Fort Smith, Van Buren officials may soon discuss water dispute
by June 24, 2011 5:12 pm 83 views
New water rate calculations and meetings between Fort Smith and Van Buren officials in mid-July may help resolve an almost 5-year water payment dispute between the two cities.
The disputed payment, at one time estimated to be as much as $1.2 million, involved a “true up” provision in the contract between Fort Smith and Van Buren.
“The provision gives Van Buren assurance that Fort Smith doesn’t set water rates in a way that generates more revenue that it costs to supply Van Buren with water. It also allows Fort Smith to recover costs if rates are set too low,” Fort Smith City Administrator noted in a June 24 memo that provided the Fort Smith Board of Directors an update on the issue.
The first two years (2004 and 2005) of the contract found that estimates were close to actual costs, with the first year slightly favoring Fort Smith and the second year slightly favoring Van Buren.
“Neither party invoked the true up provision because the amounts were so small,” Gosack explained during an November 2010 interview with The City Wire.
A drought in 2006 and system disruptions caused by the expansion of Lake Fort Smith resulted in higher operating costs — primarily related to treating Arkansas River water — and a low volume of sales related to conservation measures created a true up allowance of $455,470 in Fort Smith’s favor.
The higher costs and lower water volumes continued, with the true up value reaching $205,191 in 2007, and $539,453 in 2008. The Van Buren utility also disputes those amounts.
Van Buren did pay $161,000 toward the 2006 true up, but Fort Smith officials believe cashing the checks would have ended the dispute in Van Buren’s favor.
“Cashing the checks would have been acceptance of Van Buren’s calculations. If cashed, we would have forfeited our ability to claim a higher amount,” Gosack noted in the memo.
Gosack said a new rate model developed for the city by Kansas City-based Burns & McDonnell is being used to calculate true up amounts for the years 2006 through 2009.
“I realize the resolution of these true up amounts has lingered for some time. There’s significant dollar amounts at stake. It’s important that we resolve this in a way that’s fair and reasonable for both Van Buren and Fort Smith, and in accordance with our water supply agreement,” Gosack noted in the conclusion of the memo.