Van Buren offers deal on “true up” issue (Updated)

A Nov. 21 letter from Van Buren Municipal Utilities Commission Chairman C.E. Dougan provides a different take on the water rate “true-up” issue between the commission and the city of Fort Smith.

A true-up is an audit that, according to a water agreement between Fort Smith and Van Buren  signed in 2002, serves as the basis for what Van Buren’s Utilities Commission pays the city of Fort Smith for water. In recent years, the two entities have disputed the true-up corrections. A 2006 true-up value is still pending, and Fort Smith officials recently learned they failed to meet an August 2010 deadline for completing a “true-up” of 2009 water costs for Van Buren.

During a Nov. 16 Fort Smith Board of Directors meeting, the board voted to bill Van Buren for more than $250,000 in water rate adjustments for 2009 with the hope that Van Buren officials would pay the rate although the terms of the contract were not met in full.

Dougan’s three-page letter (Link here for a PDF of the letter.) begins by noting that Van Buren was “cast in a very disparaging light” at the Nov. 16 Fort Smith Board meeting.

“Beginning in July 2005 to present, Van Buren has informed Fort Smith of what it believes to be legitimate issues with the rate modeling process. Repeated errors together with the inconsistency in results have diminished our confidence in Fort Smith’s ability to produce accurate information,” Dougan wrote. “This combined with an honest disagreement between the parties as to the reallocation of cost in the true up process encompass most of the issues.”

Dougan also disputed claims by Fort Smith City Administrator Ray Gosack about a $161,000 from the Van Buren Utilities Commission. Gosack said during the Nov. 16 meeting that cashing a check for part of what was owed could be taken as “calling it even” over the past rate adjustments. Although city staff received “a lot of pressure” to cash the checks, Gosack said cashing the $161,000 check would have resulted in the city not being able to collect $327,000.

“I assume you were acting on the advice of counsel but to imply that Van Buren was remitting this amount as payment in full for 2006 is simply a misstatement of facts,” Dougan wrote. “I communicated to you that Van Buren had calculated an amount of $397,000 which we agreed may be owed to Fort Smith for 2006. We knew we owed at least $161,000 because of increased treatment cost. I communicated that Van Buren would begin immediately remitting monthly 1/12 of this amount to Fort Smith. The difference of $236,000 would be maintained in a cash reserve pending final resolution of the issues being discussed.”

However, the commission did propose a deal to pay $581,173 for true-up costs between 2006 and 2009 “as a reasonable and fair compromise” to the disagreements. The city of Fort Smith had at one point calculated that the true-up payments owed by Van Buren could total $1.2 million.

“The consensus in the November board meeting was to send Van Buren a bill, giving Van Buren the opportunity to do the right thing. One could assert that Fort Smith should be given the same opportunity. Van Buren simply request that Fort Smith accept responsibility for it’s (sic) culpability in this matter,” Dougan noted.

Although Dougan’s letter was direct at times, he did end on a positive note, saying his discussions with Fort Smith officials have “always been received courteously and professionally” and with “mutual respect.”

Updated info: City Director and Vice Mayor Kevin Settle said Dougan’s letter indicates that “there was a disagreement and that his (Dougan’s) interpretation of the 161 ($161,000) is different than ours.”

As to Dougan’s offer to end the deal?

“I don’t like it, but there comes a point where you compromise and move on,” Settle said, adding that he does not speak for the full Board.

Settle said he hopes the issue will be resolved by the end of the year.