Utility’s suit seeks payment for line

Brad Hicks • Jan 26, 2014 at 9:11 PM

ERWIN — The Unicoi Water Utility District Board has filed a civil lawsuit against the developers of a planned project at Exit 32, the Joint Economic Development Board of Unicoi County and the town of Unicoi, alleging the developer breached its contract on a waterline project in which the two local entities held interest.

The complaint was filed Jan. 14 in Unicoi County Chancery Court. The complaint said the board, a water utility district serving the town of Unicoi, was tasked with replacing and servicing a 4-inch water line with a 10-inch line over the nearly 4,400-foot distance from Unicoi Elementary School to the 17-acre tract owned by Exit 32 LLC, located just off Interstate 26.

Exit 32 LLC had purchased the land at the site and was promoting a development there that was to include a hotel, restaurant, convenience center and other businesses, the complaint said.

“The developer ... required this large waterline to be in service in order to successfully market the development even though the property was already served by the Utility District,” the lawsuit said. It said the project was originally estimated to cost $150,000, but “efficiencies used by the Utility District” resulted in a final cost of $83,219.13.

Preliminary approval of the proposed development was given to developer Brian Dunbar by the town of Unicoi in August 2008, the lawsuit said. Later that month, Dunbar presented a proposal to the water district in which Exit 32 LLC would reimburse the utility district for construction cost if the development was not “generating significant water usage in three years,” the lawsuit said.

The town of Unicoi agreed to contribute one-third of the cost of the project in September 2008 and the Economic Development Board then did the same, the lawsuit said.

In order to move the project along, the utility district fronted the expense from the remainder of 2008 to the summer of 2009, the lawsuit said. The project was completed in July 2009, after which the town of Unicoi and the Economic Development Board fulfilled their obligations, as each provided reimbursement for one-third of the construction costs. Each of these entities paid $27,739.71.

However, the utility district says in the lawsuit that Exit 32 LLC has not yet paid its $27,739.71 share as promised.

“The Utility District has not only been damaged by the failure of Exit 32 LLC to repay the loan, but suffers continuing damage because the 10-inch waterline requires constant maintenance and oversight (and) regular flushing and requires the Utility District to comply with additional federal and state regulations (that) causes additional cost of maintenance on a regular basis, including manpower, staff and material,” the lawsuit said.

The lawsuit also said there has been “no industrial water use to date” by Exit 32 LLC, as was part of the original agreement. The district said that because Exit 32 LLC has not paid toward the waterline project, it is in breach of its contract.

“The Utility District is concerned that if (it) does not take action against Exit 32 LLC, and continues paying utility costs for a customer who refuses to pay its own way, annual state-mandated audit findings could potentially cause the state of Tennessee Water Control Office to require the Utility District to raise rates. This would be a detriment to the Utility District and every customer it serves,” the lawsuit said.

In its suit, the district is seeking payment of the $27,739.71 for construction costs, as well as “past, present and future” ongoing costs of maintaining the waterline project and recovery of loss of revenue caused by depreciation expenses and replacement costs on the project.

The town of Unicoi and the Economic Development Board have been named as co-defendants in the lawsuit, as each entity holds an interest in the project but neither has compensated the utility district for ongoing maintenance costs, the lawsuit said.

“Whether because of the present economic climate or other factors, the (development project) has not been successful, and public records in the County Offices for Unicoi County reflect that there have been actions in foreclosure on part of the property owned by Exit 32 LLC, and potentially other foreclosures are eminent,” the lawsuit said.

The district is not seeking damages or money judgments from the town or economic development board, but it is seeking a “reasonable contribution” from each toward the costs of court fees, expert’s fees and attorney fees as a result of the legal action being taken.

It is also seeking a declaratory judgment from the court that, even though these two entities have interest in the property, they would have no right or legal ability to prevent the utility district from “mothballing” the waterline project, or taking it out of service until it is more fiscally feasible.

Town of Unicoi Recorder Larry Rea said town officials had no comment on the lawsuit at this time, other than to say the town is conferring with its attorney.

Unicoi County Economic Development Director TIsh Oldham also said she could not comment on the matter, but she said the Executive Committee of the group’s board will meet Wednesday in an executive session to discuss the case. Dunbar also had no comment. Representatives with King & King, the law firm representing the utility district, could not be reached Friday for comment.

A court date has not yet been set in the case.

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