AMWA files lawsuit against the City of Athens

By Michael V. Hannigan
Henderson County Now

ATHENS — A dispute between the local water district and the City of Athens escalated this week when the Athens Municipal Water Authority (AMWA) filed a lawsuit against the city.

The lawsuit was filed Tuesday in the 173rd District Court and alleges the City is in breach of contract, breach of fiduciary duty, is negligent and has committed fraud.

The lawsuit asks for a monetary judgement against the City, and although there is no definitive amount requested, in multiple spots the suit says the City is responsible for an amount “in excess of” $4 million.

At its root, the dispute between the two governmental entities is over who has to pay which bills for the operation and maintenance of Lake Athens, the dam, and the water treatment and transportation facilities.

AMWA General Manager Wylie Pirkle said the water authority believed the lawsuit to be the fastest way to end the dispute.

“We believe this is the quickest, cheapest way to get a resolution,” he told HCN.

Pirkle did say that the lawsuit should not interfere with actual water service to customers.

For their part, city officials have denied all accusations and called the lawsuit “a waste of citizens’ taxpayer dollars.”

“The City Council is deeply concerned about AMWA’s broader motives and that the citizens of Athens must waste taxpayer dollars on litigating this issue instead of discussing an amicable and expedient resolution on behalf of all citizens and taxpayers of Athens,” Mayor Jerry Don Vaught said in a press release issued by the city Wednesday afternoon.

HOW DID WE GET HERE

It is important to note that AMWA and the City of Athens are two separate governmental entities, run by separate boards of elected officials. Each levies and collects its own taxes to conduct business and fulfill its duties. Because the two have been so entwined since the water authority was created by the State Legislature in the 1957, residents sometimes believe they are one in the same.

But in truth, there is a contract between the two entities that delineates the different responsibilities of AMWA and the city in regard to producing water.

As the city is quick to point out, from the water authority’s inception until just recently, there have been no problems between the two entities.

In its press release the city says: “From 1958 to October 2013 the City and AMWA enjoyed a collaborative relationship and the City provided certain administrative services for AMWA. AMWA has never questioned a single expenditure until October 2013 and has continually voted unanimously to pay all invoices submitted for payment.”

So what changed?

In 2011, AMWA and the City renegotiated a new 20-year contract. There isn’t much difference from the previous contract, which ran from 1991 to 2011, but there was the addition of a separate general manager, which turned out to be Pirkle. The previous contract called on the Athens City Administrator to act as the AMWA general manager.

Pirkle said this is the first time someone other than an official from the City is advising the water authority board and trying to protect AMWA’s interests. He believes the water authority has been paying bills properly belonging to the City for years.

“Each side feels like the other has misinterpreted the contract,” he said.

After talking about the issue with the city for a couple of months, according to the lawsuit, “On October 17, 2013, AMWA presented a claim for the amount due for the City’s performance under the contract and demanded payment from the City. Because the city has refused to honor the claim and pay the just amount due as promised, AMWA asks for judgement against the City for damages.”

((NOTE: As far as I can tell, AMWA has not yet come up with an actual dollar amount owed by the city. — Michael))

WHY NOT TALK IT OUT

When I spoke with city officials on Wednesday, their surprise at the lawsuit was apparent. City Attorney Connor Bateman said he had just recently sent the AMWA attorney a list of possible mediators and dates in hopes the two sides could sit down in January.

“The City has repeatedly indicated that we would welcome a cooperative dialogue on behalf of all citizens of Athens so long as it benefits the citizens and taxpayers of Athens, all of whom have paid for AMWA’s facilities and operating expenses,” said City Administrator Pam Burton in the press release.

But Pirkle said it had become clear the two sides weren’t going to be able to move forward.

“We couldn’t get off dead center,” he said.

And so the unanimous decision was made by the AMWA board to file the lawsuit.

City officials said they hope to the two sides can get out of court and back to negotiating, which they say is best for the taxpayers.

“Until then, we will act vigorously to protect the citizens of Athens and pursue the City’s own claim and defenses against AMWA in the context of the pending litigation,” said Vaught.

The mayor also took offense at the inclusion of the fraud allegation in the lawsuit.

“Contrary to their allegations, this is not fraud,” he said. “This is a contractual dispute between two public taxing entities to determine which entity will be responsible for which expenses to provide water in the most cost-efficient manner possible for the citizens of Athens. Fraud is only designed to intimidate the City. We will not be intimidated.”