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PUC Exit 114 Report, Response, and Aug. 22 meeting minutes

Unpublished

November 21, 2013

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Benton Public Utility Commission * Liaison Report to Benton City Council November 18, 2013 I attended the Benton Utility Commission meeting held on Monday, November 4th at 1827 Dale Street (6:00pm). All commissioners were present along with Terry McKinney, department heads and Byron Hicks of McClelland Engineers. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ These topics were discussed and decisions were made in NEW BUSINESS: 1. Jody Washam requested to address the commission but was absent. No action and no discussion to place. 2. Jonathon Buff and Randy Hawkins presented information to the commission regarding problems with the Dogwood Lakes Estate Liftstation. Repairs cost $50,000 (approximately). Approved (unanimous) a waiver of competitive bidding via ordinance from the Benton City Council (Ordinance 76 of 2013). 3. Approved (unanimous) the September Financial Statement which features: (+)$453,717 ending balance for the month (-)$909,327 ending balance for Year-to-Date (-)10,000 MWH of total unit sales of electricity compared to the 2013 budget ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ These topics were discussed and decisions were made in OLD BUSINESS: 1. Byron Hicks of MCE made a presentation pertaining to the 16” waterline owned by Southwest Water Users that feed the Exit 114 property. These are the highlights of Byron’s presentation that included a map: (a.) Confirmed it is a 16” water line that Benton could tap with a master meter. (b.) MCE does not have the “hydraulics” of the line but could obtain that from Southwest if the agreement moves forward. (c.) Benton can serve water thru the line and with plenty of capacity for retail, residential and fire flow. (d.) Spoke to David Mims (bond counsel for Southwest) who stated it is an unusual scenario (an entity selling its existing water line having a current debt obligation) but it could be done. The commission approved (unanimous) a motion to table the issue until a formal offer was received from Southwest Water Users. A tentative work session was scheduled for November 5 at 5:30pm but was later cancelled. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The meeting adjourned at 7:15pm. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 1 of 4
Page 2 * Utility Commission Liaison Report to City Council * 11/18/2013 In my service as Council Liaison to the Benton Utility Commission, I feel an obligation to report the facts, as I know them, surrounding the water issue at Exit 114. I take no pleasure in this report which I will attempt to condense into as few of words as possible. On Monday October 28, I received an email from Mayor Mattingly with an attachment that appeared to be the official minutes of the special called meeting of the Southwest Water Users Board on August 22nd that was called at the request of Terry McKinney, Utilities General Manager. The contents of the document, including the terms of their offer to sale a 16” water line to Benton , were in stark contrast to the report of that August 22nd meeting given by Terry McKinney, Commissioner Phil Miller and Commissioner Jim Martin on September 16. Mr. McKinney’s report is confirmed in the official/approved minutes of the utility commission. There was no time to confirm the validity of the document before the city council meeting scheduled later that day. I called Mayor Mattingly and he agreed with my suggestion to make a motion to table the ordinance authorizing the utility commission to borrow $1.5MIL to install an additional 16” water line until we could confirm the validity of the document. The motion to table was approved by the council. On Tuesday October 29, I spoke to the chairman of the Southwest Water Users Board, Paul Shepard, who confirmed the document was a copy of their official minutes from their August 22nd meeting with Benton Utilities. In addition to the official minutes, Mr. Shepard emailed a copy of the written transcript of the recording of their August 22nd meeting. I shared this transcript and information with Mayor Mattingly and Brent Houston in an email dated October 30. Mr. Houston responded with the statement “The allegations which have been raised are obviously of a very serious nature. This situation has to be addressed fully and completely”. Mr. Houston also requested a copy of the audio recording to perform his due diligence. A few days later, I received the audio recording from Mr. Shepard which I listened to and confirmed the transcript is a near verbatim re-creation of the recording. I delivered the recording to Brent Houston who contracted with an official transcriptionist to create a court-like transcript of the recording. I have six (6) copies of the official transcript tonight.
