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Conduits carrying utilities across the Tennessee River are attached to the northbound span of the Steamboat Bill Hudson Memorial Bridge.  One of the pipes supplies Decatur Utilities water to Limestone County.
Daily photo by Gary Cosby Jr.
Conduits carrying utilities across the Tennessee River are attached to the northbound span of the Steamboat Bill Hudson Memorial Bridge. One of the pipes supplies Decatur Utilities water to Limestone County.

Second thoughts over water sale
Visions of Limestone profiting from resales give pause to members of Decatur City Council

By Evan Belanger
evanb@decaturdaily.com 340-2442

After a year of negotiation, the future of a proposed agreement between Decatur Utilities and the Limestone County Water and Sewer Authority remains uncertain.

And it appears debate over the matter could continue for weeks.

The latest rounds of discussion started last week, when members of the Decatur City Council delayed consideration of an up-to-30-year-long contract that would have allowed DU to sell up to 10 million gallons a day to the Limestone authority. It would replace an existing agreement that allows DU to sell Limestone up to 2 million gallons a day.

At the time, District 4 Councilman Ronny Russell and Council President Billy Jackson of District 1 said they wanted more time to review the contract and meet with DU officials.

But this week, three council members expressed serious concerns over the proposed contract — concerns that could further delay or kill the deal.

"I think that if it takes a little a bit longer than we anticipated, then, in the long run, it will be worth the time that we spent dealing with this," Jackson said in a telephone message Tuesday.

Specific concerns with the agreement include the overall length of the contract and the fact that Decatur does not have a means to get out of the deal if it becomes detrimental, said District 2 Councilman David Bolding.

He said his main concern is the price DU charges for the water. According to the contract, DU will sell the water at the same rate it charges any other customer, from the smallest property owner to the largest factory and even other water systems.

Bolding said he wants DU to charge a higher rate because the Limestone authority could profit heavily by selling DU water to other water systems.

"I have a real strong feeling that they are going to take this water and sell it to Madison," Bolding said. "So I think there should be some sort of stipulation as to whether we're going to profit from this deal, or they're going to profit from it."

Bolding also said he wants a guarantee in the contract that the Limestone authority cannot sell the contract to another entity.

"I just want what's best for Decatur," he said.

While all five councilmen raised concerns over the deal this week, it is unclear if they are prepared to reject the contract in the event the Limestone authority refuses further negotiation.

Bolding said he definitely would not vote in favor of the contract as is, while Russell said he did not know how he would vote.

The Daily was able to communicate with Jackson only via phone messages, and he did not say how he would vote.

District 3 Councilmen Gary Hammon and Ray Metzger of District 5 said they likely would vote in favor of the contract as presented, but they still want to see some changes.

"If we can make a few bucks, that's fine, but we don't want to lose the business," Metzger said.

While not a voting member of the council, Mayor Don Kyle said he supports the deal and thinks the council should pass the contract as soon as possible.

Limestone authority

While Limestone authority Manager Tony Sneed declined to respond to any specific questions this week, he previously said the authority does sell water to outside systems, including Madison.

In August, Limestone sold more than 239 million gallons to outside systems.

"We're sitting in the right area, and we're sharing with communities around us," Sneed said.

As to Limestone selling DU water to Madison, Ricky Pounders, who manages the Madison Water Department, said he does not intend to purchase additional water from Limestone in the future.

He also said the Madison Water Department would likely build a treatment plant within five to 10 years, which would eliminate the need for Limestone water.

An existing five-year agreement between Madison and Limestone lets Madison purchase up to 2 million gallons a day. Limestone sells that water at a 15 percent markup.

DU board

Whatever the Decatur councilmen's concerns, it seems unlikely their efforts to revise the contract will be aided by DU board members, who gave the document a favorable recommendation last month.

As of Tuesday, the DU board was not expected to revisit the matter, said board member Hugh Hillhouse.

"Our position was to recommend to (the council) a good contract that we thought was in the best interest of Decatur and Limestone County," he said. "That's what we did."

Hillhouse also said the council does not need DU's permission to alter the contract, but the Limestone authority would have to approve any changes before the agreement would be official.

Officials with Limestone would not say if the council's proposed changes would be acceptable.

"I am certain the City Council understands that having large wholesale customers such as Limestone County has a positive affect on the rate structure for their community. I am optimistic that we can address any concerns that the council might have," Sneed said in a prepared statement.

Limestone had planned to vote on the contract Thursday. He said the contract is still on the agenda but there would be no vote.

Bargaining chips

If further negotiations result, Limestone will not be without bargaining chips.

For starters, Limestone officials are likely aware that DU has a larger surplus capacity at its treatment plant than officials intended.

In 2001, DU officials, expecting a surge in growth, spent about $20 million to expand the Decatur water plant's capacity to about 68 million gallons a day.

But the surge never came.

Worse still, water-saving measures at local industrial plants and the partial closing of Solutia's Decatur operation decreased demand for DU water. Today, DU customers consume about 10 billion gallons annually, compared to 12 billion in 2000.

That means DU's treatment costs are now spread over fewer gallons, which increases the likelihood of a rate increase if the entity cannot sell more water.

Loss of Wolverine

Further compounding the problem, Wolverine Tube Inc., another of DU's major industrial customers, is expected to shut down its local operation in January.

Wolverine consumes about 98 million gallons of DU water annually.

In addition, the Limestone authority has alternatives to purchasing DU water.

While an agreement with Decatur would be more cost effective, Sneed said previously, Limestone could also build a treatment plant on the Elk River.

The Limestone authority has already purchased property on the Elk River and obtained a bond large enough to pay for a plant. But Sneed estimated a plant would cost about $40 million, compared to $10 million for a pipeline in the DU agreement.

Jackson said they hope to conclude any negotiations and potential contract changes within the next three weeks.

"Water has always been and will continue to be one of our greatest resources," Jackson said. "We just want to be sure we protect what we have."

The matter is set for the council's Dec. 3 agenda.

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