City v. Color Works 

City awaits response from company to mayor's proposal

By Thomas Wilson
STAR STAFF
twilson@starhq.com

   A local businessman says his position hasn't changed regarding a requested rollback of utility city water and sewer rates and his refusal to disclose his company's financial information to the city.
   "My position is, the city is a vendor like everyone else; the problem is, they have a monopoly," said Robert Cully, president of Color Works. "In the short run, we don't have an option."
   In a letter to Mayor Sam LaPorte dated Apr. 10, 2003, Cully requested the water and sewer rates be returned to levels prior to the rate increase enacted by City Council in February.
   The state Waste Water Finance Board (WWFB) in November directed city administrators to change the water and sewer rate structure after reviewing the city's budget structure last year. Cully has said the utility rate increase exacerbates an already sluggish economic environment the business has experienced for almost one year. "The multiple increases in water and sewer rates will not put us out of business, but can be a contributing factor," Cully states.
   Mayor Sam LaPorte replied to Cully in a letter dated May 23, 2003, indicating the city wanted to assist with Color Works provided the company was willing to reveal the severity of its financial problems. LaPorte stated in the letter the company's records would not be open to the public, but would be examined by "... someone picked and trusted by the city..." to examine the company's financial condition.
   "When you've got a company that says it's closing its doors, you know it's having difficulties," said LaPorte. "The sad part is we want to help because we don't want another business to close."
   Cully said Tuesday he received LaPorte's letter, but added he would not open his company's financial documents "under any circumstances" for review by the city.
   Elizabethton City Manager Charles Stahl on Tuesday reiterated that the city attempted to avoid the finance board's directive by slashing the water/sewer fund budget considerably in the 2003 fiscal year. The city reduced the water/sewer budget 33 percent, eliminated all capital expenditures, and froze six vacant positions in the division last year.
   Located in the Watauga Industrial Park, Color Works employs 90 people in the company's custom textile dyeing and coating operation. While Color Works receives water from its own wells, the company's sewer service is on the city. Cully said the company treats all the water on-site before sending it to the city's sewer system.
   In a letter dated Nov. 25, 2002 to city Director of Finance Brad Moffitt, an accountant with the Tennessee Department of Environment and Conservation directs the city to raise water and sewer rates fees to amounts "required to bring the Water and Sewer Fund into full compliance."
   Cully referenced documents in the city's loan agreement with the state he indicated did not include wording that required the city was not required to fund depreciation costs on the loan acquired through the state. He also felt the city should have fought the state's rate increase directive.
   "The city ought to take a harder look at their books and why they expanded the sewer system in a declining market," said Cully.
   However, Stahl said that while the Revolving Loan Fund agreement was entered into some years ago, the utility rate increase did require the city to fully fund depreciation costs as evidenced in the Nov. 25 letter from TED. "This is the last word from the state on this," said Stahl.
   City finance department has stated the 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.
   LaPorte said the city could have challenged the WWFB's directive, but he doubted the outcome would have been different.
   "We could have, in fact, filed a lawsuit," said LaPorte. "Sooner or later, we would have had to meet their directives, because we were under their supervision."
   The city took on a series of projects to improve utility infrastructure in recent years including the $10 million expansion of the waste water treatment plant at the urging of local industry officials and the Economic Development Commission, Stahl 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 and $1.1 million to construct the West Interceptor to the sewage treatment plant.