On Aug. 19, the city of Asheville lost another round in its legal quest to gain control of the city water system’s rates and revenues.
The N.C. Court of Appeals reaffirmed a lower court’s decision, finding that state lawmakers did not exceed their constitutional authority when they prohibited the city from charging higher water rates to customers outside its municipal boundaries and from requiring new developments in the county to accept annexation as a condition for water service. The General Assembly has imposed no similar restrictions on other cities in North Carolina. The vast majority of municipal water systems in the state charge outsiders more, and many demand annexation in exchange for water hookup.
The three-judge panel’s ruling also upheld the lawmakers’ right to require that the city use water-system revenues only for water-system maintenance and operations.
The current legal fight has roots in the passage of the Sullivan Act in 1933, the 1981 Water Agreement between Asheville and Buncombe County, and the state legislature’s adoption of Sullivan Acts II and III when Asheville pulled out of the agreement in 2005.
City attorneys are reviewing the decision, a city spokesperson said in a statement. The city could appeal the decision to the state Supreme Court. The city and county have spent hundreds of thousands of dollars in taxpayers’ money fighting the case.
The first Sullivan Act was passed during the depths of the Great Depression, when many local banks had failed, water districts in the county had defaulted on their bonds, and the city was desperate for cash. The act prohibited Asheville from charging residents who lived in water districts outside city limits a higher rate for water than those residents living inside the city. Asheville protested the law for decades, mounting a failed court challenge in the 1950s and an unsuccessful campaign to get the state legislature to repeal it in 1969.
Under the expansive Water Agreement of 1981, the city agreed not to mount further challenges to Sullivan Act. But in exchange, the county agreed to reimburse the city for Sheriff’s Department services that city residents pay for in their taxes but don’t use. The county also took over managing and maintaining several city-owned recreational facilities that were used by residents from throughout the county.
The agreement gave responsibility for water policies, including approval of new lines, to a newly formed Water Authority of Asheville and Buncombe. City staff, meanwhile, administered the system. The city retained ownership of its water assets and was given title to the county’s lines. Under the agreement, 5 percent of water revenues went to the city and 2.5 percent to the county.
In 1994, fears about potential water shortages prompted Asheville and Buncombe County to broker a deal with Henderson County so that a plant could be built at the confluence of the Mills and French Broad rivers. The Water Agreement that the three governments signed in 1995 added Henderson County representatives to the Authority.
The water system’s hybrid structure proved increasingly difficult in the following years. City dissatisfaction grew in 2003 when Buncombe County, at the urging of business interests, rejected a water budget that included new fees to pay for maintenance that the city felt was long overdue.
The following summer the city gave notice that it would be pulling out of the 1981 Water Agreement in a year’s time, stating a desire to better maintain the system, control growth, promote voluntary annexation and achieve fairer rates for its residents. That prompted Buncombe County commissioners to petition legislators to enact Sullivan II and III, which, in turn, led to the city’s lawsuit challenging the constitutionality of those acts.