Tennessee bill letting private companies buy water utility districts worries some in Chattanooga area

Staff Photo by Robin Rudd/ Children play in the stream in the plaza outside the Tennessee Aquarium. From back to front, Charlotte Smith and Audrey Smith play under the watch of their mother Amber Smith and grandmother Lou Ann Collier from Gadsden, Alabama.
Staff Photo by Robin Rudd/ Children play in the stream in the plaza outside the Tennessee Aquarium. From back to front, Charlotte Smith and Audrey Smith play under the watch of their mother Amber Smith and grandmother Lou Ann Collier from Gadsden, Alabama.

A bill slated to come before Tennessee legislators early next year that would permit private companies such as Tennessee American Water to buy utility districts is drawing fire.

Utility districts across the state, including the nearly half dozen in Hamilton County through which thousands of people get their drinking water, are aligned against the bill.

But private companies such as Tennessee American, which supplies water to most of Chattanooga, said passage of the bill could lead to more reliable utility infrastructure, enable added access to capital for system improvements and create cost savings.

"Private utilities' sole focus is on the service they provide to customers," said Daphne Kirksey, external affairs manager for Tennessee American.

The bill is supported in the state House by Commerce Committee Chairman Timothy Hill, R-Blountville, and in the Senate by Sen. Mike Bell, R-Riceville.

The measure would establish a procedure by which the state Utility Management Review Board and Tennessee Public Utility Commission may authorize the sale of all or part of a utility district's assets to a private utility.

In Hamilton County, the Eastside, Hixson, North West, Savannah Valley and Walden's Ridge utility districts are encouraging people to "join us in the fight to protect our water" on a website www.protectourwatertn.com.

Don Scholes, the Tennessee Association of Utility District's general counsel, said that utility districts are governmental entities which usually provide water, sewer or natural gas services in the state.

"It's a public entity," he said. "It's like a city but it only does one thing. Most are water districts."

Board members are typically appointed by the county mayor, Scholes said.

He said there's not a strong need for the new law and the group is against the bill. Among the advantages of utility districts is that they're non-profit and, unlike private, investor-owned companies, don't have to make money for shareholders, Scholes said.

"A utility district has the rates it needs to cover costs and future investments of the system," he said.

Also, utility districts don't pay federal, state, property or income taxes unlike private companies, Scholes said. He said municipalities can already sell their utility assets to private companies.

In 2013, Tennessee American Water bought and upgraded the aging water system from the city of Whitwell for $1.55 million and Tennessee American was one of the bidders to buy Signal Mountain's water system before the town council decided to maintain its own water system.

Kirksey said the bill, which was brought up last year, wouldn't force utility districts to sell.

"It does not allow for a hostile takeover, and the utility district must agree to sell to the private utility in order for the sale to take place," she said, adding that Tennessee American is part of a statewide coalition of private utilities supporting the legislation including water and gas providers.

She said the bill ensures all utilities remain an option for communities which need assistance in meeting new compliance and management expectations.

"We are willing to have conversations with water or wastewater utilities on how we may be a resource to utility districts as they consider the future of their operations and what it means for their customers," Kirksey said.

But so far, more than 750 people have signed onto a petition to which the "protect our water" website directs viewers.

One man who signed the petition, Rob Mongiello, said he lives in Chattanooga and gets Tennessee American water but he's building a house in Ooltewah within the Eastside Utility District.

He said Tennessee American water is more expensive and the company is "harder to deal with" than Eastside.

Kirksey said that the single most important factor that drives cost is the ongoing need to upgrade and replace infrastructure.

She said that a 2018 report released by the state estimates that $15.6 billion will be needed to 2040 for investment, and it acknowledges that some utilities may not be able to fund those without burdensome rate increases for their customers.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318. Follow him on Twitter @MikePareTFP.

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