MUD Board, tiny home developer clash over unsigned contract

The entrance to the yet-to-be-built Retreat at Whiskey Creek sits just off Main Street in Lynchburg in the former Lynchburg Wilderness RV Park. Water ands sewer line work remains on hold as Whiskey Creek and the local MUD Board hash out the contract. | A Lynchburg Times Photo

By Tabitha Evans Moore, EDITOR & PUBLISHER

LYNCHBURG  – The first step in any project between a public utility and a private entity is a contract and that’s where the Metro Utility Department (MUD) Board and Oakstone Land & Capital – the company developing the Whiskey Creek Retreat – seem to be currently stuck despite the fact that some work has already begun on the project. The two parties clashed on Tuesday night at the MUD Board meeting with things getting a bit heated at times.

The birth of R3 zoning

The saga of the tiny home community began in the Metro Planning Commission in 2021 when Oakstone President Chip Hayes appeared before the Commission having recently purchased the former Lynchburg Wilderness RV Park located just off Main Street.

Based on the precedent that the former owner used the property as a 48-site RV Park, Oakstone could have chosen to bring in Park Model tiny homes on wheels onto the property and proceeded without obstacles. That use matched the current zoning. But Hayes really wanted to feature site-built homes like those used in his other tiny home communities in Tracy City and Monteagle.

“We’ve moved more toward site-built homes on permanent foundations at this point. We feel it’s a better product and it’s better for the community,” Hayes would tell the Metro Council in September 2021.

However, existing subdivision rules in Metro Moore County required single family dwellings be built on no less than one acre of land. Under those strictures, Hayes could only build around 20 tiny homes on the 23.56-acre lot – far fewer than the 79 he now plans.

In the case that no existing zoning matches a project, and a zoning variance won’t work, then local planning officials get tasked with creating guidelines for the project. They don’t develop those rules based on what the developer needs but rather as a proactive form of city planning.

“We had someone apply and we didn’t have an existing standard,” then Planning Commission Chair Robert Carrol explained to the Metro Council during their August 2021 meeting. “There was no permit we could sell for any single-family dwelling less than 800 square feet.”

So, for months, the Metro Planning Commission worked with two different lawyers and leadership in several surrounding counties to develop a second set of rules for “high density” development in what would eventually become the R3 zoning category. After much debate and public comment, the Metro Council approved that zoning category in January 2022. {To read out full coverage of that final approval, click here.} The Metro Council has since placed a hold on further R3 development in the county.

A gentlemen’s agreement but no signed contract

One of the reasons Hayes says he bought the Main Street property is that it sat inside the former Lynchburg city limits and close to public water and sewer. However, he knew that providing water and sewer to his proposed 79 tiny homes would require more infrastructure than currently existed for the previous RV park. So, Oakstone got to work on a plan to add a six-inch water line to the property to be fed by the nearby Dickey Water Tank.

This is where the tiny home community collides with another ongoing project – one that brings a 12-inch water main line from downtown Lynchburg to The Jack Daniel’s Distillery to get added infrastructure in place in advance of their well-publicized expansion. The distillery will double its capacity in the next several years to meet the global demand for our tiny town’s biggest export.

In 2021, MUD’s then manager, Russell Sells, and Jack Daniel officials agreed to partner on a $2.2 million project that would both add needed capacity and solve water pressure issues on Old Fayetteville Highway. MUD agreed to fund $1.3 million to build two water pumping booster stations, and the Distillery chipped in another $1 million to upgrade water lines from six-inch lines to 12 inches lines from the Metro Water Tanks nearest Lynchburg toward the bottling plant. {To read our complete coverage of that project, click here.}

With the proposed tiny home development running parallel to where the new 12-inch lines needed to run, Sells saw an opportunity for a win-win and approached Hayes about the possibility of running the 12-inch line through the Main Street property. He proposed that Oakstone would pay for half and MUD would pay for the other half.

Gentlemen’s agreements happen in small towns all the time, and mostly without issue. But MUD Board Policy requires that “before any work is begun on any development, a developer contract must be signed by MUD and the developer.” It further states that after the execution of said contract, the developer must “pay all fees and charges” including tap fees, connection fees, any security deposits, and all engineering/plan review fees upfront.

And therein lies the rub as Mr. Shakespeare might have said. Oakstone and MUD currently don’t have a signed contract.

Contract says $258,925 due upfront

Hayes and project manager Rance Frye appeared before the MUD Board on Tuesday to plead their case.

“Regarding the contract, we want to get it done with y’all and get some work on this started. I guess the problem with it is when we first went through the whole planning process and approval, none of this was ever discussed. These things came up in the contract.”

