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Utility officials warn new state law could undercut local control of STEP wastewater systems
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Summary
Consolidated Utility District officials told the Rutherford County Planning Commission that recent amendments to SB564/HB803 let developers seek TDEC approval for decentralized STEP systems, could enable private operators to run local systems and shift bonding obligations to local government — raising questions about oversight, costs and long-term liability.
Consolidated Utility District representatives Jason (engineering) and Roger Goodson, CUD general manager, told the Rutherford County Planning Commission on April 27 that state amendments to SB564 and HB803 change how decentralized STEP wastewater systems are approved and financed.
Jason explained the law requires the Tennessee Department of Environment and Conservation to adopt rules by July 31, 2027, but also allows a developer to apply directly to TDEC rather than through the local utility. "Under this amendment ... the developer can bypass the utility and go straight to TDEC for approval," Jason said, warning of a gap between the law's effective date and rulemaking. Roger Goodson added that a private utility could take over a new system if the local utility declines to accept it.
Why it matters: CUD officials said the changes could erode local oversight and lead to higher customer rates. Goodson said the bill shifts bonding responsibilities to local governments and imposes a 100% performance-bond requirement for replacement cost during the first two years, followed by reduced percentages through year 12. "Rutherford County is also gonna have to do the bonding," Goodson said, noting uncertainty around long-term replacement costs and the possibility that the bond percentages will be insufficient to cover future capital needs.
The presentation covered several likely consequences that officials said the commission should be aware of: developers who use TDEC-approved systems could build infrastructure that the local utility will not accept; private operators certified through the state could charge higher rates because they lack the customer base to spread costs; and unresolved language in the law (for example, when bond obligations commence relative to occupancy thresholds) leaves local governments and utilities uncertain about exposure.
Commissioners pressed CUD on details. Goodson said the district currently has a 28.6 million gallons-per-day (MGD) allocation from the Army Corps and is negotiating with Murfreesboro for an additional 3.6 MGD, bringing planned allocation to 32 MGD. He described ongoing reallocation and groundwater studies and master-planning work aimed at 2060 demand estimates. Regarding hydrants, Goodson said CUD budgets roughly $200,000 annually for hydrants but places them by request from local fire departments after verifying the main can support required flow.
CUD and planning staff said legal counsel is reviewing the statute and that staff will continue to examine where the county can exercise regulatory control within the bounds of the new law. Goodson said CUD and its legal team have lobbied and proposed amendments for two years but that last-minute changes to the legislation limited some county protections. He urged the commission to note the policy's local impacts while staff and legal teams pursue clarifying language.
The commission did not take formal action on the legislation but asked staff and CUD to continue analysis and to report back once legal review and the reallocation/groundwater studies provide further detail.
