Plan could raise city's water rates

Aug. 06, 2014 @ 09:56 AM

Even if the contract terms that the Caldwell County commissioners have proposed for buying water from Lenoir had been in place last year, the county would still have fallen short of its minimum water purchase.

But the amount would be so close — less than 14 million gallons — that at current rates, the county might pay less than $30,000 to make up the difference, instead of the $130,000 it paid this past fiscal year.

All water customers served by Lenoir and the county water system could wind up paying higher rates, however, since Lenoir would have to make up for that loss of $100,000 a year in revenue it now counts on to balance its water system’s budget, city officials said Tuesday.

The county commissioners voted Monday night to seek changes in the deal the county struck in January 2007 to buy a guaranteed amount of water each year from Lenoir. The minimum called for in the contract, 505 million gallons, is more than county water customers have used in any year since then.

The commissioners, none of whom were on the board when the contract was signed, called the contract’s minimum purchase “monopolistic,” “unfair” and “absurd.”

The contract was part of the local moves made to bring Google’s data center. Lenoir’s water system needed about $8 million of upgrades to accommodate Google. Google contributed $1 million to the project, and the city wanted the county to guarantee a minimum water purchase to help ensure the city could pay down its debt on the rest of the cost, City Manager Lane Bailey said. Even at the current contract terms, the debt will not be paid off by the time the contract expires in 2022, he said.

The minimum purchase of 505 million gallons was based on the county’s water use at the time the contract was negotiated, he said.

“We based it on what they had used that year,” Bailey said. “What we were trying to do was cover the debt service we were going to have on this 15- or 20-year period.”

That year, fiscal 2006-07, the county water system used 546 million gallons of water, but that proved to be the highest by far in the past 10 years. The low point of the county’s water use in that period was in fiscal 2010-11, about 430 million gallons; the second-highest amount used was in 2003-04, 475 million gallons; and in the last fiscal year, from July 1, 2013, to June 30, 2014, customers on the county-owned water system used only 450 million gallons. 

Commissioner Clay Bollinger said Tuesday, “This was ridiculous to ever have this thing based on that one very, very high year.”

Bollinger said the city was going to have to make its water system improvements with or without Google.

“Their excuse is ‘You signed the agreement.’ They know that thing’s unfair,” he said. “I know they need money, I know that, (but it) still doesn’t have anything to do with right or wrong.”

After what Bollinger described as two years of private discussions about the contract between city and county officials, Lenoir has offered to reduce the cost of the penalty payment by 10 percent, meaning that if the amount of water purchased fell short by $100,000 worth of water, the county would have to pay only $90,000.

The commissioners unanimously agreed Monday night that discount was not enough, and they directed County Manager Stan Kiser to propose setting the minimum purchase at an amount based on the past 10 years’ use, with the low and high years not counted. Under that method, the minimum purchase would be 463.7 million gallons.

Bailey said no meeting has been scheduled to further discuss the issue, and he’s not certain when it might come back up.