KEMPNER — Kempner Water Supply Corporation board members unanimously decided Wednesday to move forward with a legal appeals process despite questions and concerns from customers.
After several hours in executive session Wednesday night, the board authorized its legal counsel to take all necessary steps to appeal 27th District Court Judge John Gauntt’s Jan. 12 ruling in a civil case between the corporation and the city of Lampasas.
Lampasas’ suit against Kempner Water Supply Corporation started in September 2013. The civil suit was a result of a billing disagreement after KWSC sent the city three years of retroactive bills for the city’s water use plus additional fees.
On Jan. 12, Gauntt ruled Lampasas’ interpretation of the contract was correct. According to recent court documents, Lampasas is seeking $117,432 in damages and between $100,000 and $500,000 in legal fees from KWSC.
After hearing about the judge's ruling, Mike Ullevig, longtime Kempner water customer, peppered board members with questions about the court case and its possible impact.
“Are you preparing for an appeal to this lawsuit? Where will that money come from?” he asked.
A 14 person audience — many KWSC shareholders — some voiced concern that legal costs associated with the case would raise already comparatively high water rates.
“(Rates) increased a week ago,” said Ullevig while the board was in executive session. “We’re worried about our rates going up again or bankruptcy.”
The rates for those who receive water from KWSC went from $2.85 to $3.15 per 1,000 gallons last week, he said.
Roger Palacios, a member since 1992, said he’s seen his rates triple in the past 20-plus years and now has to pay a $62.50 monthly base fee before he begins to pay for his water use.
“This is all kind of old news, but it seems out of control. ... I just don’t understand it at all,” he said, explaining there was no other way to get water in the area — aside from digging a well.
KWSC officials said possible additional legal fees associated with the appeal could not be disclosed because of attorney-client privilege, but the process is expected to take several months.
“If the judgment was final even after the appeals, members will have to pay more to pay our cost of delivery of water to Lampasas under the contract,” said Patrick Lindner, KWSC attorney, explaining the corporation is not in danger of bankruptcy. “As long as the members continue to pay, we will not go bankrupt.”
Lindner said possible higher rates, however, also are a concern to board members.
“The directors and management are very conscious of the members’ concerns and questions because they are members also and they do the best that they can to keep the rates as low as they can to fulfill their obligation to their members to provide reliable service and to fulfill our contractual obligations to our wholesale customers,” he said.
The disputed contract was created in 2006 to solve another dispute between KWSC and Lampasas, said David Lein, attorney with Graves, Doughtery, Hearon and Moody, the city’s attorneys.
In 2006, the flow of operations between the two entities was relatively straightforward. Harker Heights-based Central Texas Water Supply Corporation drew water from Stillhouse Hollow Lake and treated it for Lampasas. The water was transported to a pump station owned by the Kempner water corporation, where it would travel through Kempner’s pipes to Lampasas residents.
In 2010, however, the infrastructure grew a little hairier. Kempner decided to build its own water treatment plant. Lampasas chose to remain with Central Texas Water Supply because, according to documents, it was in the best interest of residents.
Currently, water treated by Central Texas Water and Kempner intermix at the State Highway 195 Pump Station — the main pump that delivers water to Lampasas and Kempner residents.
In the city’s view — with which the judge agreed — Lampasas is only contractually obligated to pay for water from the Central Texas treatment plant. It is KWSC’s responsibility to deliver that water and charge only for Central Texas treated water, according to court records. KWSC officials continue to disagree with the interpretation, which is why they said they will move forward with an appeal.