (Warren and Associates). “Mr. (Jerry) Warren stated in his study that it cost (city) approximately $2.67 per thousand gallons to produce water. In addition, in his sworn testimony at the UMRB hearing (in April), he further stated that because there would be no transportation costs for providing this water, that the rate could be reduced by as much as 42 cents per thousand gallons. The rate we are proposing is actually higher than what the study and testimony revealed would be a reasonable rate to charge a wholesale customer such as the DeKalb Utility District,” wrote Branstetter.
Without an agreement by January 1, the city officials have said that the DUD could be charged as much as $7.50 per thousand gallons, the same as other water customers outside of the city. However in his letter to Parsley, Branstetter said such a move would be unrealistic for a wholesale customer such as DUD and suggested that it might be in violation of state law. “To propose to charge DUD $7.50 per thousand gallons is unreasonable, and based upon the information provided by your own consultant and engineers, would be several times what a reasonable rate should be. As I know you are aware, there are several sections in the Tennessee Code that are applicable to municipally owned water systems, and all of those code provisions mandate that a city charge a reasonable rate for its water services. I would specifically direct your attention to Tennessee Code Annotated 7-34-114 (a) and 7-35-414, both of which require that a municipality that operates a water system must charge just and equitable rates,” wrote Branstetter.
He added that the DUD Board of Commissioners are hoping to resolve this matter before the current contract expires and would like a response to their offer soon from the city. “In order to help facilitate our discussions, the proposal which I am making in this letter has received the unanimous approval of the Commissioners of the DUD, which occurred at their last regularly scheduled monthly meeting. We would also request that any response have the approval of the Board of Aldermen of the City of Smithville so that the Commissioners will know that the city has approved any response to our proposal,” wrote Branstetter.