Family Brands levied 80 percent water, wastewater rate increase

Heather Mays Farragut Press - Thu, Aug, 7, 2008

If your utility company raised your water and wastewater rates 82 and 88 percent, respectively, what would you do?

That is the question that has been facing John Edd Wampler, pictured right, president and COO of Family Brands Internat-ional, LLC, since January.

Family Brands, maker of Wampler's sausage and Cades Cove barbecue, is Lenoir City Utility Board’s largest customer, and as of January 2008, Family Brands has paid $8,000 a week in utilities.

This rate hike comes after a November 2007 vote in which LCUB members voted to raise industrial rates 30 to 40 percent. Only board member Tony Aikens opposed the vote.

“I just thought we should tighten our belts in-house before we start increasing water rates that much,” Aikens said.

“No company can stand that much of an increase, and I just didn’t think it was fair to put that on them,” he added.

However, the original vote didn’t seem to mean much. Or perhaps it meant more than it seemed: rates were raised more than double the 40 percent hike the original proposal allowed.

In a July 10 special-called meeting, several LCUB members challenged the rate increase, stating that the original vote to increase rates by 30 to 40 percent was not adhered to.

Aikens, Eddie Simpson and Vice Mayor Buddy Hines voted to drop the rates to the originally approved increase. The motion failed, and Family Brands and Wampler are left paying nearly $760,000 a year in utilities.

“I suppose if you say you’re building a road, and everybody votes for building a road, and then it turns out that [you] weren’t building a road, [you] were buying a helicopter, then it just stands,” Wampler said.

Wampler has considered treating Family Brand’s water and wastewater himself, or just plain leaving Lenoir City.

“If we were in Loudon, six miles away, we would save 47 percent. If we were in Sweetwater, we would save 70 percent. If we were in Farragut, we would save 55 percent; if we were in Alcoa, we’d save 53 percent; if we were in Maryville, we’d save 50 percent … if we were in Knoxville, we’d save 42 percent,” Wampler said.

“We’re looking at the possibility of relocating or treating our own water and sewer, and if we do any of those … what are they going to do without the revenue?” he added.

Wampler believes he is paying for LCUB to construct a new water treatment plant. The state has ordered LCUB to build a new treatment plant to keep up with demand.

The state measured LCUB’s intake, including an estimated number of wastewater generated at an industrial park in Roane County: 750,000 gallons daily.

However, the industrial park actually sends about 10,000 gallons monthly.

“That’s put us in kind of a dilemma: we have committed to 750,000 gallons, but Roane County is only sending us 10,000 gallons a month,” Simpson said.

“But the state calculates it on the 750,000 gallons, as if it were being delivered daily,” he added. The state may be requiring LCUB to build a plant it doesn’t need at the current time.

LCUB borrowed nearly $13 million for the expansion Tennessee required, even though bids came in for about $10 million. The new plant is set to be completed in 2009.

Another problem, according to Wampler, is that LCUB charges customers based on block rates.

Most utility companies charge customers in decreasing rates, according to how many gallons of water the customer uses. In other words, rates decrease the longer a company is a customer.

Not so for LCUB.

“They had the declining rate … but the Power Board voted to go to a block rate, which means they collapsed those decreases … the way the other systems created their block rate was they collapsed it into the low rate so that they could attract industry.

“What [LCUB] did, when they collapsed them, they collapsed it into the high rate,” Wampler said.

Because Family Brands was already in the upper tier of water usage [Family Brands uses 100,000 gallons of water a day; Wampler's uses 80,000 gallons per day], their rates were increased drastically when the Board changed to the block rate.

According to Wampler, LCUB general manager Fred Jones advised him to just charge a nickel more for his sausage in order to make the payments.

“Well, he wants to build his sewer plant off your grocery bill. I don’t think that’s fair to you, if you buy our product, that they build a new sewer plant and want us to charge you more for sausage.

“That’s almost like a hidden tax or something, and unlike them, we have competitors,” Wampler said.

