Crossville Chronicle, Crossville, TN

July 23, 2012

TSUD, POA meeting canceled

By Heather Mullinix
Assistant editor

CROSSVILLE — A meeting set between the Tansi Sewer Utility District and the Lake Tansi Property Owners Association board set for July 12 was canceled, and one TSUD board member wanted minutes to reflect why the meeting was not held.

"We called for the Tansi POA and TSUD to have a meeting," said Virgil Ferguson, TSUD commissioner. "That meeting was canceled by Mr. [James] Heath, and I want it to be in the minutes that Mr. Heath canceled the meeting."

Ferguson said Heath contacted himself and Commissioner Trey Kerley and informed them the meeting was canceled. A letter was also sent to Danny Plumlee, president of the POA, notifying him of the canceled meeting.

"It bothered me the board had set a meeting and Mr. Heath canceled it on it's own," Ferguson said.

Heath had advised the commissioner that, after consulting with the Tennessee Association of Utility Districts, the meeting could be improper. Ferguson noted, however, the meeting had been advertised.

"Our attorney Mr. [Don] Scholes said he did not discourage the meeting, that it might even be a good idea," Ferguson said.

Heath said he canceled the meeting have talking with TAUD personnel.

"Based on TAUD advice, I thought it was not a good idea to have the meeting," Heath said. "I thought it was the right thing to do. If it was not the right thing to do, I'm sorry about that."

The meeting had been planned so that the two entities could discuss possible resolutions to the continuing lawsuit filed by the POA against the sewer utility. The suit, filed Sept. 23, 2011, was filed for nonpayment of loans totaling more than $1.3 million made to Tansi Waste Management, Inc., the predecessor of Tansi Sewer Utility District.

The POA allowed TWMI to use a line of credit established by the POA, with promissory noted issued that included principal and an interest rate of 6.25 percent from the date of the loan. Only $187,438.15 was paid back.

In May 2011, the POA demanded payment from TWMI, but no payment was made. TWMI had already transferred its assets to the new sewer district; however, the suit states TSUD conditioned its repayment of the POA loan on receiving public bonds. The suit asks the transfer of the sewer system be declared void and that TWMI be declared in default.

Heath updated the board and those present on discussions between the POA and TSUD attorneys regarding the suit. He reported Scholes told him the POA's attorney indicated the POA was not interested in running the sewer treatment plant and taking over the sewer system.

Richard Cahill, member of the POA board of directors, said that was not the case.

"We want payment or the plant," Cahill said. "I don't know how we can be more clear."

A letter to that effect was mailed to TSUD by the POA on Tuesday, Cahill said, though it had not yet been received by the district.

Heath cautioned the POA would come under the authority of the Tennessee Regulatory Authority, which would set rates for customers. He also wondered if the state would approve allowing a private corporation to operate the public utility serving residents.

The district has explored taking over the notes or at least paying the interest, but Heath said, "We're not in a position to take over the contract or in the position to take over a $5,000 a month payment."

Heath said that, based on his conversations with TAUD, it was believed that no financial institution would accept the district as a signee on the notes. If a financial institution did accept such an arrangement, it could trigger the state declaring the district financially troubled and allow the state to take over operations immediately, setting new rates.

Another possible solution to the lawsuit could be a merger of the sewer district with another sewer service provider, such as the city of Crossville. Heath said attorney Scholes had suggested the county form a committee to ask the city about absorbing the sewer system into its wastewater system.

Cahill said the POA was anxious to reach a conclusion on the lawsuit, adding, "Time creates animosity."

The continuing lawsuit is also a strike against the district should it try to gain loans through the state revolving fund (SRF) loans.

Heath said, "Applying for the revolving fund loans would be a waste of time and money."

The district would also have to pay its engineer to prepare the documents to apply for SRF funding, and Heath estimated that cost at upwards of $20,000. He did not feel the district could shoulder that cost at this time.

A question was raised regarding rates charged for sewer service to Hiawatha West and East condominiums, which are $50 per month for 3,500 gallons of effluent. That's less than the rate charged other commercial customers, which are charged $70 a month for 2,500 gallons of effluent.

The rates are based on a contract between RCI and TWMI; however, the contract does not include an effective date or an end date.

Kerley said, "Nothing I read says we can't change the rates."

Ferguson suggested checking with a lawyer to see if the district could change those rates to its published commercial rates.

The board approved payment of a $2,654.92 repair bill for the sewer treatment plant, which was damaged by a lightning strike in July. The bill will also be submitted to the district's insurance company for reimbursement.

The board set a new regular meeting time of the second Tuesday of each month at 4 p.m. The next meeting will be Aug. 14 at 4 p.m. at the TSUD office, 7004 Ute Lane.