Average Markup For Most Utility District Customers Is About 400 Percent
BY KRISTEN BUCKLES
In the rural areas of Greene County, the vast majority of citizens who get their water on tap get it from the same ultimate source -- the Greeneville Water Department's intake on the Nolichucky River.
However, for various reasons, not everyone outside the town who buys that water winds up paying the same price.
Customers in one rural water utility district may pay a rate 40-75 percent higher than a customer in another rural utility district for the same amount of water -- even though both districts buy their water from Greeneville for the same price.
According to utility district officials, the average family in Greene County uses about 3,000 gallons of water per month.
That amount of water costs less than $17 in one area of the county but almost $29 in other areas, although though both districts buy their water from Greeneville at the same rate.
And in one utility district -- which has higher overhead expenses since it operates its own treatment plant and does not usually buy water from Greeneville -- the price a customer pays for 3,000 gallons is about $37.
FROM THE SOURCE
Those living inside the Greeneville city limits only pay the amount the Greeneville Water Department charges for the water plus the department's overhead costs.
Customers who live outside the Greeneville city limits but buy water directly from the Greeneville Water Department -- not from one of the rural utility districts -- pay an "outside" rate that is double the inside-Greeneville rate.
Superintendent Laura White said that the customers who pay the "outside" rate consist mostly of individual residences in the City of Tusculum and a few in the South Greene area: a total of about 3,000.
These customers pay the higher rate, she said, because of the added distance the water must travel to the point of delivery.
The additional distance, she said, creates higher costs related to distribution, maintenance and water loss.
White said most other municipal water systems throughout the state have a similar pricing system for individual customers who live outside the municipality where the particular water department is based.
"Most municipalities do that," she said. "Their outside rate is normally double."
A much larger number of water customers outside the city limits, however, live beyond the area served by the Greeneville Water Department itself and are therefore not direct customers of the department.
These customers are instead served by rural water utility districts in their respective areas of the county.
Greene County has six utility districts, most of which purchase water from the Greeneville Water Department at a wholesale rate, then re-sell it to their customers at a retail rate.
The water utility districts are: Chuckey Utility District, Cross Anchor Utility District, Glen Hills Utility District, North Greene Utility District, Old Knoxville Utility District and Town of Mosheim Water Works.
The utility districts must charge enough to their own customers to cover the cost of buying the water from the Greeneville Water Department, plus covering their own administrative costs.
Greeneville Water Department Comptroller Kim Bowers said the department sells water to the utility districts at the "inside" rate.
In addition, because the utility districts make their purchases in bulk (more than 15,000 gallons), the vast majority of the charge for the water would come at the discounted, bulk rate.
Since each utility district has faced its own unique challenges and made different administrative decisions during the period of its existence, the charge paid by customers in the various districts varies from district to district.
Expenses for the districts include such items as water line installation and maintenance and administrative costs.
According to White, an early 2012 rate study by the Greeneville Water Department found that utility districts' markups averaged about 400 percent over what they pay the Greeneville Water Department to buy their water.
A study of current rates conducted by The Greeneville Sun shows an average markup of 466 percent (based on the rate the districts charge their customers for 3,000 gallons per month, compared with the $4.40 average that Greeneville charges the districts for that amount of water.)
The North Greene Utility District has the highest fees in the county, but also faces the unique situation of being the only district to operate its own treatment plant to obtain the majority of the water it provides its 2,000 customers.
If North Greene were to purchase water directly from the Greeneville Water Department and maintain its current rates, the comparable markup would be 758 percent above the purchase price.
North Greene Utility District President John Waddle said in an interview that he would "love" to purchase water from Greeneville, and does so when necessary by purchasing the water indirectly.
The North Greene district, however, draws water from Lick Creek, not the Nolichucky River, and treats it using a membrane system.
"We're restricted because Lick Creek only gives so much water," Waddle said. "We really need -- and we're headed that way, that is my main goal is to head that way -- to get another water source other than Lick Creek.
"Whether or not we will still process water, that remains to be seen," he said.
Waddle, who is also a county commissioner, became president of the district about two years ago.
He said he has reduced the number of employees in order to significantly decrease administrative costs. He added that the district has taken a "proactive" approach in the maintenance of its equipment.
Challenges, he said, stem from the distance between the residences of the district's water customers. He estimated that the distance averages a quarter-mile.