The proposed Whiskey Creek tiny home community in Lynchburg is not Oakstone’s first. They currently boast over 300 units at Deer Lick Falls and Sunset Bluff in Monteagle and Water’s Edge in Tracy City.

“The way we have completed those projects is that we run the infrastructure. They inspect it, then we hand it over and warranty it for a year,” Hayes explained on Monday. “There’s none of this buying all the water meters and everything up front. That’s never anything that we’ve ever had to do, and it was never discussed on the front end of this development.”

By his own admission, Hayes says Grundy County developments have been a little make-it-up-as-you-go. Metro Moore County doesn’t exactly work that way.

Before a developer can begin work in our county that requires public water and sewer, a developer must submit a preliminary plat review and engineering. Once they receive it, MUD is required to send the developer a fee schedule “along with a written itemized and detailed description of the costs involved.” Those plans then go to the Tennessee Department of Environment and Conservation for approval. Once that approval is obtained, MUD submits a contract that must be signed prior to beginning any work.

Once the contract is signed, MUD asks developers to pay all tap fees, connection fees, a security deposit or construction bond, and any engineering fees upfront. MUD is financed 100 percent by ratepayer and the Board’s contract avoids ratepayer money being used as an “interest free loan” to develop projects inside the county, according to one MUD official we spoke to.

One of the issues Hayes brought before the MUD Board on Tuesday were these upfront water tap and sewer connection costs. Water tap fees for the project are estimated at $118,000 with another $134,000 in sewer connection fees.

“We didn’t build that into the cost of the lots,” Hayes explained. “Our assumption was that money would be collected later from the homeowner. We got a copy of your guidelines for the first-time last week.”

The Times obtained a copy of the MUD/Oakstone contract, which states that the amount due upon execution of the contract is $258,925 and includes the upfront fees. According to MUD officials, they originally emailed the contract to Oakstone officials in June 2023. They received an edited copy back from Oakstone in March 2024.

New member Greg Guinn pushed back against Hayes claiming ignorance of the policies.

“I’m new to this board, but I’m not new to the industry. I don’t buy that you never knew those policies. I’m also in the building business. I do my homework. When you develop, you go into that county, and you find out what the rules and regulations are. I’m not calling you a liar. I just find it hard to believe. I find it ridiculous that we’re all here going over a contract on a project that started over a year ago.”

Chair Taylor emphasized Guinn’s point.

“Mr. Hayes, if I’m not mistaken, this entire project was slated for completion in November 2023. It’s now April 2024 and we’re just now talking about the contract with you.”

Other contract issues

Another point of contention for Hayes was MUD’s insistence that gravity flow pumps be used in the development. Hayes stated that he thought it made more sense to use grinder pumps – an idea Chair Taylor disliked.

“With the grinder pumps, I’m a no,” Chair Taylor stated – explaining that all subdivisions in Moore County used gravity flow pumps and that an exception for Whiskey Creek represented a potential exception for every subdivision.

“I’m not trying to die on that hill,” Hayes responded. “This really doesn’t have to be confrontational. We want to work with you, and we want to benefit the city by actually running the water line.”

Hayes also took issue with the eminent domain clause in the contract. The tiny home property serves as the ingress and egress to the Dickey Tank and therefore falls under Tennessee’s eminent domain laws. Hayes believed the way the contract verbiage was written left him exposed.

“I’m paying for it already, but if you go do something after the fact that I have no control over and no say over, I just become a blank check.”

Chair Taylor ended the discussion by agreeing to take Hayes’ proposed contract changes back to MUD attorneys for an opinion.

“I can respect that you weren’t told something maybe by the previous manager. I can also respect that you were paying a man to handle your business for you that might not have been handling it really well,” Chair Taylor responded. “We can set all that aside, but this Board is supposed to protect the citizens of Moore County. I’m sorry for what’s happened in the past, but we need to pick the ball up and go forward.”

No action was taken on Tuesday.

The next MUD Board meeting will take place on Tuesday, May 14 at 6 p.m. at the Metro Utility Department located on the Fayetteville Highway in Lynchburg. Anyone wishing to be added to the agenda, should notify MUD Board Chair Taylor by no later than 4 p.m. the day of the scheduled meeting. You can reach Taylor at [email protected] or the MUD offices at 931-759-4297. •

{In total, this article represents nearly 10 hours of work by our editorLast night’s MUD Board meeting lasted from 6 to 10 p.m. Every word was recorded by our staff and then transcribed. The article itself required over three hours of research. None of that includes the decades of experience and knowledge it takes to report on something as complicated as a local utility board. Consider subscribing to support our work at this link.}