New contract keeps Coweta from buying excess water

• Thursday, September 20, 2012
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“We were at a point where we were kind of saturated,” he said. “Our customer base hadn’t grown any.”

“That was really going to start hurting us, to take water we couldn’t sell,” he said. “We were getting in that boat. Something just had to be done.”

The authority and Griffin were locked in litigation over the contract starting in late 2009, until the Georgia Supreme Court ruled in Griffin’s favor in May 2011. Griffin had won at every step in the legal process.

The legal battle cost the authority about $500,000.

The authority’s success in getting the contract changed came from a different approach.

George Rosenzweig, legal counsel for the authority, knows Drew Whalen, Griffin’s city attorney. One day he asked him to lunch to discuss the Griffin/Coweta contract. Things advanced from there.

“I had talked with George numerous times,” Boren said, even before the retirement of General Manager Ellis Cadenhead.

The feeling was “we’ve got to do something,” Boren said. “We are in a contract that is so progressive, that is based on all this growth that just had not happened in Coweta,” Boren said.

In fact, the Coweta water system has fewer customers now than it did in 2007. That’s when the authority became an independent entity from the county. There were around 25,000 customers then, Boren said. Now it’s more like 24,500.

But when the contract was initially drawn up, “that’s when everything was booming,” Boren said. “Some of the projections were Coweta” was “going to grow like crazy,” he said.

There have been many meetings over the last several months, Boren said. Neither side is getting everything they want.

“We had more concessions than we wanted and they had some they just didn’t want to budge on,” Boren said.

“I have to give a lot of kudos to George,” Boren said of Rosenzweig. “He was very instrumental in getting with their lawyer, and trying to get something that would make it work between us and Griffin — so that we were not going to be in litigation for the next 40 years,” he said.

“I really feel like it is more of a partnership nowâ ¦ than somebody forcing us to do something that we just don’t need or want,” Boren said of the authority’s relationship with Griffin.

“We had some good negotiations over the course of the last year,” said Griffin’s Whalen. “I think the attitude has changed. We realized we had to have a solution that worked” for both sides.

“I think the difference this time is everyone acted in good faith,” said Griffin city commissioner Joanne Todd after Tuesday’s meeting. “Nobody was trying to back anyone into a corner,” she said.

Coweta’s offer of $9 million was generous, Todd said. “They wanted a reduction in their water. They knew they had to put something in,” she said.

“We think it was a win-win for both of us,” Boren said. “We’re trying to get out of this litigation and move forward and honor this contract that we’re in,” he said.

Coweta’s up-front payment of $9 million means that Griffin won’t have to issue bonds to do the needed system improvements. That translates into a substantial savings for Griffin. The cost for the bond issuance would have been passed on to the customers, including Coweta, anyway.

Boren estimates that Coweta will recoup that $9 million just by not having to deal with future rate increases related to Griffin’s debt financing.

“When you issue debt, it amplifies cost,” Boren said. He ran some preliminary numbers and determined that the cost of the increased debt would have added about 26 cents to Coweta’s cost per 1,000 gallons. “That would have been a huge cost that we would have to pass on to our rate payers,” Boren said.

“The $9 million adequately represents the revenue loss Griffin will sustain” through the lower required purchases by Coweta, said Whalen. And it will save Griffin money. It will also allow the city to move toward refunding (or refinancing) bonds issued in 2002.

“This does a lot — not just for Coweta but for all the wholesale customers of our system,” Whalen said at Tuesday’s meeting in Griffin. “I think this will be good for the benefit of the entire regional water system,” he said. “And I would certainly commend both the Coweta County Commission and their water authority board, as well as the authority’s new attorneys.”

“It is a very big plus for our community,” Todd said.

The actual rate that Coweta pays for water from Griffin will not change, based on the new contract. It will still be calculated each year, at Griffin’s cost to produce the water plus a 20 percent markup. The rate is based on each year’s audited financial statements, Boren said.

The Coweta authority currently purchases water from Griffin and Newnan Utilities under long-term contracts, with guaranteed minimums.

There is also the B.T. Brown Water Treatment Plant.

Because of the required water purchases, B.T. Brown is operated minimally, with only one shift a day.

“It’s almost used as a peaking plant,” Boren said. “That’s just the way it is.”

The B.T. Brown water is the cheapest for the authority. “It’s hard to put a cost on B.T. Brown because we really don’t run it at high efficiency,” Boren said. But he estimated the production cost would be about $1.65 per thousand gallons.

The current rate for Griffin water is $2.55 per thousand gallons, and the current rate for water purchased from Newnan Utilities is $1.95 per thousand gallons.

The new contract agreement is “very beneficial to our ratepayers,” Boren said. He can’t guarantee there won’t be rate increases in the future, but if there are, “they’re going to be a lot less than what they would have been,” he said.