Five uneasy pieces: What an MSD/Asheville water-system merger might mean

Studied: MSD board members Jerry VeHaun and E. Gene Kelly listen as General Manager Tom Hartye (right) discusses the findings of the Arcadis report on the possible merger of the sewage system with the Asheville water system. photo by Bill Rhodes

In the latest chapter of an intense controversy, concerned residents packed a room at the Metropolitan Sewerage District's Riverside Drive offices Nov. 14 to hear what consultants hired by MSD had to say about the agency’s perhaps taking over Asheville's water system. The report from Arcadis focused on operational matters such as staffing and infrastructure, rather than such big-picture issues as who would own the assets and the potential cost of leasing them from the city or compensating Asheville for losing them. According to the executive summary, “It is our understanding that the analysis of such issues will be performed subject to the enactment of the proposed legislation” — in other words, after the merger was already a done deal.

Nonetheless, the study does provide some tentative numbers and educated guesses concerning the water system’s possible future.

Led by Rep. Tim Moffitt, state lawmakers have pushed for a merger, sparking heated complaints about the Legislature’s heavy-handed approach to local affairs. In a referendum earlier this month, city voters overwhelmingly opposed selling or leasing the water system, and Asheville City Council members called the vote a rejection of the merger idea. A study committee chaired by Moffitt, a Republican, has said it won't force the issue as long as MSD and the city are engaged in “good faith negotiations"; the Arcadis report is part of that effort.

The city will present its own analysis of a merger later this month; a second Arcadis report will consider including smaller systems serving Montreat, Weaverville and Biltmore Forest. Meanwhile, here are some key points from the dense, 200-page document.

MSD takeover might save money

One of the main arguments for consolidation is the idea that combining services such as billing and engineering expertise would generate significant savings. MSD would also avoid “nonbetterment” costs the city has to pay when water infrastructure must be changed or moved due to highway or other construction. Merging the operations would save funds in the long run, the study concludes.

The report lays out three scenarios representing different staffing levels. In one, a merger would actually cost more in the first year, reflecting the cost of building new office space and personnel to help with the transition. After those one-time expenses are finished, however, the consolidated system would save anywhere from $2 million to $4 million annually, the study predicts, while enabling better coordination of water and sewer construction.

City would lose revenue; system employees would make more

On average, MSD employees earn more than city water system workers and have received more raises in recent years. In a merger, all water system employees would come under MSD's pay scale; the district would also hire 13 new workers.

The Sullivan Acts (state legislation governing Asheville’s water system) allow the city to use a percentage of water revenues for other infrastructure needs. A merger would end those transfers, saving money but forcing the city to seek alternative funding for other necessary infrastructure improvements.

Water rates might increase more slowly

Asheville's system has averaged $8.6 million in annual infrastructure expenditures, the study finds, compared with $13.1 million for MSD. But in recent years, the city has ramped up its infrastructure spending, noted MSD General Manager Tom Hartye, with plans to increase it to $12.2 million annually. That means MSD wouldn't need to raise rates beyond what the city had already planned in order to maintain an aggressive line-replacement program. And after the first few years, the increases would be smaller.

Both the consultants and board members, however, emphasized that these rough projections don't necessarily reflect what MSD will do.

Both systems well-run

The current water and sewer systems both have solid infrastructure and responsible financial management, the report concludes.

“Things were generally in good condition,” said consultant Cathy Traynor. “We didn't see anything out of the ordinary; [the water system] was fiscally well-run.” Arcadis did recommend that Asheville spend more on updating its infrastructure, but this is true for many municipalities, Traynor observed, “especially a city having to balance the affordability of doing that with the need to invest in their pipelines.”

Huge issues not addressed

Because Arcadis was tasked with considering only system operations, the report leaves out the most controversial questions, and local activist Barry Summers, a vocal critic of the merger idea, asked how the report could say there would be savings without tackling those potentially very costly ownership and compensation issues.

MSD board Chair Steve Aceto responded: “We're just trying to solve a problem here. … No one should expect us to have X-ray vision” about all the complexities a merger would entail. Aceto asked Summers if he felt the report fell short as a first step in getting a handle on the issue.

Summers called the report “a wonderful job” but said the whole process concerning a possible merger has been flawed.

During MSD's full board meeting later that day, Asheville Vice Mayor Esther Manheimer, who serves on the board, moved that the report be sent back to MSD’s Planning Committee for further discussion of those issues. The consensus was that if the legislature forces a merger, MSD should be prepared with some suggestions.

David Forbes can be reached at 251-1333, ext. 137, or at dforbes@mountainx.com.

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