Page 2 of 4
Page 3 * Utility Commission Liaison Report to City Council * 11/18/2013 The recording and the official transcript of the August 22nd meeting confirm Southwest Water’s presentation to McKinney, Martin and Miller of the official terms for the sale of their 16” water line to Benton. The terms of their offer are:  $303,000 = Benton’s sales price (1/3rd of Southwest’s cost to install the line, less interest).  Reimbursement from Benton to Southwest of their bond interest paid on the $303,000. The amount of bond interest will be calculated by Michael Storey at Yoakum & Lovell (it is my understanding that amount is $87,000).  Benton can pay $400,000 cash upfront or discount all of Southwest Water’s purchases from Benton by $0.25/1,000 gallon until the $400,000 is paid off (0% financing) which will take approximately six years.  Benton will pay Southwest a wheeling charge of $0.25/1,000 gallon for all of Benton’s purchases from Southwest for the Exit 114 property (it is my understanding the $0.25 wheeling charge is standard for these types of agreements).  Benton is forbidden from selling water to the City of Haskell from this 16” water line unless Haskell pays Southwest 1/3rd of the original cost to install the line. The recording also contains a request from Terry McKinney to Paul Shepard to slow down the conversation to allow Terry to take notes. This contradicts Terry’s response on October 18 to an FOIA request in which he says, “There were no notes taken of the meeting”. The terms of the offer from Southwest Water were presented by Terry McKinney and affirmed by Commissioner Jim Martin and Commissioner Phil Miller on September 16. The terms were misrepresented by Terry as follows (page 6 of the minutes of the Utility Commission meeting on 9/16/13):  $1,000,000 + appreciated value = Benton’s sales price (Benton would pay the total cost at appreciated value).  Reimburse the bond interest paid on the $1,000,000 total cost.  $0.25/1,000 gallon discount to Southwest until that is paid off (“that is really going out a long time” – Terry McKinney).  Benton pays an additional $0.25 upcharge for water taken from the master meter.  “It wasn’t a very productive meeting” – Terry McKinney
Page 3 of 4
Page 4 * Utility Commission Liaison Report to City Council * 11/18/2013 Summary of the official minutes of the 09/16/13 meeting of the Benton Utility Commission (continued from Page 3):    Alderman Ponder asked Terry to confirm the total cost to be $1.3MIL to $1.4MIL plus interest in the form of a $0.25 discount to Southwest. Mr. McKinney said that is correct. Alderman Moore asked for confirmation of the $0.25 discount + $0.25 upcharge for a total of $0.50/1,000 gallon paid to Southwest. Mr. McKinney said that is correct. Mr. McKinney asked Commissioner Martin and Commissioner Miller if he had missing anything. They both confirmed Mr. McKinney’s report.
