Title
Discussion regarding mitigation credits for the Meadow Park Lake dam project
Body
SUMMARY: At the September Council meeting, Council directed the City Clerk to place this item on the November agenda for discussion and action.
The following were points of discussion regarding the mitigation credits at the September meeting:
1. The price for mitigation would remain the same if either the City or the Water Authority paid for their out-of-pocket costs of approximately $300,000.00.
2. UT would like to have a verbal commitment prior to October 15, 2026.
3. If the City did not want to continue with this process, then they were in the process of forming a water credit bank where these credits could be sold to other entities at two to three times the cost offered to the City.
4. If the City paid this amount and later decided to not to build the dam that “after the bank became profitable and they started selling the credits, that the City would be refunded the amounts paid”. There is no date or guarantee as to when the repayment would happen. I think it will happen, but it will probably be a few years before the City was repaid.
5. The other bidders, when this project was bid, were approximately $3,000,000 to $4,000,000 more than the UT bid. These other bidders are now actively creating and establishing water credit banks for the sale of these credits that were being offered to Crossville.
6. The cost of these credits has risen sharply since this project was initially bid.
7. If these water credit banks are created, and if the City has no contract with UT or another facility to purchase water credits, then under the rules from TDEC and the Federal Authorities, that the City will be required to buy the credits from any bank that is located in our area. In other words, we will not be free to shop and buy at the cheapest place.
8. UT is interested in negotiating with TDEC to see if the City can self-mitigate by utilizing the wetlands that will be created when the lake is expanded. This would result in a substantial saving of several million dollars if that were to occur.
9. The Water Authority was included in these meetings in light of the pending referendum. The Water Authority, as a show of good faith, is willing to approach its board with a request to pay one-half of the costs ($150,000.00), provided that should the referendum fail and/or should the City Council not approve a merger that it would receive the first $150,000 when the credits are sold through the bank as described in paragraph four (4) above. A condition precedent to this is that the City of Crossville would also have to participate and pay $150,000.00.
10. If the City does not want the Water Authority to participate, then the Water Authority would have no obligation to participate further.
Council requested for the City Attorney to ask UT for additional time to make a decision. They do not want to make a decision regarding the dam that will bind the next Council depending on the referendum vote.
In an email sent on September 4, 2026, UT agreed to additional time and requested a response by November 11th, subject to the following conditions:
• The City commits to the $300,000 down payment, with a legal agreement, by the close of business on November 11, 2026.
• The City commits to funding the mitigation project, with a legal agreement, by the close of business on February 26, 2027. That agreement would specify a payment of $11,220,000 for 6,000 stream credits and 45 wetland credits.
• Finally, the University of Tennessee wants to renegotiate the payment schedule. The schedule in the original RFP no longer provides an allocation of financial risk acceptable to us. We would propose this schedule:
o $300,000 payment by November 15, 2026
o 75% of the balance upon permit approval and placement of deed restrictions on the property
o 25% of the balance upon completion of the mitigation construction
Recommended Action
NECESSARY COUNCIL ACTION: discuss and take necessary action