MSD planning committee endorses compensation for city in proposed water merger

The planning committee of the Metropolitan Sewerage District of Buncombe County hosted an overflow crowd at its November 30 special meeting, which was called to discuss compensation to the city of Asheville in the legislatively proposed water/sewer operational merger.

As reported by the Xpress on November 29 (see “MSD Offers …”), that proposal would offer an adjusted total of $57 million to the city of Asheville, using a book-value assumption of $169 million for all water assets, less outstanding debt and other accounting considerations.

MSD General Manager Tom Hartye further cautioned the committee at the meeting that the main transmission line replacment-rehab for the water system was currently under investigation, which could mean further adjustments.

The compensation proposal is contrary to the water/sewer consolidation proposal put forth by the Legislative Reseasrch Committee of the N. C. House earlier this year. That committee, headed by Rep. Tim Moffitt of Buncombe County, recommended a straight public transfer without compensation – something that follows the pattern of other utility mergers in the state. The LRC’s position was that the water customers had already paid for the assets, and those assets stayed with the customers – who should not pay for them twice.

The MSD compensation estimates were developed by staff in consultation with the N.C. Institute of Government’s Environmental Finance Center. The estimates follow an original-cost accounting method for capital assets.

At one point in the committee’s discussion of the ramifications of the merger proposal, Asheville’s Vice Mayor Esther Manheimer, who is one of the city’s appointees to the MSD board, moved to the podium in order to address the board under her what she called her city council hat. She expressed appreciation for MSD’s recently released impact study, which she called “thorough and objective.” But she reminded the board and audience that the council and “approximately 86 percent of voters don’t want anything to happen,” referring to the recent referendum vote opposing a water system transfer.

She surmised that when Asheville’s own impact study is released (due December 11), the city’s estimated losses would exceed the amount of compensation being discussed by MSD. She referred specifically to the loss of overhead payments by the water department and the loss of some $1.7 million per year in Sullivan Act compensation to the city (a payment authorized by the General Assembly when taking away the city’s right to charge differential water rates).

“That amounts to a real annual loss to the city in the range of $3.5 million (annually),” Manheimer stated. “I know that many people will say that’s not MSD’s role to fill that hole,” she added.

Buncombe County Commission Vice Chair Bill Stanley, an MSD board member, responded that if the planning committee passed the proposal on to the full board, “that’s where those negotiations should come.”

Committee Chairman Al Root, mayor of Weaverville then asked for a roll-call vote, with the eight committee members voting 6 to 2 in favor of forwarding the proposal to the MSD board, which will meet December 12 at 2 p.m. Manheimer and City Council member Chris Pelly, also on the MSD board, voted against the recommendation.

Following discussion of the compensation report, Root offered the two legislators in attendance – Rep. Susan Fisher of Buncombe County and Rep. Chuck McGrady of Henderson County – an opportunity to address the committee.

McGrady mentioned he had held recent meetings with public officials—specifically City Council members—in conjunction with Nathan Ramsey, former Buncombe County commission chair and newly elected representative to the General Assembly. Legislation concerning the water/MSD merger is already on the drafting table in Raleigh, McGrady said, and he expressed his hope that by January or early February the local entities will reach agreement on terms that could potentially be incorporated into the legislation.

“In an ideal world,” McGrady said, the parties would come up with an agreement and “we write that in – make it so.” But he made no promises that any of the local proposals would actually be incorporated into the legislation.

“You’re right in noting that the LRC recommendations were assuming no compensation,” McGrady told the committee. But he agreed personally with the group that there should be compensation for the city of Asheville. “I expect to be supportive of legislation that includes compensation,” he said.

Fisher also took a brief turn at the podium.“I appreciate that there are representatives on this board from all the entities that may or may not be included (in the merger). I hope to be surprised by the result of all of this work when this legislation is introduced,” she said of the efforts to provide local input into the ultimate legislative action.

by Nelda Holder, contributing editor

To see the financial presentation to the committee and the agenda packet for November 30, click here.

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