Among the districts that purchase water solely from Greeneville, sister utility districts Chuckey and Cross Anchor have the highest rates.
The two districts charge almost exactly the same rate for 3,000 gallons of water. Chuckey charges $28.77, while Cross Anchor charges $28.76.
For both districts, this rate represents a 554 percent markup over the $4.40 rate charged them by the Greeneville Water Department.
The Chuckey and Cross Anchor districts recently placed four employees on unpaid administrative leave pending the results of an annual audit investigation that revealed "questionable practices by the management," according to local CPA Mickey Ellis.
Ellis is still conducting his audit, but also submitted his early findings to the Tennessee Comptroller of the Treasury for further investigation.
The Greeneville Sun's analysis of the two districts' financial records revealed large employee bonuses, significant cell phone allowances and a nearly $8,000 retirement party for former manger Shirley Collins, one of the employees now on leave.
The Chuckey Utility District's board chairman, John Carter, who also serves as a county commissioner, said that he believes the Chuckey and Cross Anchor districts' fees are about the same as those of other area utility districts.
He said the Chuckey board called a halt earlier this month to a planned $2 rate increase until further study could show if the project for which the increase was earmarked (line replacements due to reported water loss) is even necessary.
"We're not going to replace them," he said. "We've put everything on hold. I don't know that we needed that anyway."
Carter said the district's many upgrades have resulted in what he believes could be among the best functioning equipment in the county.
As for any rate increases, the last increase for both districts came in March 2012.
"I don't look for us to have any rate increases for many years to come," Carter said.
Cross Anchor President Lloyd Dawson also said that there are no upcoming rate increases from Cross Anchor, which already has a line replacement project underway.
GLEN HILLS UTILITY
Glen Hills Utility District, which charges $27.27 for 3,000 gallons, has a 520 percent markup over the $4.40 cost.
Glen Hills runs on as few employees as possible while maintaining employees with the skills to provide all necessary maintenance and operation services, board President Lloyd "Hoot" Bowers said.
"I feel like our rates are very competitive with other districts'," Bowers said. "We're very satisfied with our rates. We try to stay on top of everything and serve the people the way we should."
Bowers, who also serves as a county commissioner, described Glen Hills as "a top-notch utility district," saying the district received the American Water Works Association's Distribution Award for the Kentucky-Tennessee Section in July of this year.
General Manager Chris Myers said that a delegation from the association examined the system set-up, tank sites, pump stations, water loss and record keeping, among other areas.
"I'm very proud of my employees and my operation. They do a good job," Myers said.
OLD KNOXVILLE UTILITY DISTRICT
Old Knoxville Utility District's markup is 429 percent, with residential customers charged $23.27 for 3,000 gallons.
J.W. Douthat, board president of Old Knoxville Utility District, said he feels the rates the utility district charges are fair.
"They're cheap enough, to think about a household using $30 worth of water a month; that's only a dollar a day," he said. "What else can you get for $1 a day that's that convenient?"
Douthat has served on the district's board for about 35 years and plans to retire when his term ends in April, he said.
He noted several improvement projects that he has been proud to lead over the years, including water-line extensions and the district's own maintenance crew.
The only increases the district has passed on to customers in years have been cost increases from Greeneville, he said.
"I'm proud of what we've accomplished. We've accomplished some good clean water for churches and schools," Douthat said.
"We've worked at it and tried to do what was right."
TOWN OF MOSHEIM
The Town of Mosheim Water Works, which charges $16.48 for 3,000 gallons, has a markup of 275 percent over the $4.40 cost.
This is the cheapest rate of all the utility districts, including what Greeneville charges for its "outside" customers.
However, Mayor Tommy Gregg noted that customers will see another 13 percent increase coming in January as the town works to upgrade many of the system's 6- inch lines.
"Greeneville went up 5 percent yearly for five years, [beginning last year]," he said. "That increase is going to come over to us, too.
"What we strive to do is to keep the rate as low as we can to the payers. We don't like to have too many growing pains," Gregg added.
However, the town did need to address the problems of water loss, low water pressure in some areas, and the need for new meters and better lines running for the installation of fire hydrants, he said.
"We think it's as good a deal as we can give our water customers, at this point in time.
"Hopefully we can continue to have a reasonable rate," he said. "We're counting on this to be a big improvement to our system."