Archive for Wednesday, October 20, 2010

Legal battle over water means higher fees for rural Eudora customers

October 20, 2010

In eastern Douglas County, a long-simmering water war is starting to produce new levels of pain.

Patrons of Rural Water District No. 4 likely will see a jump in water rates in 2011 to help pay for a lawsuit with the city of Eudora that has cost the district about $900,000 in legal fees.

But leaders with the water district — which serves much of southeast Douglas County — are putting Eudora residents on notice that eventually the district expects to get more than $1 million from the city.

“The law says if we win the lawsuit, the city will have to reimburse us for reasonable attorney fees,” said Scott Schultz, the administrator for RWD No. 4. “I expect the legal fees to be over $1 million by the time we’re done with the appeals court. Quite honestly, I have no idea how they are going to find $1 million to pay us back.”

An attorney for the city of Eudora, though, said the water district may not want to hold its breath on that issue.

“I’m going to be very surprised, even if the water district wins the case, that they are going to get anything close to $900,000,” said Curt Tideman, an attorney with Lathrop & Gage. “I would say that $900,000 never should have been spent on this lawsuit, and I would expect a court to find the same thing.”

At the moment, the most certain point seems to be that RWD No. 4 patrons will pay more for their water in 2011. The district’s board is finalizing a new $4 per month “debt service fee” that will be added to the bills of patrons for the next three years.

Schultz said the new fee primarily is to rebuild the district’s cash reserves, which have dwindled as the district has paid the legal fees plus some infrastructure projects that were started before the lawsuit. Schultz said the district would like to have cash reserves of about $400,000 to cover any emergency infrastructure projects. The reserves currently are about $150,000.

“We still believe we’re going to prevail, but the board has looked at it and believes it may be a couple of years before we get reimbursed,” Schultz said. “We’ve had to bite the bullet and ask our patrons to help out a little bit.”

The lawsuit between the district and Eudora dates to 2007. It centers on a dispute about whether the city has the right to provide water service to newly annexed areas of southern Eudora. The district — which sued the city — has claimed in the lawsuit that Eudora must pay the water district a fair price to give up the territory or else allow the district to sell water to the area even though it is now in the city limits. The two sides were never able to agree on a price for the disputed territory.

The water district has won a ruling in federal district court that has prohibited Eudora from providing the drinking water to a new Lawrence Memorial Hospital medical building that is being built in the disputed area. The city also has been ordered to pay slightly less than $40,000 in damages, Tideman said.

But Eudora is appealing the ruling to the 10th Circuit Court of Appeals in Denver. Oral arguments are set for Nov. 17, and a decision is expected in early 2011.

But a decision on whether Eudora is required to pay any of the district’s legal fees will be decided in a separate hearing.

Despite the costs, Schultz said he believes the case has been worth it. He said the district has three cities — Eudora, Lawrence and Baldwin City — growing into its territory. If the district isn’t fairly compensated for the loss of its territory, Schultz said rates for its remaining customers will have to increase to cover the district’s basic operating costs.

Tideman, and other city officials, were not able to immediately provide information regarding how much the city of Eudora has spent on the lawsuit. Tideman said it was “considerably less” than $900,000 but said the city’s expenses have been “hundreds of thousands of dollars.”

Tideman said the city could not guarantee that city water rates won’t increase as a result of the lawsuit. He said if the city is ordered to pay a substantial amount of the district’s legal fees that a rate increase or issuance of new bonds would be possible ways that the city would cover those costs.

“But if the circuit court said we’re wrong on each and every issue in the case, even then we don’t believe we would be ordered to pay $900,000,” Tideman said. “Or at least we would hope not.”

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