ANALYSIS: West Alabama Officials Mull Possible Solutions To Lake View Sewer Crisis

TUSCALOOSA, AL — The Regions Boardroom at the Chamber of Commerce of West Alabama's office in downtown Tuscaloosa was at near capacity with extra chairs having to be brought in for Monday night's meeting of the Chamber's Public Affairs Committee.

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Committee Chair Lee Garrison remarked that the attendance was one of the largest the committee had seen in recent memory, as business leaders and Tuscaloosa's legislative delegation gathered to discuss the ongoing battle over the City of Lake View's private sewer system.

Tempers flared at times during the nearly two-hour meeting and while the dialogue finally began in a room full of some many important and influential people in the area, many came away with more questions than answers due to the complex nature of an issue over two decades in the making.

Indeed, few stories encountered by this reporter have been as multifaceted — one complete with an alleged shell scheme, financial misdirection in bankruptcy court and a fight for the people of one small city to see its private sewer owner held accountable for his business practices.

That private sewer owner — J. Michael White of Leeds — was the only noticeable absence from Tuesday's meeting, albeit this reporter would have never bet he would show anyways.

Still, the conversation Tuesday was a rich one, with movers and shakers in the west Alabama community discussing just what they can do to see bring some real reprieve to the people of Lake View.

With this in mind, Tuscaloosa Patch sat down to write an in-depth analysis of the solutions discussed, along with examining the validity of the possible options.

History as a starting point

It was said in several different ways during Monday's meeting at the Chamber that it was important to focus on what can be done instead of what has happened in the past.

True, there must be an emphasis placed on the potential solutions at hand. This was no more evident when an overwhelming majority of the voters of Alabama approved to place White's private sewer system under the regulatory oversight of the Alabama Public Service Commission for the next five years during the last general election in November.

Despite White using every possible avenue — namely federal bankruptcy court and the U.S. Court of Appeals — to try and slip out from under the judgements against him and before the regulations go into effect on Jan. 1, 2023, it is crucial to the task at hand to consider the events that led to us here.

This reporter won't bore you with all of the history, but the best place to start is with the franchise agreement settled upon by the city and SERMA Holdings in June of 1999 — less than a year after the city was incorporated. SERMA is owned by White and serves as the administrator for the Tannehill Sewer System.

ALSO READ: Into The Sewer | Lake View Private Sewer Owner's Alleged Shell Game

SERMA is also one of two companies owned by White that are currently in the process of federal bankruptcy reorganization, with the other being ECO-Preservation Services LLC — the firm that serves as the system's operator on the ground.

The bankruptcy filings are no doubt strategic, with the obvious goal of keeping White in business while hobbling the $4.7 million series of judgements handed down against him by Tuscaloosa County circuit judge after the sewer rates for a handful of residents resulted in collective sewer bills climbing to over $500,000.

Patch obtained a copy of the franchise agreement back in February — a dense and nebulous document filled with confusing legalese. However, it does provide a clear black-and-white picture of what the city's founding fathers signed away when they agreed to do business with SERMA.

What to know about Lake View franchise agreement with SERMA

• Exclusive sewer rights granted to White and SERMA.
• Lake View and its Governmental Utility Services Corporation (GUSC) are barred from performing any work on the system that exceeds $1,000.
• When the franchise agreement reached term, the city was granted the statutory right to inquire as to the purchase of the system, based on White's assessment of the fair market value of the system — nothing more.
• In exchange for purchasing the sewer, White has previously communicated to Lake View officials that if he indeed sold the system to the city, he would require 75% of the sales tax revenue generated from the system in perpetuity.

Solutions

Here's how Tuscaloosa Patch would respond to each of the possible solutions mentioned during Monday night's meeting, based on our past reporting and intimate knowledge of the ongoing situation.

Could there be a moratorium placed on new construction so there will be no new expansion for the Tannehill Sewer System?

Apart from the construction currently underway at the Tannehill Preserve, just a short walk from the Lake View Municipal Complex, Lake View Mayor Adrain Dudley said a kind of moratorium was already in effect due to the ongoing sewer crisis.