The terms of Southwest’s offer to Benton, as presented by Mr. McKinney, triggered my support of a plan for Benton to install an additional 16” water line to Exit 114. Also, those terms presented by Mr. McKinney were included in my “Liaison Report” to the Mayor and Benton City Council on 09/23/13. In addition, Mr. McKinney’s report triggered my endorsement of the loan offer from the State of Arkansas ($1.5MIL + 3% + 20 Year Term) and the exorbitant surcharges on the Exit 114 meters to refund our utility system for the cost to install the additional line. My endorsement was based on my trust and acceptance of Mr. McKinney’s report as being complete and factual. I have since confirmed the fact that Mr. McKinney’s report on September 16 was a complete misrepresentation of the original and official offer conveyed by the Southwest Water Users Board of Directors. The owners of the Benton Utility System, the ratepayers and citizens of Benton, pay Mr. McKinney to represent its best interests in all of the dealings, negotiations and actions that impact the utility system. The Benton City Council has transferred a significant amount of authority, responsibility and trust to the Benton Utility Commission to pursue the best interests of our utility system. Based on the facts presented in this report, there was a failure to represent the best interests of the utility system which led to false information reported to the public, Mayor and Benton City Council. Submitted: November 18, 2013 Alderman Brad Moore Council Liaison to the Benton Utility Commission 501-860-4817 Page 4 of 4
To: Mayor Mattingly, Brent Houston, City Attorney, Benton City Council Members and Press RE: Response to Allegations Made By Alderman Brad Moore The PUC members has for too long remained non-responsive to much of what has been written and said regarding the Southwest Water Users August 22, 2013 meeting and ultimate reporting to the Commission. On Monday you heard a less than complimentary report from the council PUC liaison. Up to now our position has been to stay out of the politics and continue working with the information at our disposal to try and solve a very perplexing problem. This report to the council however, leaves us no choice but to make a statement in defense of the challenge it makes on our individual integrity and character. To that end Commissioner Phil Miller and I (Jim Martin) have drafted the attached statement for your consideration. As you contemplate the contents and allegations contained in Alderman Moore’s report we respectfully request that you carefully review, with an open mind, Southwest Water Users own minutes for any mention of selling Benton the line for $350,000 (see attached minutes). This offer of a sale came to the Commission on October 22, 2013 by way of developer Dan Moudy who had visited with Southwest's Chairman. In our response you will see our rationale as to why we did not believe the initial option from Southwest on August 22nd to be in Benton's best interest and it was simply not reported for consideration at the September 16th PUC meeting as a viable option. Respectfully Submitted, Jim Martin Phil Miller
Commissioners Response to Allegations Made by Alderman Brad Moore
To date, much has been said, as well as written, that appears to challenge the integrity and resolve of the Public Utility Commissioners and staff over the issue of providing Benton water to the ! proposed development" #n pursuit of that goal the commission reached out to $outhwest %ater Users Association via an e&ploratory meeting on August '', '( )" The staff and commissioners in attendance came away from that meeting somewhat shoc*ed and confused over some of the content of those discussions" %e personally ma*e no apology as to that which was reported at the $eptember +, '( ) PUC meeting as the most relevant proposal discussed" ,et me be clear, this Commission has and continues to be deliberate and concerned that any and all decisions it ma*es are thought to be what is in the best interest and welfare of the Benton ratepayers" %e believe it is safe to say that none of us now serving on the Commission have hidden agendas or see* any personal gain but we constantly strive to be transparent in all pro-ects and deliberations" The August '', '( ) meeting with $outhwest %ater Users was initiated by the PUC after developing a feasibility study for constructing its own + inch line to ! Properties and upon recogni.ing a lac* of available funds" Benton/s basis for the meeting was to e&plore the possibility of securing a temporary tap 0metering point1 onto $outhwest/s e&isting line -ust west of the ! property 0Mountain 2iew Rd area"1 The PUC/s re3uest was flat out re-ected on the spot" The Association then countered with a proposal that essentially stated 1 you pay $outhwest %ater your original agreed on one third share of the cost of the e&isting + inch line with interest 0total estimate at 4)5(,(((1 and we will give you a temporary master meter, '1 subse3uent discussion addressed how Benton could pay off this obligation by discounting the current wholesale rate $outhwest pays Benton by '5 cents per ,((( gallons" #ncidentally, this reduction in rates would be less than it cost Benton to produce the water and the Benton ratepayers would be responsible for absorbing that e&pense, and )1 their proposed rate for water ta*en through the temporary master meter would have amounted to a 5( cents per ,((( gallon surcharge