Chesapeake officials explain water talks with Portsmouth

Chesapeake officials have changed tack in their explanation of a $1.7 million payment to Portsmouth for water the city didn't need or receive, saying they turned down an offer of a one-year billing grace period because it would have cost more in the long run.

The city has paid Portsmouth $2.8 million over the past three years for unused water. During the past year, it has also spent $4.5 million making adjustments to its water system so it could put what it buys from Portsmouth to use in the future.

Officials on Wednesday said those costs were still less expensive than taking Portsmouth up on its offer to extend its purchase contract. Chesapeake leaders did not respond to an October letter from Portsmouth City Manager Kenneth Chandler offering the deal, and they say that in doing so, they were looking out for city water customers, not passing up an opportunity.

"There was not a cheaper alternative to addressing the problem," City Manager William Harrell said. "The bottom line is this: We determined that extending the term was not beneficial to Chesapeake rate-payers."

That contradicts information Chesapeake officials provided last week, when they first insisted they had received a one-year grace period and later confirmed that they had paid the $1.7 million bill without discussing the matter.

Documents, emails and letters obtained from both cities under the Freedom of Information Act show that Chesapeake did not respond to Portsmouth's offer. The Virginian-Pilot reported the payment in a story Monday.

Chesapeake has some of the highest consumer water rates in the region, in part because it is locked into long-term contracts to buy most of its water from Norfolk and Portsmouth. In the past few years, the amount Chesapeake has obtained from the other cities has increased, even as it uses its own water less.

The minimum amount of water purchased under the Portsmouth contract increased in January 2010, from 3 million gallons a day to 4 million. The city, which already wasn't using the full 3 million gallons, did not use any of the additional 1 million gallons a day last year.

Demand has shrunk because of water conservation measures and because growth in the city has slowed significantly since the Portsmouth contract was negotiated in the 1990s.

"Certainly at the time those projections seemed realistic," Harrell said.

At the time the city negotiated with Portsmouth, it also needed to secure a steady supply of clean water. Droughts and other problems plagued Chesapeake's water system in the 1980s and into the 1990s, and the city had to spend millions of dollars in the mid-'90s to upgrade its Northwest River Water Treatment Plant. 

Chesapeake first came up with the idea of a one-year grace period. In a letter in early 2010, Harrell requested the change, citing declining usage and tough economic times, and offered to extend the Portsmouth contract for a year.

Chandler, the Portsmouth city manager, responded in October, offering the grace period and suggesting that the cities extend the contract. He offered for his staff to meet with Chesapeake officials to work out a deal.

At a City Council meeting Tuesday, Harrell said the terms Chandler suggested were unfavorable because they would have required the city to extend its purchase contract with Portsmouth for an additional 15 years, and buy 1 million to 2 million additional gallons of water.

Chesapeake never responded to Portsmouth's offer, officials confirmed Wednesday, because it was so far outside of what they had hoped for.

Harrell said Chesapeake has honored its contract with Portsmouth and paid its bills for the unused water. The city will continue to negotiate its long-term contract with Portsmouth, and with the improvements to its water system, it will be able to use all 4 million gallons a day starting in April, he said.

 Pilot writer Marjon Rostami contributed to this report.

Meghan Hoyer, (757) 446-2293, meghan.hoyer@pilotonline.com