Gravette seeking to purchase portion of Centerton water district

Centerton says, ‘Not so fast!’

The above map shows Centerton's waterline (in yellow) which now runs through Gravette and also into Bella Vista.
The above map shows Centerton's waterline (in yellow) which now runs through Gravette and also into Bella Vista.

— The city of Gravette notified Centerton Utilities, in a Feb. 24 letter addressed to Centerton Waterworks and Sewer Commission and Melvin Coffelt, chairman of the Centerton Commission, of its intent to "explore the feasibility of ... purchasing the portion" of Centerton's water district which lies within Gravette's corporate city limits and planning jurisdiction.

On March 21, Patrick Hall, business director for Gravette, addressed the Centerton Utilities Commission to express Gravette's intent to pursue the purchase of a portion of Centerton's water system under Arkansas Code 14-208-102, which addresses a municipality's right to acquire rural water service properties, facilities and customers when a rural water service area and customers are annexed into a municipality.

Gravette also asked that ongoing negotiations with the city of Bella Vista to purchase from Centerton a short line reaching up into Bella Vista's corporate city limits be halted at the present time because that line crosses through the city of Gravette following the annexation of the Hiwasse area.

Centerton Utilities, however, is questioning Gravette's actions and saying it wants to take a closer look at the requirements of the state statute Gravette is citing to imply it has the right to purchase the portion of Centerton's water system which now lies within Gravette's corporate city limits and planning area. Also of concern, should such a sale take place, is that permanent boundaries be established so the two water districts do not end up in a similar situation in the future as municipal boundaries expand.

While A.C.A. § 14-208-102 does speak of a municipality's right to acquire rural water service properties, facilities and customers in (a) (1), it also speaks of mutual agreement between the two entities in (2) (A) and limits the municipality's right to extend its own water system into the rural water system. Any change in service areas also requires state approval from the Arkansas Natural Resources Commission and compliance with the Arkansas Water Plan.

Patrick Hall, Gravette's business director, did come and address the Centerton Utilities Board on March 21, according to Robert Anderson, the secretary and treasurer of the Centerton Utilities Board, but his presentation was not well received by the board because it came across more as Gravette's demands than a proposal to discuss and negotiate a transfer of part of Centerton's water service area to Gravette. He said an alternate proposal he had considered was never even brought up because of the demanding nature of Hall's presentation.

"We want to be good neighbors," Anderson said, "but we can't be forced to sell a part of our service area. We need to take a closer look at the impact such a sale would have on our system and on water customers," he said, explaining that the sale would not benefit Centerton Utilities at all but would leave it with two dead-end lines rather than the loop it currently has.

Anderson said Centerton's water system is not government subsidized and is paid for in full by customer water rates. He did not think it would be fair to Centerton's water customers to take any action which would cost them higher rates.

And regarding Bella Vista's efforts to purchase a small finger of the water system that extends into Bella Vista, both Anderson and Frank Holzkamper, Centerton's public utilities director, said negotiations -- first informal, then formal -- have been ongoing with Bella Vista since Bella Vista incorporated. For the transfer of the line into Bella Vista to be completed, Bella Vista would have to be approved as a water service provider and be assigned a water service area by the state. Should that happen, Centerton would supply water to Bella Vista wholesale through its system connected to the Benton-Washington Regional Public Water Authority.

And, if that should happen first, Gravette would need to deal with Bella Vista in regard to the part of that line which passes through Gravette, Anderson said.

Selling a portion of a water service area is not so easy it can be accomplished quickly, Anderson and Holzkamper explained. A number of issues are involved and the process takes time. And it is not a decision which can be made simply by mutual agreement of two municipalities or water service providers. The final decision rests with the Arkansas Natural Resources Commission.

Also to be considered in the process, according to Anderson, are the impact on rates to customers in the two water service areas, the effect on the water systems and system maintenance, existing loans and financing and other rules and conditions of the transfer. A lengthy and detailed analysis of the water system and its parts, depreciation, the cost to make both new systems efficient, the effects on customer water rates, as well as the impact on the environment and the state's water plan all come into play, Anderson and Holzkamper explained.

Anderson said Centerton did not want to pay for such a detailed analysis and then have the sale not go through because the cost of the study would impact the rates for Centerton's water customers with no benefit to the customers. He said Gravette should have to pay the costs of such a detailed study whether or not the sale is ever approved.

Of special significance is a clause in the agreement between Centerton and the Benton County Rural Water Development Authority signed when Centerton took over water service in a portion of the Authority's service area back in 2005. The clause requires there to be no discrimination within the water service area in regard to customer rates. The clause does not permit Centerton Utilities to charge some of its water customers a higher rate than others and would not permit Gravettte to charge water users in the Hiwasse area a higher rate than water users who were a part of Gravette before the large annexation. Any costs to acquire the additional service area would have to be borne equally by all Gravette's water customers.

Gravette's proposal, according to Holzkamper and Anderson, would have to involve building a new 12-inch line to loop Centerton's system, and then building a second large line (possibly 12 inches) between Gravette's current water system and the Hiwasse area and building a water-storage tank or tower and a pumping system to make the Gravette system work. Holzkamper said the cost for that could run into the multimillions and would likely mean an increase in water rates for all Gravette's water customers.