above the proposed discounted wholesale rate $outhwest would pay Benton on all water metered" Throughout this proposal/s initial discussion never was there any mention by $outhwest to sell Benton the line" %hy was that offer summarily re-ected by the PUC representatives and not reported as such at the $eptember +, '( ) meeting6 7irst and foremost, we did not consider their proposal as in the best interest of the Benton ratepayers who we are by ordinance obligated to represent" $econdly, it had the appearance of a significant financial penalty for the PUC/s alleged non8participation in the lines initial installation" 9ust to get a temporary water supply to the ! property" :one of us concluded from the discussion that there would be any long term subse3uent supply" #n effect, the message to us after re-ecting Benton/s re3uest for a temporary tap was ;pay us what you allegedly committed to in '((< and we/ll give you a temporary tap"= The tape transcript of the August meeting when read very closely will validate our conclusion" There followed what we consider a second level of discussion that shifted to that of buying the line with the cost of construction
Commissioners Response to Allegations Made by Alderman Brad Moore
plus interest putting the one million dollar number on the table" The previous proposed method of pay was again discussed which would reduce the rates charged $outhwest %ater by Benton for however long it too* to pay off the purchase price" Although a number of people including the PUC Chairman have involved themselves in the process of providing ! Properties water from $outhwest, nothing definitive has been confirmed to date" Chairman ,ivers sent a written re3uest to $outhwest dated >ctober '5, '( ) re3uesting a written proposal on what $outhwest was offering" ?ue to the urgency of trying to resolve this matter the Commission elected to have a wor* session on Tuesday, :ovember ' th but this wor* session was cancelled due to a lac* of a proposal from $outhwest" Chairman ,ivers contacted Chairman Paul $hepherd of $outhwest on 7riday, :ovember @ th and as*ed Paul if they had been in contact with their bond attorney to see that a legal pathway e&ists to sell Benton the + inch waterline and to date we still have not heard a response to that 3uestion" #n retrospect, let us respond to a couple of 3uestions that begs an answer as to why we ever approached $outhwest in the first place" ,et us e&plain and then reference the '((< alleged agreement" The city >rdinance !' of '((!, creating the PUC, plainly states in $ection ) that ;the commission shall not provide any free, reduced charge or donated service to any entity nor shall it donate any of its e3uipment, material, labor or funds without the e&press approval of the city council"= Aistorically, the prevailing policy and practice has been that when a developer has a need for an e&tension of utility services 0primarily water and sewer1 they will share in that cost" The developers/ portion of the cost is calculated on anticipated use of the line/s capacity" As an e&ample the developers of the B&it ! property and Big Red facility on Awy +< shared in the cost of the sewer line e&tension bac* in '((@" #n regards to getting Benton water to the now anne&ed ! Properties, an engineering estimate was prepared based on the developers proposed plans for residences and commercial properties which resulted in the need for a + inch line with a cost of 4 "5 million" That estimate based on current PUC practices put the residential pro rata at ) " C and the commercial at +"DC of the estimated pro-ect cost of e&tending water across the river" The current developer and the two proposed developers categorically re-ected any willingness to participate in a cost sharing arrangement" :either of the parties were interested in an e3ual cost sharing of the engineering cost for the pro-ect" To date, the Commission has attempted to have the city council pass an ordinance creating a funding mechanism that would ma*e possible the construction of a water line and capture the respective pro rata shares by way of a surcharge on the eventual customers" This ordinance was developed for the City Council/s review because the Commission did not want to place any additional utility costs on the current customers in Benton" That proposal has also been resisted by the proponents of the development"
Commissioners Response to Allegations Made by Alderman Brad Moore
The Commission and its staff have in our opinion diligently sought to find the means to provide water to the ! proposed developments 0including $outhwest %ater Users Association1, while adhering to the city created ordinance and practices" A second 3uestion surrounds the '((< verbal agreement or 0agreement in principle1 between the Benton PUC, $outhwest %ater Users Association and the city of Aas*ell" There is no denying that some discussion and correspondence went on as to Benton/s involvement, but the bottom line is that the issue never garnered the PUC/s recommendation for participation" As to the city of Aas*ell/ participation, we cannot verify any position they may have ta*en on the agreement at that time" #t continues to be a commitment of the PUC and staff to provide utility services to proposed developments that would accommodate future growth with minimum impact on e&isting ratepayers" $ubmitted by Commissioners Phil Miller 9im Martin
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