DOE WATER CONTRACT
The following represents an unofficial account of the discussion and vote on the 2016 extension of the DOE water contract during the March 29, 2016 City Council Special Called Meeting. The complete agenda packet is found here and here. No video of the meeting was made. Draft meeting minutes will most likely be posted at the city website as part of the April 2016 Regular Meeting Agenda packet.
The Bottom Line Up Front
Council voted 4-2 to extend the current water contract. Baughn and Hope voted “Nay” and Smith was absent.
The changes of this contract will result in an 8-11% cost reduction to DOE while residents and businesses are facing yet another increase this year estimated at 6%.*
DOE will now pay $1.68 per 1,000 gallons of water (per the finance director). Their previous rate was $1.89 per 1,000. By comparison, current rates for residents vary, but range from $6.99-$7.56 per 1,000. Commercial rates also vary, but those who use over 50,000 gallons pay roughly $4.94 per 1,000. Complete rate breakdowns are found on page two of this document.
A Brief History
In 2000, the City of Oak Ridge agreed to take over operations of the dilapidated water plant from DOE, who retains the right to resume operations of the plant.
DOE consumes about half of all the water that the city provides. Between 2012-2015, the city has increased water rates for all residential and commercial customers EXCEPT DOE. To date, rates have more than doubled for most customers except DOE.
In February 2012, the city changed its rate structure for water and sewer for its residential and commercial customers to a flat charge per gallon and instituted a minimum use charge. In December 2012, the city extended the DOE water contract for three years. (See original and extended contracts here: 2012 DOE Water Services Contract Extension, 2016 DOE COR Water Contract Extension Cover Letter 3-24 (2), 2016 DOE Water Contract Mod 077 Page 2, 2016 DOE Water Sevice Contract Extension Mod 077 SF 30 Unsigned). The flat contract amount was $2,075,000 for potable water based on a total usage of 53.5% (1.96 billion gallons).
*Whereas additional monies for capital maintenance had previously been part of this contract, this extension removed all of those monies and instead allowed for a case-by-case negotiation. In essence, the total contractual financial obligation of DOE was reduced. Nominal capital maintenance monies ($125K) were rolled into the flat contract amount in the 2016 is extension, causing some of the mathematical confusion.
The Reason for My Vote
It is the same as it was three years ago: “This contract negotiation was our only chance to negotiate rates for the next 3 years (in this case, one.) I question why we would impose higher rates on our residents and businesses but not on our largest water customer (DOE). I also question how many more rate increases our residents and businesses must face over these next 3 (1) years while DOE will face none.”
What’s the alternative? Call their bluff and give them back the plant and its operations all together. While they scramble for resources, we immediately begin work on building our own water plant, one that is fit to meet only our city’s needs. (The current plant was built to meet an exponentially larger need which greatly contributes to our costs to operate it). The city manager has indicated in negotiations that the city intends to do this very thing over the coming months; however, the burden of this contract has been well known for many, many years and such actions should have started long ago. The fact that DOE doesn’t want the plant back gives us greater leverage than most want to believe.