Wampler's, Elm Hill May Leave County

Poor management and years of neglect by Lenoir City Utilities Board management may lead to the loss of LCUB's two largest water and sewer customers. Drastic water and sewer rate increases by LCUB may force both Wampler's Farm Sausage and Family Brands/Elm Hill to relocate to another county with affordable services or to take other measures to remain competitive in their industry.

The new water and sewer rates that went into effect on 1/1/08 will cause the two industries to pay an increase for services of $419,715.00 for a total cost of $759,472.00. That's just for 2008. Rates are expected to continue to increase again each year for the next three years.

Management at both Wampler's and Elm Hill state that they can not absorb these increases and remain competitive in the market. Representatives from both industries have met numerous times with LCUB officials in an effort to resolve the issue. But last week, the LCUB Power Board/City Council plus two, voted to maintain the current rate structure forcing both Wampler's and Elm Hill officials to begin to seek other alternatives.

A statement from Wampler's and Elm Hill, management, see below, make it clear that their desire is to remain in Loudon County and be contributing members of the business community but they can not remain competitive given LCUB's position. An 82% increase in water rates and an 88% increase in sewer rates leaves them no option but to seek other alternatives which could include both plants relocating to another county or to seek other sources of water and waste water treatment. The relocation of the two industries would mean the loss of more than 300 local jobs and millions in lost revenues to LCUB, Lenoir City and Loudon County.

Which ever way the industries decide to go could be devastating to LCUB's $13,000,000.00 state mandated sewer plant improvements. If LCUB loses the nearly $12,000.00 per week revenue paid by the two industries, they will not be able to make the payments on the loan. Apparently LCUB officials and at least some power board members seem to feel they have Wampler's and Elm Hill over a barrel but this may not be the case. Unlike LCUB officials, men like the Wamplers have been in business for a long time and became successful by providing a quality product and taking care of their customers. LCUB may have forgotten the first rule of business, the customer is always right.

Below is a statement from management of Wampler's and Elm Hill.

Statement Of Position

In November of 2007 the Lenoir City Utilities Board met to consider rate increases for water and waste water. The board was told by managers of LCUB that the proposed rates were in accordance with a TDEC rate study. TDEC does not perform rate studies and have advised us they do not have one for LCUB.

Further, managers of LCUB told the board that the rate increases for Family Brands and Wamplers would be 30 to 40 percent and in a 6 to 1 vote they adopted the new rate structure which went into effect in January of this year.  In reality, the rate increase on Family Brands and Wamplers was more than double what the board was told.

Representatives from Family Brands and Wamplers began contacting officials of LCUB earlier this year to request a review of the rates, which are more than double the average of all the surrounding utility systems. We provided them with a letter and data showing the rates of the surrounding systems as well as the rates of the utilities where our competitors are located.

LCUB Manager Freddie Nelson told us that we just needed to go up on what we charge for sausage.  This same sentiment was expressed to us by board member Gene Hamby.  They want the public to pay for their new treatment plant in the form of higher grocery bills. We do not agree.

Further, unlike LCUB, we have competition and our customers have the ability to make choices.  Williams Sausage in West Tennessee is one of our closest competitors and they pay $1.82 per thousand gallons for waste water treatment, while LCUB charges Wamplers $8.72 which is nearly five times as much.  In order for us to compete, we must have a level playing field.

We explained that it was our desire to remain customers of LCUB, but that we could not absorb an increase of over $8,000.00 per week.  We listed our options as follows:

1.    We could relocate our facilities elsewhere and to that end, we have looked at several plants over the last few weeks. This would be our last choice, but there are attractive locations available.

2.    We could move part or all of our production to other plants, provided it met our high standards and specifications.

3.    We could treat our own waste water.  We have hired an engineering firm that specializes in this area and have brought in engineers and specialists to put proposals on the table for the equipment to achieve this.

4.    We could treat our own incoming water. We purchased a water treatment plant in Virginia last week and are in the process of moving that equipment here.

We stated very clearly, in advance of their vote, that if LCUB adopted competitive rates that we would remain customers.  Equally as clear, we emphasized that if we were forced to pursue other options that our funds would possibly no longer be part of their revenue stream to fund their expansion plans or their continued existing operations.

Following these contacts with board members, City Attorney Shannon Littleton sent a memo to the board of LCUB stating that LCUB management had reviewed the new rate structure and that the increase was 82 percent for water and 88 percent for waste water.  The memo went on to say that this was in accordance with the TDEC rate study.  A request was made to LCUB under the Tennessee Open Records Act for same and no document was provided.

The bids for the new treatment plant came in considerably below the original estimates. Board member Eddie Simpson asked the utility board to pass the savings from the lower cost back to the industrial customers because that is where the increase was the largest. Greg Jones stood and said they could need the extra money for contingencies. No vote was taken on the issue at that meeting.

At the next meeting of the utility board this issue was discussed again, but no vote was taken. Finally a called meeting was held on July 10, 2008 for consideration of the rates.  Board member Eddie Simpson made a motion that the rates be 40 percent over last year, which is what they thought they had approved in the November meeting. After much discussion the only three yes votes were from Eddie Simpson, Tony Aikens, and Buddy Hines. The motion failed and the previously instated rates remain in force.

We would like to thank the Lenoir City Utilities Board for holding the called meeting on July 10, 2008 to review the current rate structure that has been adopted for water and waste water. We understand that LCUB needs to build a new treatment facility, whether we are customers of same or not. We understand that in large part this is due to LCUB’s contract with Roane County which allows for up to 750,000 gallons per day being sent to LCUB.  All rate payers are expected to pay for LCUB’s decision to service Roane County.

We have put forth every effort to remain a customer of LCUB at rates that compared either with the surrounding utility systems or rates that would be competitive in nature with those companies which are in competition with us. At the same time we have been very transparent as to our inability to pay more than double the average rate of the surrounding systems or nearly five times the rate of our competitors without pursuing other options.

In 2008 alone, with the new rates in place, we will pay over $400,000 extra for water and waste water.  LCUB has also already passed additional increases that go into effect for 2010, 2011 and 2012 culminating in rate increases of over 100 percent.  Who could imagine an increase in any rate or tax of over 100 percent? They have gone up, and are going up each of these years on all rate payers.

These new rates and the future rates have never been submitted to City Council for approval. According to Tennessee Law it is the responsibility of the City Council to adopt rates. We believe these rates as well as all rates passed by LCUB which have not been submitted to City Council for approval are not legal for any LCUB customers.

We are paying our bills under protest and believe a refund is due to us and all rate payers. If any other customers of LCUB would like to claim a refund, we suggest that you notify Mayor Matt Brookshire, Chairman of LCUB and his father in-law Freddie Nelson, Manager of LCUB, that you too are paying these rates under protest.

Although we have spent a great deal of time and money dealing with this issue, we (on behalf of our two companies and over 300 employees) are still willing, at this point, to accept rates which are comparable to the surrounding systems as expressed in our first letter to the management of LCUB. With each passing day, this becomes less of an option and completely disappears once we sign any contracts to purchase additional treatment equipment or facilities elsewhere.

Management Wampler's and Elm Hill