By Leslee Kulba- The City of Asheville won the last round of the ongoing water dispute. December 21, the Supreme Court of North Carolina overturned a Wake County Superior Court decision by Judge Howard Manning, which overturned a trial court decision. The decision, in essence, voided legislation passed in 2013, formally known as House Bill 488. The bill, popularly attributed to former state representative Tim Moffitt, called for the city to turn its water system over to a regional authority without compensation. The case was heard on May 17.
Had the city not sued, it would have stood to lose, according to a footnote in the decision, “a sizeable watershed; two impoundments; three water treatment plants; twenty-nine treated water storage reservoirs; 1,661 miles of transmission and distribution lines; at least forty pump stations; certain intangible assets, including, but not limited to, approximately 147 trained and certified employees, numerous licenses, wholesale water supply contracts, contracts for the supply of goods and services, and revenue accounts containing more than $2,218,000 that are held for the purpose of ensuring repayment of outstanding bonded indebtedness.” In 2014, the system served 124,000 customers.
The bill was the last in a series of state-level attempts to prevent the City of Asheville from using its water system as a cash cow. Of the arguments proposed and debunked through the years, the strongest could be that no other city in the state has similar restrictions. The first Sullivan Act was passed when the city was in terrible financial shape after choosing not to default on its debts incurred during the Great Depression. Subsequent acts required water resources to be spent only on water system projects, and then expanded the definition of water system projects to include repaving waterline repairs, which the city, in turn, stretched to include Azalea Park enhancements and River Arts District streetscaping. Allegations that the city did not own the system were settled when Buncombe County conveyed its interest in the system to the city in 2012, and an entangled land parcel was sold to the county for the failed recruitment of Deschutes Brewery.
Another complaint lodged against the city was that it had not maintained the system. Actually, the former regional water authority had been so, in the words of Standard & Poor’s, “dysfunctional,” it could never agree on a repair and refurbishment program. So, in 2005, then City Manager Jim Westbrook, acting within the terms of the agreement, announced the city’s intention to dissolve the existing water authority and assume unilateral control of the system. The city then embarked on an extensive capital improvement program. In addition to repairing lines, it invested in an expensive, state-of-the-art, GPS camera that would travel along waterlines, locating lines lost to history and mapping deficiencies. In 2015, the city issued $50,625,000 in refunding bonds for better interest rates on the bonds it had floated for water system capital improvements in 2005 and 2007.
Asheville voters just approved three bond referenda totaling $45 million. Mayor Esther Manheimer said she had hoped at least two would pass. The city further did not lose the water system, the prospect of which presumably had substantial financial impact, since the city had prayed the courts, in the event of losing the suit, to “award monetary damages sufficient to indemnify the city,” or “an amount greater than $100,000,000.” In apparent contradiction, the city’s 2016 Comprehensive Annual Financial Report claims the resolution of any of the lawsuits in which the city is involved “will not have a material adverse effect on the city’s financial position.” Multiple requests for clarification from city staff on the budgetary impact of the recent developments went acknowledged but unanswered.
It is possible city staff had assurances they would win the suit against the state and the Metropolitan Sewerage District, which would have assumed control of the water system. The MSD did not respond to any of the city’s claims, which cited various violations of the North Carolina constitution and argued the legislation would upset the city’s contracts with its bondholders. The CAFR explains that, were the city to lose the litigation, the new authority would assume responsibility for all the massive debt the city had incurred for the system’s improvement. What’s more, there were other unnamed, requisite pre-conditions governing the city’s revenue bonds that the new system owner would likely not be able to meet. In his dissenting opinion, however, Justice Paul Newby argued this was not the case.
In the end, the court ruled the state’s claims that the bill should promote health and sanitation on a statewide level a charade; and its claim that Asheville’s “misuse of public monies and other resources’ has ‘engendered a toxically high level of public distrust and cynicism concerning local government in that region which itself makes sound democratic governance there difficult to achieve,’” ineffectual.