Still, it's worth noting that White has played this card himself in the past when commenting to Patch, floating the possibility of a moratorium of his own due to the looming uncertainty of oversight under the PSC. This would, in turn, most definitely slam the brakes on any hopes of commercial development for the people of Lake View and should be viewed as more of a threat from White than anything else.

Could he follow through on it in the right set of circumstances? Sure. But commercial development is less than stagnant at present, so the impact if he decides to do so wouldn't change much in the short term.

The threat of imposing his own moratorium was also coupled with White mentioning the possibility of raising sewer rates in order to cover the costs of compliance for the PSC — a move that would ultimately make a bad problem that much worse for private residents if he follows through on it and his operations go unchecked by the state.

"We don't say we don't want to talk about the past," Woodstock Mayor Jeff Dodson said during the meeting, "but we have to understand how this thing developed and understanding how we got to this point."

Why doesn't Lake View just buy the sewer?

This is arguably the most widely discussed and most unrealistic of the possibilities, due to a complete lack of a tax base for the City of Lake View.

A stagnant tax base and minimal reserves result in lower bond ratings and higher borrowing costs, which would leave Lake View with its pockets pulled out and on the verge of bankruptcy if it goes all-in on purchasing the system itself.

What's more, if the city decides to financially destroy itself by purchasing its private sewer based solely on its current economic situation, that money would go to effectively bail out White and allow him to continue his myriad other questionable business dealings as he sees fit.

Simply put, the city would risk all of its financial well-being while White gets a big pay day. Lake View stands to be the only party to lose in such a deal.

Some also floated the idea of a possible package deal with nearby Woodstock and West Blocton — as the two municipalities recently signed a 20-year agreement to work together to provide sewer service to their residents and businesses of the area.

Woodstock Town Attorney Boozer Downs pointed to this dynamic as a possible starting point and made as compelling of an argument as any in doing so.

"You've got a system that's had nothing but problems [in Lake View] and you've got a lot of political involvement with it and sitting right next to it you have a system [West Blocton/Woodstock] that was basically done from scratch and runs a very good system. It's not perfect, but I think if I'm looking for somebody to take something over ... I'm looking at the successful system. I'm looking at the one that's making it happen."

Using environmental regulations

State Rep. Chris England, a Democrat from Tuscaloosa, was on hand at Monday night's meeting and posed the possibility of encouraging further oversight from the Alabama Department of Environmental Management (ADEM).

To his credit, this has proven an effective tactic in recent months with respect to reigning in the practices of other irresponsible private entities such as Burgess Equipment Repair in Northport.

As Patch previously reported, ADEM was successful in not only stopping an ongoing chemical spill within walking distance of two neighborhoods and an elementary school, but also provided the legal teeth necessary for area residents to hold the company accountable through a class action lawsuit.

And yes, there have been environmental concerns and even formal citations against Tannehill Sewer for its practices in the past. However, the fines are minimal when compared to the multimillion judgements White is currently working to fight off and have appeared to do little to force improvements when considering the system's day-to-day operations.

Problems range from noticeable foul odors for residents near Tannehill Sewer's treatment facility in McCalla to the private firm's ongoing dumping of treated waste into nearby Mud Creek via a discharge line that reportedly runs through Tannehill State Park.

Judging by the history of citations and small fines levied against White, these are small, barely noticeable blows to how the company does business. And after all, officials in Lake View will be the first to admit they have no firm understanding of what the sewer infrastructure under their own feet looks like, so this becomes even less of a possibility when it comes to identifying new areas of focus to point out to ADEM.

It's also worth noting that ADEM is a grossly underfunded and understaffed agency that is spread thin when it comes to addressing the slew of complaints it receives on a daily basis.

As England pointed out, the primary issue with this possible solution is the timetable in which something could be done to produce noticeable change. Sure, ADEM could chip away at White with small fines and demands, but it has had little effect over the last 20 years and would likely take a major development for further action to be taken.

And if you ask residents of Lake View specifically, it's not so much the environmental issues they notice, but the rising fees and shady business operations of the firms that operate Tannehill Sewer.

Takeover via bankruptcy?

At one point in the meeting, talk turned to the possibility of White's sewer assets being liquidated and sold to someone else by his creditors. It's worth noting that White is in bankruptcy reorganization at present and does not appear to be on the verge of losing an inch of ground.

