The Board of Supervisors Thursday rejected an amendment to a water service agreement with the Town of Minden, likely sending the two entities to mediation or, if that fails, to court.
The amendment would increase Carson City’s water delivery rates and factor into those new rates new costs the city disputes are its responsibility.
“I don’t think a rate analysis can add additional costs that were never contemplated or agreed upon in the initial agreement,” said Mayor Bob Crowell.
The decision means Carson City and Minden will now have a “confer and meet” to see if the two municipalities can work out their differences on their own, said Jason Woodbury, Carson City district attorney.
If not, they’ll move onto mediation with either a Ninth Judicial District Court judge in Minden or an independent mediator agreed upon and paid for by both parties.
In the meantime, water delivery from Minden will continue as usual and Carson City residents won’t be affected.
The supervisors directed staff to pay the new, higher rates for the water service “under protest,” which allows the city to remain in compliance with the agreement but recoup overpayment in the future.
Under the amendment, water delivery rates will go from the current rate of $.777 per 1,000 gallons to $.862, and eventually to $1.283 per 1,000 gallons in 2021-2022.
Supervisor Brad Bonkowski asked if, alternatively, the city shouldn’t pay the portions of the new rates allocated to the items under contention — stabilization and construction loan repayment — which are new categories previously not included in the rate structure.
“We’ll pay the full amount so not to put ourselves in the position where another party could declare Carson City to be in breach of the contract,” said Woodbury after the meeting.
Ryan Russell, an attorney with Allison MacKenzie representing the Town of Minden, spoke during public comment.
“May I very respectfully point out the action on the table is a mistake,” said Russell.
Russell said Minden conducted a rate study as required by an amendment to their agreement and invited its customers to respond to it.
“We told our wholesale customers numerous times if the rate is wrong make a counterproposal and we heard nothing,” said Russell.
“What I have is a letter that was never responded to,” he said.
Crowell was referring to a January letter written by Carl Ruschmeyer, public works director, Douglas County, to Jenifer Davidson, Minden town manager.
Douglas County is also a wholesale customer of Minden’s under the agreement and the letter was copied to Carson City and the Indian Hills General Improvement District, another wholesale customer on the agreement.
In it, Ruschmeyer laid out the county’s concerns with the proposed rates, including the allocation of certain personnel and well production costs to wholesale customers and repayment of a construction loan for $12.3 million.
“The Town has stated that they have the capacity for the Phase I wholesale commitments so it is not clear why a loan and repayment is necessary or justified,” the letter reads. “Moreover, when we negotiated the current rate structure, we consented to a service charge to cover, in part, this expense.”
Minden did recalculate the personnel costs and as a result lowered the new rates by 3 cents per 1,000 gallons for one year.
At one point, according to Darren Schulz, Carson City public works director, all the parties agreed to enter into a one-year amendment in order to work out all the issues with the rate study during that time, but Minden eventually decided to go ahead with the five-year amendment and the town board approved it in June.
On Aug. 4, the Douglas County Commission adopted the amendment, too, on a vote of 3-2.
Indian Hills GID has yet to consider it.
In 2010, Carson City purchased water rights from Minden and signed an agreement for delivery of the water that included construction of a water line.
In 2013, an amendment set initial rates until enough data could be collected to set rates based on actual operations and required a rate study to be completed by February 2016.
Minden paid for and completed the study earlier this year.
“We will continue to be a good neighbor and a reasonable partner,” said Woodbury after the meeting. “Carson City is not looking to force the Town of Minden to operate at a loss. But we are not here to subsidize retail water consumers in Minden. If the Town of Minden chooses, as they have, to raise retail rates at a fraction of the amount rates were raised for wholesale users, the Town of Minden, not Carson City, should bear the consequences of that choice.”
Woodbury said he expects the city and Minden “to make significant progress,” on the matter by the end of the year.
“No one wants it to be in flux,” he said.
In other actions, the board:
adopted a resolution to change the bidding requirements on the Facade Improvement Program
accepted a $58,402 grant for the Tri-Net Narcotics Task Force and a $117,000 grant for the Regional Gang Initiative
approved a $146,772 contract with Firetrucks Unlimited for an ambulance chassis remount
accepted the policies and procedures update project from the city’s internal auditor, Moss Adams as well as recommendations from the Audit Committee to approve completed remediation plans.