Jones declined to comment, saying, “They have sent an attorney over here to gather information … so I can not comment.

“But as soon as I know something, I’d be happy to share our side of the story, because it needs to be shared.”

Aikens and Simpson are concerned about the effect on the community and the economy if Family Brands relocates.

“It’s a catch-22 thing: whether or not they move out or they stay here and build their own plant, we’ll still be in trouble either way,” Simpson said.

“My main thing is that the 400 employees [of Family Brands] could affect drastically the local economy. That really bothers me more than anything else does: that we could lose jobs for over 400 people,” he added.

“Those two companies [Family Brands and Wampler's] have given a great deal to the Lenoir City community. They’ve been here for over 60 years and they’ve given back to the community,” Aikens said.

Wampler companies, LCUB at odds over rising water costs

By Hugh G. Willett,

LENOIR CITY - The rising cost of water and wastewater treatment under the Lenoir City Utilities Board's new rate structure may be too much for the utility's largest commercial customers to absorb.

Family Brands International and Wampler's Farm Sausage Co., both Wampler-family owned processors and distributors of pork products located in Lenoir City, may have to move outside the county or find a cheaper way to access and treat their water.

Both companies will see an 88 percent increase in water and wastewater rates under the new utilities board rates that went into effect Jan. 1. By 2012, the rate schedule will effectively double the companies' annual water bill over 2007 rates.

The two companies, both managed by the Wampler family, are among the board's largest customers. Family Brands and Wampler's together will pay more than $750,000 to the utilities board in 2008, plus a 10 percent administrative fee, according to John Edd Wampler, CEO of Family Brands, which includes the brands Wampler's Farm Sausage, Elm Hill, Frosty Morn, Cades Cove, Houser, Dinner Delight, Charlie's, Jubilee and Mayo.

"We explained that it was our desire to remain customers of LCUB but that we could not absorb an increase of over $8,000 per week," Wampler said.

Wampler would like to see LCUB industrial water rates reduced to equal the average of rates in surrounding communities. The average cost of water and sewer in surrounding districts is $2.27 per 1,000 gallons of tap water and $3.38 per 1,000 gallons of waste water, he said.

Williams Sausage in Union City, Tenn., is one of Wampler's closest competitors and pays $1.82 per thousand gallons for wastewater treatment. The utilities board now charges Wampler's and Family Brands $8.72 per thousand gallons plus a 10 percent administrative fee for the same amount of treated water.

"They're asking us to pay five times as much as our competitors," Wampler said. "We are in a very competitive market. We just can't afford to pay that much more."

The two companies have explored several options, including relocation to another part of the state or country, partial outsourcing of production to other plants, and treating their own incoming water and wastewater.

Wampler said his company has hired an engineering firm to submit a proposal for in-house wastewater treatment. The company also has purchased a water treatment plant in Virginia and is in the process of relocating that equipment for use in treating incoming water.

According to Wampler, when the utilities board and the Lenoir City Council first began discussing rate increases in November, his company was told the increases would be somewhere in the range of 30 percent to 40 percent.

"In reality, the rate increase was more than double what the board was told," Wampler said, adding that both companies have been in contact with the utilities board as well as the Lenoir City Council to have the rates reduced.

"LCUB told us that we just needed to go up on what we charge for sausage," Wampler said. "Unlike LCUB, we have competition and our customers have the ability to make choices."

The Lenoir City Utilities Board may not have competition but it does have to follow state regulations, General Manager Fred Nelson said.

Nelson said the increased rates are needed to support state-mandated infrastructure improvements. The board is under a state order to build a new water treatment plant by 2010, he said.

"We're trying to make the rate system as fair as we can," Nelson said.

Pat Phillips, director of the Loudon County Economic Development Agency, said he is aware of the problem Wampler's has with water but his agency can't do anything at this point.

Many of the large industrial water users in Loudon County have water and wastewater services through the Loudon Utilities Board. Wampler's and Family brands are two of three large users in the county that use the Lenoir City Utilities Board.