The Arkansas Court of Appeals has upheld a July 2017 ruling finding the City of Mountain Home did not breach its contract by overcharging for water it sells to the Northeast Public Water Authority.
The water authority, which provides water to about 1,800 residents, filed a lawsuit in November 2015 contending the city had overcharged for water it sold to the authority under the terms of an agreement updated in 2012.
In his ruling in 2017, Judge Gordon Webb wrote the city did not breach its agreement with the water authority, and the price charged by the city for water purchases was permitted by the agreement and was appropriate.
An appeal was filed in January in response to Judge Webb’s ruling.
The contract between the city and Northeast Public Water Authority calls for the city to sell potable water in an amount not to exceed 250,000,000 gallons a year under a formula establishing the per-one-thousand gallon purchase price for the water. The formula takes a number of factors into consideration, including the buyers share of expenses the city incurs in connection with the production and delivery of water.
Just what expenses are to be counted in arriving at the wholesale purchase price was at the heart of the appeal.
In the appeal, Attorney Keith Billingsley of Little Rock maintained agreements between the city and the authority in 1982 and 2012 are quite different with respect to wording and terms, with the later version specifying Northeast is to be charged only the actual expenses incurred in connection with the production and delivery of water.
Since the execution of the 2012 contract, Northeast has been charged a prorated share of the salaries and expenses of the Mountain Home City Council, Planning Commission, four city officials, two departments and other expenses including maintenance on hundreds of miles of water lines.
In the appeal, attorney Billingsley wrote water to Northeast comes from the treatment plant to the Wallace Knob tank, a distribution line constituting 1.4 percent of the total water system. During a seven-hour daily window when the plant is offline, the city contends Northeast obtains water from the entire system, which the attorney says is an effort to legitimize its charges.
In upholding Webb’s decision, Court of Appeals Judge David Glover wrote in the 11-page decision the contract, drafted by the attorney for the Northeast Water Authority, specifically defines actual expenses to include general and administrative expenses separate for those not actively engaged in water production from the “general and administrative expenses associated with the production of water.”
Judge Glover wrote a court cannot make a contract for parties but can only construe and enforce the contract the parties have made. In this case, Judge Webb did just that–construed and enforced the contract made by the parties.
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