JASPER -- A circuit judge found Lead Hill town officials in contempt of court Tuesday because of their failure to follow a court order to repay thousands owed to a rural public water system that depends in part on Lead Hill's water payments.
Judge Shawn Womack warned officials that he plans to order them jailed if payments to the water system are more than five days late in the future.
"That's going to be an ongoing provision," Womack said.
Board members for the water authority and Lead Hill town officials appeared before Womack on Tuesday at the Newton County Courthouse in Jasper.
During the hearing, Womack told Lead Hill Mayor Jimmie Lou Nuessner, Town Councilmen Gary Van Meter and Mike Farrar, and Recorder Kaye Farrar that he has twice ordered the town to make payments, once in March and again in May. No payments were made until the end of July, he said.
"Instead of complying with the court's order, you've dug a $66,000 hole for your customers and your constituents to now have to pay back when you had ample warning," Womack said.
The water authority sued Lead Hill in October after it quit making monthly payments and notified the authority that it would disconnect from the water authority's new system. The town resumed using its own well system soon after.
The water authority began supplying the town in November 2012 after the completion of a $72 million project to build a new water-treatment facility and to distribute water from Bull Shoals Lake to Lead Hill and 17 other members via 120 miles of pipeline.
Under Lead Hill's contract that helped to guarantee federal loans, officials agreed to purchase wholesale water from the water authority -- at a minimum monthly charge -- regardless of whether Lead Hill took water from the water authority.
After a May 22 hearing, Womack ruled in favor of the water authority and instructed Lead Hill to abide by its contract.
By last week, the town owed the water authority $65,939.62 in unpaid bills. The town sent the water authority a check last week for $1,000, said Chris Lawson, an attorney for the water authority.
Representatives for the water authority and Lead Hill agreed Tuesday that the town would reconnect to the authority's water and that the town would begin making monthly payments by mid-September.
Town officials also will give Lead Hill voters the option of adopting a sales tax or increasing water rates to the level necessary for the town to meet its financial obligations, according to an agreement read in court. The additional revenue would go toward monthly payments for ongoing water use and toward repaying what's owed to the water authority.
The town will have three years to pay the overdue amounts.
"I was really pleased the parties were able to come to some agreement so the town can receive a reliable source of potable water for its customers," Lawson said. "We really want to be able to establish a financial working relationship with the town."
Sam Pasthing, an attorney for Lead Hill, said the resolution gives the town a path forward while town officials continue to pursue an appeal.
Under the agreement, the water authority and the town will continue to try to resolve outstanding contractual issues related to the amount of water used, Pasthing said.
Nuessner has said the town lost population after the contract was signed, and that means the minimum monthly charge of $5,200 would amount to paying for more water than the town uses.
But beginning Sept. 15 and the 15th of every month after that, the town must make payments to the water authority, Womack said. If the town is more than five days late, the court will issue an order for town officials to be jailed until a payment is made, Womack said.
Under the agreement, the overdue amount will be subject to 2.75 percent interest, the same amount of interest the water authority owes to the federal government on loans issued to build the treatment plant and pipelines, Lawson said.
The water authority also will provide the services of a consultant to conduct an analysis on the town's water system rate structure, and the town has agreed to contact the consultant, Lawson said.
Metro on 08/06/2014