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The state’s highest court is set to weigh in on the fate of the Asheville water system.

If the North Carolina Supreme Court rules against the city, it could mean the end of a three-year legal battle, with roots going back decades, and the takeover of the municipal water system by a regional authority.

The court could also uphold an earlier lower court decision that the Court of Appeals overruled, which found the takeover unconstitutional. That could send the matter back to a lower court for further review.

At stake is a system that serves 124,000 customers inside and outside the city, with holdings that include a 17,000-acre protected watershed, 40 pumping stations, 29 treated water storage reservoirs and 1,660 miles of distribution lines.

Although city residents make up a majority of the water system’s customers, Asheville Mayor Esther Manheimer told Carolina Public Press that they would have little say in how it would be run under the arrangement laid out by the state in a 2013 bill mandating the transfer to a regional authority.

In 2012, Asheville Vice Mayor Esther Manheimer made a presentation to legislators studying the city’s water system. She has since become mayor. Lissa Gotwals/Carolina Public Press file photo

Advocates for the transfer contend the city doesn’t have in mind the best interests of its neighbors.

Those who’ve studied the issue say the case’s ramifications would extend well beyond Asheville and Western North Carolina.

“If they rule against the city, I think you’ll see a reluctance by municipalities to invest in infrastructure or to extend their water resources outside their city limits,” said Ralph Hamlett, associate professor of political communications at Brevard College in Transylvania County.

“I question what the incentive will be for municipalities to make those investments if they feel their oversight might be reduced and voices marginalized.”

The Sullivan Acts

In 1933, the General Assembly passed the first of the Sullivan Acts, which dictated the city must charge residents and non-residents the same rates for water. Two more Sullivan Acts were passed in 2005, just as a nearly 25-year-old water agreement with Buncombe County was coming to an end, to ensure non-residents would continuing paying the same rates as people living in the city.

Legal battles ensued, with the courts ultimately upholding the acts, to the city’s objections.

In 2011, a legislative subcommittee began studying whether merging a municipal water system into a larger metropolitan system would “improve the efficiency of providing public services.”

In February 2012, the Asheville City Council voted unanimously in favor of the city maintaining control of its water system.

The subcommittee, co-chaired by former state Rep. Tim Moffitt of Buncombe County, issued a report in May 2012 stating, among other things, that the city refused “to acknowledge Buncombe County’s contribution and investment” in the water system; and that non-residents were “at risk of inequitable treatment.”

Manheimer insists such concerns were unfounded.

“Again, there is legislation that prohibits that, so it was never a possibility,” she said. “And that (raising water rates for non-residents) is not something the City Council has even considered in the six years I’ve been on it.”

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The report also recommended the merger of the city’s water system with the county’s Metropolitan Sewerage District, arguing that both entities essentially served the same customers, and that economies of scale could “be achieved in the areas of administration, planning and engineering.”

Legislative action

The following March, Moffitt along with Rep. Nathan Ramsey, also of Buncombe County, introduced House Bill 488, calling for Asheville’s water system to be transferred to a newly created Metropolitan Water and Sewerage District. The City Council again passed a resolution opposing any such transfer, arguing that the action “would not achieve financial or operational efficiencies.”

The bill, however, passed in May 2013, and became law without Gov. Pat McCrory’s signature.

Under the bill, all the system’s assets and debts would be taken over by the new water and sewer district, which would also have the power to issue bonds.

The district itself would be governed by a 15-member board. Only three of those members would be appointed by the City of Asheville, even though 76,000 of the system’s 124,000 customers live within the city limits.

“The primary concern is who is going to be in control,” Hamlett said.

“You have (under the current system) a water department who answers to a board through a city manager with oversight. But with the new association, how will the new board operate?”

Supporters of the transfer say county residents need a greater say in how the system is run.

“The idea here is to broaden representation to include all of those who are supplying water and using water,” said Rep. Chuck McGrady, R-Hendersonville.

Rep. Chuck McGrady, R-Henderson

McGrady noted that the water system “has a lot of different pieces to it” that are outside the city.

“Some of it was a system not put together at all by the City of Asheville,” he said.

“We’ve got already a regional sewer system that has managed to do a pretty good job. For example the French Broad River is much cleaner now than it was when we had a lot of different sewer systems run by municipal governments.”

City files suit

The city filed suit against the state on May 14, 2013, and a judge in Wake County Superior Court soon issued a stay on the new law.

The suit alleged the bill violated the state Constitution, which prohibits the legislature from enacting “any local, private, or special act or resolution … relating to health, sanitation, and the abatement of nuisances.” The suit also contended that the legislation was depriving Asheville of its property for a reason “other than a constitutionally permitted purpose” and that the transfer of the water system would cause the city to breach various obligations related to its water bonds (the principal balance on which, according to the suit, stood at $65.6 million).

In June 2014, Wake County Superior Court Judge Howard Manning ruled the transfer violated the state constitution’s equal protection clause, as the water system would continue to be used essentially for the same purpose as before without a change in quality.

He also found that the statute was indeed a local act related to health or sanitation, which would make the actions unconstitutional.

The state filed a notice of appeal a month later.

In October 2015, a three-judge panel of the Court of Appeals decided unanimously in the state’s favor.

The court’s opinion, written by Judge Chris Dillon, stated that even if the statute was a local law, it did not directly deal with matters of health or sanitation. The court also found the state did not have to compensate the city for taking over the water system.

‘More than one way to skin a cat’

The city appealed to the state Supreme Court, which in January agreed to hear the case. The court has also issued a stay on the Court of Appeals decision.

Arguments have not yet been scheduled.

In its petition to the court, the city contended that the Court of Appeals decision “eviscerates our Constitution’s ban on takings without just compensation.”

The city also argued that if the transfer is allowed to take place, “municipal residents throughout the state, as well as bond-purchasers, will ascribe more risk to utility investments.”

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Manheimer said if the Supreme Court ultimately rules against the city, the fight would essentially be over, at least the state level. Whether the city would continue fighting the transfer through other legal avenues would be up to the City Council, she said.

City Attorney Robin Currin declined to comment on what sort of legal options would be available to the city should the Supreme Court rule in the state’s favor.

The Court of Appeals decision officially remanded the case back to the trial court, but only so the trial court could issue summary judgment in the state’s favor.

Frayda Bluestein, professor of public law and government at the University of North Carolina School of Government, told CPP that if the state Supreme Court upholds the Court of Appeals decision in its entirety, the parties wouldn’t be able to go back and make further arguments at the trial court level.

However, the state Supreme Court could possibly uphold or reject portions of it, in which case further arguments might be made, she said.

Manheimer said she wasn’t in a position to discuss whether or not the city is considering a settlement with the state.

McGrady said if the court were to rule in the city’s favor, the state would take “other approaches.”

“We’ll wait for the Supreme Court to decide before we get into alternative strategies,” he said. “But there’s more than one way to skin a cat.”

If the city does lose in the state’s highest court, Bluestein said the city might be able to make an argument under the federal Constitution.

“I suppose it’s possible they could appeal to the U.S. Supreme Court,” she said.

Robert Lopez

Robert Lopez is a contributing reporter to Carolina Public Press. Contact him at roberto.lopez79@gmail.com.

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