State board: South Fork Utility District must find a partner

NASHVILLE, Tenn. (WJHL) — South Fork Utility District’s days are likely numbered after a state board recommended Thursday that the embattled water provider merges with one of several neighboring utilities.

Tennessee’s Utility Management Review Board (UMRB) voted at a quarterly meeting to have South Fork join either Bristol-Bluff City Utility District (BBCUD), which already sells South Fork its water or the City of Bristol’s water system.

UMRB assistant director Ross Colona told board members that either option would save SFUD customers money. That data came from a consultant’s study conducted this summer.

“Whether or not South Fork chooses to go to the city of Bristol or Bristol-Bluff City, their customers can save money,” Colona said of the Jackson-Thornton study. “It didn’t matter where they went.”

A feasibility study showed that at a rate of 5,000-6,000 gallons a month, customers pay $843 at current SFUD rates. That cost is $635.28 at Bristol-Bluff City and $480.96 for Bristol customers who are outside the city limits — savings of 24% and 43%.

Colona didn’t mince words when it came to SFUD, its former board or ex-general manager Garry Smith, who resigned Tuesday. SFUD came onto the board’s radar in April after the Tennessee Comptroller’s Office (TCO) released a blistering report about the utility’s activities after TCO concluded an investigation.

“In my opinion, some of the items in that report were pretty egregious and I know that a lot of people on the board were not happy about some of the stuff we found in that report,” Colona said.

Colona said the work he and other staffers have done since was strictly designed to help SFUD customers.

The UMRB was planning ouster proceedings against SFUD’s board members, but four of the five resigned several months ago. Colona said the remaining member was newer and “really wasn’t party to a lot of the things that had happened.”

Many of those things centered around Smith, who the investigation revealed had directed more than $1.6 million of “questionable payments” for work by companies Smith was an owner or part owner of. Smith, who remains under investigation locally for possible civil charges related to the utility.

Colona said Smith’s resignation made him “happy.”

“The manager is no longer with the district, which we think is a big win for the customers,” he said.

What comes next for SFUD and its customers will depend on further study of the two possible merger partners. BBCUD is itself financially distressed, and one of the only upsides to a merger with it would be the possibility that SFUD could retain a nearly $800,000 rural development loan.

Colonna says BBCUD needs a cost of service study done and would even if the SFUD situation wasn’t in the picture.

“We’re adding (a cost study recommendation) with the caveat that there should be pro forma financial statements that would evaluate what that merger would look like on Bristol-Bluff City’s books to ensure that Bristol-Bluff City’s customers aren’t harmed to the benefit of South Fork,” Colona said.

“We’re not going to pursue a merger if either of the parties don’t benefit. We’re only doing it if everyone involved has a benefit.”

While a quick merger with Bristol city has obvious upsides from a cost to consumers perspective, UMRB staff noted that losing SFUD as a water customer would hurt the already strapped BBCUD.

Jackson Thornton’s report, though, said Bristol city was willing to do a merger while BBCUD was hesitant. Bristol city also offers the biggest cost savings for SFUD water uses in the immediate term — about $30 a month.

“Right now I don’t know what the best long-term solution is, other than South Fork should not remain on its own,” Colona said. “That I do know. But we don’t know what entity should be pursued for the merger.”

The UMRB ordered SFUD’s board to send updates by April 1, 2023, about grants and loans they’ve accepted, capital projects underway and updates on mergers being pursued.

“The math can’t be argued with that the customers will save money if they go with another utility,” Colona said. “Regardless of any other reason that there may be for South Fork to exist, in my opinion, they should be acting in the best interest of the ratepayer and if the ratepayer can get equal or better service at a cheaper rate that should be pursued.”