NEWPORT – Newport City and the Village of Derby Center went head-to-head in court Monday over a disputed water contract.
The trial began with opening remarks and quickly moved into testimony. By 4:30 p.m., a number of witnesses had not yet taken the stand and the trial is set to continue another day, as of yet when is unknown.
In 1997, the city and the village agreed that the village would supply water to the Industrial Park just off the Derby Road. The city, with voter approval, invested between $800,000 and $900,000 for the construction of a water main with the understanding that the village would provide 10,000 gallons of water a day to the city.
“This was a win-win for both,” said attorney Phil White, who was representing the city. “The city wanted to use water in this hard-to-serve area and the village wanted to sell water.”
In 2006, the village changed its rate arrangement from a minimum rate structure to a structure that takes into account how much water each customer uses plus how much is allotted or reserved for its use.
That action caused city officials to cry foul because, the city asserts, it built it's water main in reliance on the agreement. The city also has an obligation to maintain the meter that shows the village how much water the city uses.
There was never any discussion that the village would charge the city for additional allocation, White said.
Chris Smart, attorney for the Village of Derby, said the city, without authorization, connected users outside of the industrial park onto the system. One of properties is the North Country Credit Union that opened this fall. The second was the Top of the Hills and a small trailer. That, said White, was an oversight and the village would have granted the request just like the city granted requests to hook up the Derby side of the Newport Derby Road.
White also told the court that the city discovered problems with monitoring the water and with the bypass valve. White said that early on someone from the village shut off the bypass valve, which made the water unavailable for fire emergencies; and once someone from the village locked the bypass valve. There have also been problems with the bypass valve malfunctioning.
However, White believes those problems have been corrected.
“What we’re going to be asking the court to do is take the data provide by actual meter readings of the individual customers and calculating who owes what to whom on this,” said White. “The city has never objected to paying for actual usage plus or minuses wherever that number falls.”
The city’s position is that it is illegal to charge for reserved capacity in this manner and the city paid for the reserved capacity, White said. He said the 10,000 gallons per day are not the result of individual users connected to the system but what the city bought with its agreement when it built the water main.
"If you look all the reserved allocations of the individual users, you'll see it's about 2,500 gallons per day and not 10,000 gallons per day. If you're going to try to create an equivalency between what's happening up in the village and the Town of Derby with city users, you'd have to look at the individual allocations of the individual users hooked into the system in order to calculate that reservation – not the full 10,000," White explained.
The city already paid the fees in advanced by investing into the system, but if the court is going to say it needs to pay something, the city argues it should look at the individual users on the system, White said.
What's interesting is how much work went into the agreement, Smart said. A joint committee made up of individuals from the city and village made the agreement. The committee met five times. The agreement went to the governing bodies of both parties and to the voters.
“There is a lot to this agreement,” said Smart. “It was a very serious process. This was not a wink-wink over the breakfast table type of agreement. This was definitely something very formal, very public.”
There are three major issues, Smart said. The first is that under the 1997 agreement, the village was given the discretion to amend its rate schedule to charge for "ready to serve fees." Smith explained the system’s pipes need to be maintained even if the customer is not using the water.
In 2006, village officials decided it wasn’t fair to charge low users the same as high users. It also cost more to bring water to high users than it is to low users.
The second is that the village didn’t find out that the city hooked on unapproved users until officials looked at state permits.
Third, users in the industrial park were supposed to be connected to a master meter just outside the city, Smart said. However, the master meter started giving inaccurate readings. In 2010, the meter showed negative readings for the city. Smart also said the village wanted to treat the city as one customer.
The trial is expected to continue for at least another half day sometime in December.