Color Works seeks rate rollback

City help contingent on company's financial status

By Thomas Wilson

   A local company is petitioning the city of Elizabethton to return water and sewer rates to levels prior to the rate increase implemented by the city earlier this year.
   In a letter to Mayor Sam LaPorte dated Apr. 10, 2003, Color Works, Inc. President Robert D. Cully requested the water and sewer rates be returned to levels prior to the rate increase enacted by City Council in February.
   The rate hike was precipitated after the state's Waste Water Finance Board (WWFB) directed city administrators to modify utility rates to fund the water/sewer system.
   "I don't believe Nashville has unilateral, ultimate authority to issue that kind of dictate," Cully told the Star on Monday. "The city and county have a right to challenge it and should challenge it."
   The WWFB summoned city administrators to Nashville in November to discuss the system's financial structure and the city's budget reductions for the current fiscal year.
   Elizabethton City Manager Charles Stahl said the city actively attempted to avoid the finance board's directive by slashing the water/sewer fund budget considerably in the 2003 fiscal year.
   "We cut the budget 33 percent; we eliminated all capital expenditures, and froze 6 vacant positions in the division," said Stahl. "These efforts were not enough, and the wastewater finance board director actually raised rates in January to fund operations debt and depreciation cost."
   Stahl said it would be premature to speculate on the city recommending to extend a utility rate rollback to Color Works. "One thing that would have to be demonstrated is the need being demonstrated by the company, and weighing the need along with the heavy debt and operational needs of the water and sewer system," he said.
   "Other than reasonable and stable water and sewer rates, Color Works does not want anything from the city other than we would like to be left alone," Cully stated in his letter to LaPorte.
   Mayor Sam LaPorte replied to Cully in a letter dated May 23, 2003, and described a scenario regarding a possible rate adjustment. However, LaPorte said subsidizing one utility customer at the expense of thousands of others would require significant foundation.
   "I told him if he wanted a rate adjustment at the expense of current users he would have to justify it, and perhaps give concessions," LaPorte said. "If he is losing money, that is a justification -- but he would have to convince us he is losing money."
   LaPorte said the only way for the city council to determine true cash flow and service is for the books to be open. "If the business is having difficulties, the city is interested in helping," he said.
   The Mayor's letter reads that the financial records of a private company would not be open to the public, but would be examined by " ... someone picked and trusted by the city" to examine a report of the financial condition of the company.
   Cully said Monday that he had not read LaPorte's letter, but opening the company's financial books was not a scenario that interested him.
   "In terms of releasing financial information, I wouldn't," Cully said.
   Located in the Watauga Industrial Park, Color Works employs 90 people in the company's custom textile dyeing and coating operation. The company ranks as the city's largest sewer service user but draws water from its own well system. The actual Color Works facility does not lie inside the city limits.
   Cully states in his letter the company's business has been "very slow" since September 2002. "The multiple increases in water and sewer rates will not put us out of business, but can be a contributing factor," Cully states.
   The city has taken on a series of projects to improve utility infrastructure in recent years. The $10 million expansion of the city's waste water treatment plant was undertaken at the urging of local industry and the Economic Development Commission, Stahl said. The city acquired funding for the project with the state of Tennessee's Revolving Loan Fund.
   Cully said the city's loan agreement with the state did not require the city to fund depreciation costs. He also felt his company's request was not out of order given the incentives offered to recruit industries.
   "They will turn around and look at doing all types of giveaways to Inland (Paperboard and Packaging) after the horse is out of the barn, and they will do all types of giveaways to get people in here," Cully said. "Why do you penalize the people who are already there by making them maintain a higher cost structure?" He characterized the city as "completely unresponsive" to past requests of assisting the company with utility rate structure. "To expect they would do anything in the future would be extremely optimistic," he said.
   City Finance Director Bradley Moffitt said Tuesday the loan agreement did require the city to pay for depreciation costs. That funding directive was made part of state revolving loans several years ago with the state taking up more aggressive enforcement of the depreciation payment in recent years, Moffitt said.
   The treatment plant's expansion came as a heavy debt burden and unfortunately coincided with the announcement of industrial decline, specifically Alcoa Extrusions. The closure of Alcoa Extrusions cost the city roughly $200,000 in lost water/sewer revenues. Other utility projects undertaken by the city have included a state-mandated $2.2 million water filtration system at the Big Springs Water Plant. The city also spent $1.1 million in constructing the West Interceptor to the sewage treatment plant, which added more capital costs.
   Stahl said the city requested the Big Springs project be deferred, but the state ordered the project to proceed.
   LaPorte said it was incumbent on city council and administration to investigate the needs of an industry to determine how the city could be of assistance. "It is good public policy to investigate any situation," he said.
   Cully said keeping the company competitive in the midst of a stagnated national and regional economy was more than enough to worry about without a utility rate issue.
   "We've had a very difficult time because of low volume," Cully said. "I have a lot of other things to worry about."