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Carroll, Hillsville meet in court over utility dispute

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By Christopher Brooke, Reporter

HILLSVILLE — After arguing over water and sewer bills and rate calculations in court filings for years, attorneys for Hillsville and Carroll County went toe-to-toe in a March 30 motions hearing about the long-standing utilities disagreements between the two localities.

Hillsville has appealed to the Carroll County Circuit Court to grant its claims against the county for water and sewer service to the Interstate 77 area and sewer service to county buildings in the amount of $156,199.

Carroll County has filed a counterclaim, alleging that the town had overbilled the county for years after the two localities inked a water and sewer service contract in 1986.

Overbilling the county for $426,261 amounts to fraud, the county attorney has argued.

The disagreements arose in 2002-2003 after the town presented the county with a bill for utility service and Carroll officials declined to pay.

Carroll officials had the town utilities audited after the disagreements came to light. The auditor said that parts of Hillsville's water and sewer systems that were not being used to supply service to the county were included in the rate calculations — that's where the overcharging claims came from.

County officials have also argued that Hillsville improperly ended a 1953 contract that stated the town would not bill for sewer service to Carroll buildings after the county kicked in $90,000 and a sewer line for the treatment plant.

These matters are scheduled to go to trial before Judge Brett Geisler in June.

In the motions hearing, Carroll Attorney Jim Cornwell asked the judge to rule on whether the town breached the 1953 contract by terminating that agreement.

Cornwell's motion seeks to dismiss the town's claim for $84,000 for sewer bills to county buildings.

The 1953 contract had a clause that said Hillsville could start billing the county for sewer service if the town repaid the $90,000 it had initially gotten from the county, the county attorney said in court.

"But they wanted to charge us and keep our $90,000," Cornwell summarized for The Gazette after the hearing.

"The deal was the deal basically," Cornwell said. "I didn't write it. I was three years old [in 1953]. We all agree that the contract says what it says and the town hasn't paid the $90,000."

Carter Glass, representing Hillsville in the court case, argued that the 1953 contract had an indefinite term and so, by law, could be cancelled by the town after a reasonable amount of time.

He argues that after more than 40 years of service, a reasonable amount of time has passed. Plus, both the sewer plant and sewer line in question have been abandoned and no longer serve as a part of the treatment system.

What's unreasonable to the town officials is the county's apparent position that the terms of the contract go on for an unlimited amount of time, Glass said.

Both parties agree there is sufficient evidence available for the judge to rule on the matter.

Cornwell, in addition, asked the court to limit testimony from a wide range of current and former town representatives about what they remembered about the 1986 contract.

The county attorney repeatedly referred to this as "he said, she said" testimony that wouldn't be helpful in settling the legal questions before the court. Cornwell said the testimony would only serve to prolong the trial and increase the expense.

Instead, he insists the court has plenty of evidence that will come from the contract and other documents to make its ruling.

The county has alleged fraud regarding the 1986 contract, but Glass notes that for 16 years after this contract was put in place, the county officials didn't have a problem with billing.

Carroll officials have said that the town should not have charged the county for things like depreciation and salaries for non-utility department personnel.

Cornwell argued in court that the town hid the overcharges in the billing in order to keep the county as a utilities customer. That, he says, amounts to fraud.

In answer to the county's overbilling claims, Glass points to the idea that the contract outlines that the charges to the county were to be calculated from the audit of Hillsville's utility accounts.

Government accounting standards require that all components of the utilities be taken into account by the audit, not solely the parts of the system that provide direct service to the county, Glass noted. County officials knew and understood this, as shown by the agreement they signed under the contract and the lack of controversy over the bills that followed.

Hillsville's attorney wants to be able to show through evidence that the contract was in place for 16 years without any objections to the billing calculations, he explained to The Gazette. The disagreement over the calculation of the bill does not rise to fraud, he argues.

These disagreements arise because the contract is poorly drafted and can be read in more than one way, Glass told the court. Because the contract is ambiguous, the judge should hear the town's evidence.

Geisler did not issue any ruling in court during the motions hearing, but indicated he would do so as soon as possible.

The court held the motions hearing even as Carroll County gets ready to switch from Hillsville to Galax as its sewage treatment provider. Carroll County will send its sewage from the interstate area to the city through the new Woodlawn sewer system.

Carroll County will get its water through its regional water partnership with Wythe County and Wytheville after construction on the county's distribution system is complete.