Tennessee Board Mandates Merger for South Fork Utility

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NASHVILLE, Tenn. — The Tennessee Board of Utility Regulation (TBOUR) has mandated that the South Fork Utility District (SFUD) enter into merger negotiations with the Bristol Bluff City Utility District (BBCUD) following several allegations of financial mismanagement by former SFUD leadership.

During a meeting held in Nashville at the Cordell Hull Building at 10 a.m. on Thursday, the TBOUR voted unanimously to require SFUD and BBCUD to negotiate a merger. This decision stems from ongoing concerns about SFUD's financial practices, including conflicts of interest and questionable payments totaling $1.6 million, as identified in reports by the Tennessee Comptroller's Office. The proceedings were streamed live via Microsoft Teams.

Background and Decision

SFUD, serving approximately 3,400 customers, was established in 2020 through the merger of two former utility districts. The utility district has been under scrutiny since April 2022, when the Tennessee Comptroller's Office released a report highlighting significant financial discrepancies and conflicts of interest within SFUD. This led to the resignation of the general manager and several board members. In 2024, another report uncovered additional questionable payments amounting to nearly $150,000 by an SFUD employee, according to TBOUR reports.

Despite these issues, Eric W. Reecher, the attorney representing SFUD, argued that the new leadership had substantially addressed inherited problems. Reecher stated that a forced merger would be an overreach by the government to rectify issues that have already been resolved.

Timeline for Negotiations

Initially, the TBOUR planned to give the utility districts 60 days to finalize the merger but extended the deadline to December 31, 2024, to allow adequate time for negotiations. The merger's progress will be reviewed in the TBOUR's first meeting of 2025, with both districts encouraged to reach an agreement ahead of schedule.

Future Implications

The ordered merger comes after the Tennessee Comptroller's Office expressed a strong interest in consolidating the two utility districts to ensure better financial management and service delivery. Reecher emphasized that SFUD is financially stable and argued against the necessity of the merger, suggesting that it would distract the district from its primary focus of serving its customers.

"They've righted the ship; let them remain on that course and keep their focus on serving their customers," Reecher said. "Please don't distract them from that purpose by forcing an unwanted, unnecessary, unjustified merger."

As SFUD already purchases all of its water from BBCUD, the merger could streamline operations and improve customer service quality in the long run. The outcome of the negotiations will be closely watched by stakeholders and customers alike.

For further details, visit the Tennessee Board of Utility Regulation website here. A link to view Thursday's board meeting packet (July 18, 2024) can be found here.