Understandably so, this tactic is arguably the most cathartic for residents who have dealt with Tannehill Sewer for the last two decades, but one that comes with just as many pitfalls — including the system only changing hands to another private entity that could, in theory, make the problems even worse.

The possibilities were raised by Garrison when he thought back to a similar situation involving a private sewer system in another part of Tuscaloosa County that was forced into bankruptcy and was eventually purchased in 2016 by another private owner — businessman Stan Pate.

"It was bought for pennies on the dollar and still remained private," Garrison said. "And there were several businesses and homes and I think maybe even educational facilities that were taken advantage of because it remained private. They knew they were the only game in town and the assets were bought for pennies on the dollar and the same thing happened again."

The system he was referring to operates as the Fosters Waste Water Treatment Plant and was once owned by Danny Ray Butler. However, the assets were seized by the bank and purchased by Pate after Butler was sent to prison for fraud. To this day, the private system does not have to go under oath to the PSC for public rate hearings and many of the same problems persist that were reported in the past.

If the primary goal for the residents of Lake View is for White to be held accountable, the only way it will be able to do so is through governmental oversight.

Opening the books

In all of White's threats and tactics, it appears the one solution he doesn't seem to be a fan of — apart from the $4.7 million judgements against him — relates to opening his books under oath for the PSC.

After all, this has been the only action that has prompted White to begin hurling public threats of raising rates to cover the cost of compliance or even putting a stop to expanding the system.

As it stands, the average sewer fee for a Lake View resident is roughly $126, which is a number that has steadily ballooned in the last decade. Some residents have told Patch of shutoff valves being placed on their homes if they get behind on payments and the Tuscaloosa County Probate Court has reams of past liens against homeowners filed on behalf of the once-litigious private company.

But after more than a year of dogged research and reporting on the matter, this journalist is left noticing (1) a primary desire for accountability on the part of those impacted by the fees and (2) the need for a solution that does not end with White getting exactly what he wants — a major payout.

No, accountability is the only thing this reporter can see as a feasible solution for the residents of Lake View. And while the possibility of a partnership with the West Blocton/Woodstock sewer system does indeed seem like a decent and honest proposal, a prevailing sentiment noticed in Lake View is the desire for identity ... for the city to be on a path of independent growth and not one dependent on any decisions made in another municipality.

So keep this in mind: Tannehill Sewer will officially be under the PSC's regulatory oversight beginning on Jan. 1, 2023. It's also worth noting that State Sen. Gerald Allen, a Republican from Tuscaloosa who was in attendance at Monday's meeting, worked in a rider amendment to the measure that will see the PSC oversight sunset after five years, so the clock will begin ticking at midnight on New Year's Eve.

Both White and Allen have been adamant that the real problem is a power struggle for control of the Exit 100 corridor between Lake View and Woodstock, but that possibility was not raised by anyone present during the meeting of the minds on Monday nor has it been brought up by anyone other than White and Allen.

Conversely, very little was mentioned Monday night about the role the PSC could potentially play in reigning in White's business practices, despite the looming oversight appearing to represent the sum of White's fears. As I've documented ad nauseam in past reporting, the day-to-day operations for the system are an absolute mess — a confusing and intricate network of LLCs that provide little to no customer service and continue to treat the City of Lake View as White's own personal fiefdom.

So what better way to untangle such a twisted web of deceit than to force White to do it by going before the PSC for a public rate hearing under the penalty of perjury.

It is the hope of Tuscaloosa Patch that officials will now begin working to gain a deeper understanding of the complexities of the situation, while taking a measured approach to see just what, if anything, can be done once White is forced to open his books to the PSC.

A big first step was getting the conversation started among so many heavy hitters who can see things clearly and offer solutions, so the Chamber of Commerce of West Alabama should be commended for providing a forum to do so Monday night.

And again, with so many unanswered questions still lingering, regulatory oversight is likely the most reasonable tactic to bring previously unknown information out into the public. After that, the decisions moving forward will be that much easier to make with so much more knowledge in hand.

Have a news tip or suggestion on how I can improve Tuscaloosa Patch? Maybe you're interested in having your business become one of the latest sponsors for Tuscaloosa Patch? Email all inquiries to me at ryan.phillips@patch.com.