In a March 27 post on the city of Gravette's Facebook page, also shared by email, Gravette city residents and news subscribers were notified of the city's stated intent to purchase the portion of Centerton's water service area which lies within the city of Gravette or its planning area.

The post indicates that state statute requires Centerton's Water and Sewer Department to negotiate the sale of a portion of its service area to the city of Gravette. It also states the city's expectation that Centerton's utilities commission table any ongoing negotiations with Bella Vista for the portion of its water service area which extends up into Bella Vista.

The post reads (unedited) as follows:

CENTERTON WATER ANNOUNCEMENT

On Tuesday evening, March 21, the City of Gravette officially approached Centerton Utilities and expressed our intention to pursue the separation and purchase of the portion of the water supply system which services the area that lies within Gravette's corporate limits and the surrounding planning jurisdiction. It is the administration's belief that the planning process for citizens and developers in the eastern part of Gravette will best be served when water and wastewater management is organized in conjunction with land use planning under the supervision of a single governing body.

Such instances of one municipality operating a water system within the boundaries of another municipality have been addressed by the Arkansas Legislature and the law provides guidance allowing any city that already operates its own system to purchase the facilities and customers that lie within its corporate boundary. The two parties are statutorily obligated to negotiate in good faith.

Also, we recently learned the City of Bella Vista (not POA) has been in negotiations with Centerton Utilities to purchase a portion of this district. The section which they have identified similarly includes land within Bella Vista's corporate city limits, but also includes several hundred acres of land that lie within the corporate city limits of Gravette. Considering we have made known our intentions to explore the purchase of all areas within our corporate boundaries, we expect these negotiations to be tabled until further study can be done.

The post included maps showing the Centerton Water District, Gravette's new corporate city limits and the Gravette Water District.

The Arkansas Natural Resources Commission website spells out some of the procedures for changing a water service area in its rules section. According to those rules, "The (ANRC) Executive Director must provide written approval for any amendment to an article or bylaw that would change a water authority's water or sewer service area. Before the Executive Director will provide written approval, the authority must first receive water plan compliance approval pursuant to ANRC Title VI, Water Plan Compliance Review Procedures."

Those procedures include the following:

Upon agreement of the providers exchanging territory, the providers shall submit a written proposal to the Executive Director of the Commission for consideration.

A. The proposal may be made part of an application for project approval under the Arkansas Water Plan.

B. The Executive Director will determine whether the impact of the exchange is sufficient to warrant payment of an equitable portion of the current provider's outstanding financial assistance.

C. If the Executive Director determines that payment is required, the following factors shall be considered in determining the sufficiency of the payment:

1. The impact of the transfer of the area on the current provider's existing indebtedness and its ability to repay the debt;

2. The value, including depreciation, of the current provider's facilities in the area to be transferred;

3. The amount of any expenditures by the current provider for planning, design, or construction of service facilities outside the area that are directly and reasonably allocable to the area to be transferred;

4. Any demonstrated impairment of service or increase in cost to consumers of the current provider remaining after the transfer of the area;

5. The impact of future lost revenues from the current provider's existing consumers in the area to be transferred, but only until the indebtedness is retired;

6. Necessary and reasonable legal expenses and professional fees; and

7. Other relevant factors as determined by the Commission.

Under Subtitle VI, Review of acquisition of properties, facilities, or customers belonging to another system, the following general procedures are outlined:

A (1) . Prior to acquiring rural water or wastewater service properties, facilities, and customers pursuant to Ark. Code Ann. § 14-208-102, a municipality shall receive approval from the Arkansas Natural Resources Commission that the action complies with the Arkansas Water Plan.

(2). Similarly, a municipality containing an area within its corporate limits that is served by another municipality, may elect to purchase the other municipality's customers, distribution or collection properties, and facilities located within the acquiring municipality using the same procedures applicable to municipalities acquiring properties, facilities, and customers from rural systems.

B. Both systems, the one doing the acquiring and the one being partially or wholly acquired, shall submit a written proposal using the factors in Section 605.3(C) to the Executive Director, addressing the amount of consideration to be paid to the rural service or municipality whose customers or facilities are being acquired for the proposed acquisition and any costs attributable to the negotiation or appraisal.

C. The Commission shall review the amount of consideration to be paid to the rural service or municipality for the proposed acquisition and any costs attributable to the negotiation or appraisal in accordance with the factors identified in Sections 601.5 and 605.3(C).

D. The Commission shall: 1. Approve the application under the Plan if it determines the requirements of Section 605.3 are satisfied; 2. Deny the application under the Arkansas Water Plan if it determines the requirements of Section 605.3 are not satisfied; or 3. Issue a letter to the municipality that the proposed action is exempt from review under the Arkansas Water Plan.

Subtitle VII also states that "The Executive Director shall not approve any application unless he determines that (a) the project complies with and implements the goals and objectives of the Arkansas Water Plan; and (b) the project adequately coordinates the use of water resources within the region in which the project is located and within the state as a whole."

General News on 04/05/2017