Crossville Chronicle, Crossville, TN

August 29, 2012

TSUD and POA near decision

By Heather Mullinix
Assistant editor

CROSSVILLE — The Tansi Sewer Utility District may be nearing the end of its suit with the Lake Tansi Property Owners Association, with TSUD announcing it had directed its attorney to draft an agreement that would turn assets of the public utility over to the POA.

James Heath, president of the TSUD board, said, “In order to settle the lawsuit, we have agreed with our lawyer to proceed with writing up the legalities of that.”

A draft of that agreement is expected within two to three weeks. Heath said the agreement would be on a future agenda for the board to discuss with its attorney Don Scholes and to field questions on how a transfer of assets and service would take place.

“I fully expect that when the negotiation is done and the transfer happens, we will be given a certain amount of time to pay all outstanding debts that we agree are outstanding and have funds to pay,” Heath said. “Probably any unused funds in our account will be transferred to the POA, but that’s not been part of any discussion. I’m just assuming that’s what will happen.”

The POA filed suit against TSUD and its predecessor Tansi Waste Management, Inc., in September 2011, for nonpayment of loans totaling more than $1.3 million. Those loans were made to finance construction of the sewer system in Lake Tansi to serve POA amenities, businesses and various homes.

According to the suit, the POA allowed TWMI to access a line of credit the POA established at First National Bank and promissory notes were issued by TWMI that included the principal and interest rate of 6.25 percent from the date of the loan. Eleven promissory notes were issued from Feb. 17, 2009 through June 15, 2010, each signed by Claude “Duke” Coyne, president of TWMI and former general manager of TSUD. He retired from the sewer district in November 2010.

Only $187,438.15 was repaid, according to the lawsuit.

In August 2010, TSUD voted to absorb the assets of TWMI. According to the lawsuit, neither TWMI or TSUD had the funds available at the time of the transfer to satisfy the loan and TSUD conditioned repayment of the notes on receiving proceeds from the issuance of public bonds. Those bonds were never issued.

The suit asked that the transfer of assets from TWMI to TSUD be declared fraudulent, and that TWMI be declared to have defaulted.

After the two parties come to an agreement, the settlement would still have to be approved by a court and the Tennessee Department of Environment and Conservation would have to approve transfer of an operating permit. Currently, the state has not issued a new operating permit for TSUD.

Another question is who will be liable for a disputed bill from Environmental and Civil Engineering. The bill, at $430,000 in February 2012, reportedly included no invoices or supporting material as to who ordered the work to be done. TSUD believes at least portions of the outstanding bill were for work performed for the POA or Tansi Waste Management, Inc., prior to the establishment of the public utility district.

Heath said Tuesday, “If he thinks we still owe the money, he can resubmit the bills and invoices based on contracts or work agreements.”

No such billing had been received by Tuesday.

In other business, TSUD approved payment of its yearly insurance premium in the amount of $6,414, provided the utility be reimbursed if ownership of the assets were to change hands in coming months.

The board also agreed not to revisit contracts for service to Hiawatha East and West, which are billed at rates below the published commercial rates of the district based on a contract between RCI and TWMI that was absorbed by the public utility district.

“We don’t need to go into renegotiating that contract or revising our policy because the inconsistencies aren’t really causing any problems at this time,” Heath said.

Ferguson added that the contract did state fees could be reviewed and adjusted yearly though it did not include an end date.

“I see no reason to get into that now because we don’t know what the outcome will be,” Ferguson said.

Ferguson also noted he had been reviewing financial records of the utility district and found $586,000 in funds had been transfered to TSUD from TWMI, but there was an electronic transfer dated May 6, 2010, taking $100,000 from TSUD to TWMI that he found no explanation for in TSUD minutes or financial records. Heath said he recalled an explanation of that transaction, but did not remember the details. He told the board and audience he would check with former TSUD president Herb Pallatt.