Whitesburg KY
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Judge sets phone hearing in firm’s suit against city

A federal judge in Pikeville has ordered a “status conference” to consider a motion filed in connection with Veolia Water North America – South’s lawsuit against the City of Whitesburg.

U.S. Magistrate Judge Edward B. Atkins this week ordered that a “telephonic status conference” be held at 9 a.m., October 28, to consider questions raised in a motion filed by Pine Mountain Lumber LLC, which has been ordered to surrender the $1,500 monthly rent it normally pays Whitesburg to a “court registry” instead.

Pine Mountain Lumber operates a sawmill and log yard on cityowned property in West Whitesburg. The monthly rent the company pays to the city was garnished by Indianapolis-based Veolia Water in August and is being applied to an $823,722 debt the city still owes Veolia even though the company stopped managing the city’s water and sewer departments in 2011.

In a series of actions taken in federal court since August 16, Veolia Water has also seized $6,470 from the City of Whitesburg’s bank accounts at Community Trust Bank and $63,138 from the city’s accounts with Whitaker Bank. The court has also allowed Veolia attorney David C. Stratton of Pikeville to garnish the $2,000 monthly rent paid to the city by the Whitesburg campus of Southeast Kentucky Community and Technical College.

Next Monday’s status hearing was ordered after a motion filed on behalf of Pine Mountain Lumber said the company was unsure about how to proceed with payments of monthly water bills and $7,477 in ad valorem taxes the company owes the city in addition to the monthly rent.

The legal dispute between the city and Veolia Water began in August 2011, when Veolia filed a breach of contract lawsuit in U.S. District Court in Pikeville seeking payment of a $1.05 million debt the city owed Veolia for operating, maintaining and managing the city’s water and sewer departments. The debt had been accruing since before October 30, 2009, the date the city and Veolia signed what would be their final contract, in which the city agreed to pay Veolia a fee of $967,144 to run the water and sewer departments for another 12 months.

The lawsuit was settled August 7, 2012 when the city, which by then was back to operating its own water and sewer systems, agreed to pay the $1.05 million owed Veolia in monthly payments of $29,917. The city was able to reduce the debt to $823,722 by April 1, 2013, but was unable to make the May payment or any subsequent payments.

On August 16, Veolia revived the original 2011 lawsuit by filing five “writ of garnishment” actions against the city.

Twenty-four days later, the Whitesburg City Council voted unanimously at its September meeting to institute a 1.5 percent payroll tax on people working within the city’s limits. An ordinance establishing the payroll tax was approved by a vote of 4-1 Sept. 24 and became law Sept. 25.

While employers have been withholding the payroll tax from employees since Oct. 1, none of the money will be available to help pay off the Veolia debt until after the taxes are collected from employers in December.

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