While the proposed DeKalb Utility District water treatment plant is still being planned, DUD officials have asked the City of Smithville to formulate a proposal for a new 30-year contract to purchase water from the city.
City aldermen voted to send members of the DUD board a letter requesting a meeting to discuss between the matter.
Secretary/Treasurer Hunter Hendrixson told the board that he felt a face-to-face meeting was the best way for both agencies to come to a conclusion.
“DUD has sent us a written proposal/contract asking us what we would like for the contract to be for a long-term purchase program of our water,”  Hendrixson told the mayor and aldermen.
“Rather than just go back and forth by letters, I think our board should have a sit-down with their board to just get down to it and figure out what they want and if they really want it,” he continued.
“I would like permission from the board to send a letter to each of their board members asking for a sit-down to hopefully negotiate a long-term contract.”
The city now sells water to the DUD for $2 per 1,000 gallons.
The rate increases by five cents per 1,000 gallons every year in January.
The contract, which was entered into in 2004, expires in 2014.
One of the question marks in the matter is that the city has not done a study in several years to determine exactly what it costs them to produce a gallon of water.
“I think we cannot in good faith negotiate any kind of contract until we can determine how much it costs us to produce a gallon of water,” Alderman Shawn Jacobs told the assembly.
The proposed contract from the utility district not only calls for a cost study, Hendrixson said it specifies that the DUD will share the cost.
“In their contract, I do like the fact that they are willing to split the costs 50/50 for a (cost) study on this and I'm willing to do that now if the board is,” Hendrixson said.
“What it comes down to is that we need to know what a gallon of water costs, no matter what,” said Alderman Tim Stribling. “I commented on that a couple of months ago. There are so many factors involved. Depreciation. Raw materials. It's not just the people at the plant,” Stribling said.
“It will help us from our own standpoint in addition to this contract,” Jacobs agreed.
According to city officials, DUD manager Jon Foutch sent a rough draft of a proposed contract to the city in August.
The document came with a request for the DUD to be allowed to inspect and copy certain public records.
Foutch wrote, "In order to aid in the determination and discussion of a reasonable rate, we need certain information to review."
Hendrixson responded in an early September letter, saying that the city is more than willing to meet with the DUD to discuss a long-term agreement.
In a Sept. 19 letter, Foutch wrote, “I would ask that you please advise as to the city's position on the proposed contract and or provide me with a proposed contract that the city would like to submit for DUD's consideration. I ask that you please address this issue as soon as possible and I appreciate your kind attention to this request.”
Hendrixson encouraged the board of aldermen to pursue a meeting with the DUD, saying that a continued relationship with the utility district was in everyone’s best interest.
“Everything is stagnant right now,” Hendrixson told the mayor and aldermen.
“They are not selling bonds to my knowledge at this moment to fund their project, which is going to run anywhere from $10-15 million. I believe the city should re-negotiate a contract with them at a decent price to continue working with DUD and to keep ratepayers on both sides of the utility districts from having to suffer any rate increases. So, with your permission, I would like to invite them to sit down with us,” said Hendrixson.
City Attorney Vester Parsley, Jr. voiced concerns that attorneys from both sides be included in the talks.
“Their attorney has never contacted the city attorney about this,” Parsley told the board. “They did send us a proposal some months ago. However, that wasn't sent to the city attorney. It was sent to you (Hendrixson) and the mayor. It was a one-sided contract. It wasn't a negotiated one. It was one they were proposing. Normally, the attorneys representing the various entities are involved. They did not involve me. Now whether Keith Blair was involved as their attorney, I don't know. Maybe he wrote the contract. But irrespective, at any meeting, I think it would be imperative that Keith and myself be there so that we understand what terms are trying to be negotiated and the prices and any escalator clauses and so forth. But to this date, I have never received anything from DUD asking me to re-negotiate or try to negotiate other than what you have received. I feel it is important that the attorneys be involved," said Parsley.
Stribling moved that the aldermen authorize the secretary/treasurer to ask for a meeting with DUD officials.
“I make a motion that we give Hunter the authority to contact the DUD board for a sit-down meeting to begin talks,” Stribling said. "Not necessarily negotiations but to begin talks to find out what they really want to do.”
The DUD has an ARC grant in place for the proposed plant, as well as loan and grant funding from USDA Rural Development.
A bond resolution has also been approved, but the bond sale has apparently not been finalized.
Since the DUD plant can not possibly be completed by the time the current contract expires in Jan. 2014, the utility district will need to come to some agreement on a contract.
No immediate action was taken on the matter of the cost study.