Buncombe County Commission

In the ongoing standoff between Asheville and Buncombe County over the future of the local water system, both sides have expressed a willingness to compromise — but it isn’t clear that they’ve gotten significantly closer to reaching an agreement.

At a special May 24 meeting, the Buncombe County Board of Commissioners and county staffers laid out their arguments for a combined water-and-sewer authority. The powwow came exactly 365 days after Council lobbed the first water balloon in the current war, announcing the city’s intention to withdraw from the compact in a year if they weren’t able to reach a new agreement with the county on key points.

The county also suggested that the current Water Authority has spent too much on administration and put too much money into its rainy-day fund. According to the county, its new proposal could free up millions of dollars to repair the decrepit water infrastructure.

Talking points

County Manager Wanda Greene took the lead in explaining the plan, which she boiled down to three key points: paying Asheville for its water assets, adopting differential tap fees that would fund water- and sewer-line extensions during annexation; and avoiding millions of dollars in payments to the state Department of Transportation.

The last point represents the largest block of potential savings under the county plan, said Greene. “A consolidated water-and-sewer authority,” she explained, “would be considered a public utility under North Carolina general statute 162.” As a result, it would not have to pay the “nonbetterment” fees the DOT charges municipalities when it has to move water or sewer lines in connection with highway projects. If the DOT tears up a 6-inch water line during a road-widening, for example, and replaces it with a line that’s essentially the same, municipalities — but not public utilities — must pay for the work.

The Water Authority now pays about $1 million per year in nonbetterment fees, said Greene, and the pending reconstruction of the Interstate 26 corridor is expected to incur nonbetterment fees in excess of $10 million.

But Interim Water Resources Director David Hanks told Xpress, “We’ve not had any projects in the last five years that have incurred nonbetterment costs.”

Charting differences

The commissioners next heard from Metropolitan Sewerage District Director Tom Hartye concerning his agency’s history and current work. MSD was created in 1962 and began treating sewage in 1968. Up until then, Asheville’s sewage had been straight-piped into the French Broad River. In 1990, said Hartye, “We began consolidation of collection systems [in the county] and became one of the largest in the state. When consolidation occurred, we created a construction-improvement-plan committee.” Once a year, the committee meets with all of the affected municipalities to discuss the system’s needs, he explained. Based on those meetings, MSD lays out plans for the coming year. New construction and debt service on past projects account for two-thirds of the agency’s budget, noted Hartye.

Next up was Water Authority Chairman Bill Lapsley, who told the commissioners that under other circumstances he would have been presenting them with a budget for fiscal year 2005-06. The agency, he said, had in fact approved a budget projecting no significant change in revenue. But Lapsley explained that the Authority had not invested much time in fine-tuning the document, since it appears likely that the agency will cease to exist after June 30.

The Water Authority, said Lapsley, now spends about $2 million a year on repairs but should be spending $8 million to $10 million annually. MSD, he observed, budgets about $14 million per year for renovation and repairs.

That prompted Commissioner David Young to blurt out, “We have to put these systems together, because right now our water system is crumbling and our sewer system is being repaired.”

Lapsley responded, “I’d just like to add that the Authority has tried, on numerous occasions, to address the situation.”

In 2003-04 and 2004-05, the Water Authority passsed budgets including new meter fees to fund system repairs. City Council approved those budgets but the county commissioners did not. Last year, however, the commissioners voted unanimously to approve the water budget — if the city dropped its plan to dissolve the Water Agreement.

At that point, Commissioner Bill Stanley (who serves on the Water Authority board) weighed in, saying, “I think you’ll agree with me that this is a Water Authority without any authority.” Lapsley agreed.

But after the meeting, when Xpress suggested that the Authority had in fact authorized line extensions and set policy, Lapsley responded, “It might be more accurate to say, ‘We’re an Authority with some authority.'”

Chairman Nathan Ramsey, agreeing with Young, said, “An independent authority is the only way to ensure that all the money that goes into the system stays in the system.”

A numbers game

County Planning Director Jon Creighton compared the Water Authority and MSD budgets. Total collections, he noted, are comparable — “$18 [million] to $19 million apiece,” but there’s a big difference in what they do with the money.

“MSD is spending four times what the water system spends on repair and replacement,” Creighton reported, “and the administrative costs for the Water Authority are double that of the sewer system.” He also observed that the Water Authority was adding to its fund balance (a reserve-cash fund) at the rate of $1 million per year and currently holds $17 million in that fund.

Vice Chairman David Gantt interrupted Creighton to ask, “Do you know any reason why the Water Authority should squirrel away $17 million when there are repairs that need to be done?”

“No,” Creighton said simply.

“Where does that $17 million go when the Authority ends?” Gantt inquired.

“It reverts to the city,” Creighton responded.

Hanks, however, disputed that figure. “We do not have $17 million in the fund balance; the county is incorrect on that point,” he told Xpress. At the start of the current fiscal year, we had $11.5 million. We have to keep a certain amount due to our bond covenants; also due to good accounting practices. During the flood this last year, if we hadn’t had money, we wouldn’t have been able to pay for that.”

The discussion then turned to the value of the water system (which the city owns). During the past year, wildly varying figures have been put forward by various parties, and how to reimburse the city — and how much — for relinquishing ownership has been a sticking point in the dispute. At the May 24 meeting, Creighton noted that while much higher figures have been offered by the city, “The actual value of the water system is less than $100 million.”

Gantt rejoined, “The city figure says $64 million.” (At times, the city has estimated the replacement value as high as $750 million.) Ramsey, however, told Xpress that the county figure “doesn’t involve the land or the reservoirs.”

After reiterating her main points, Greene wrapped up the presentation, saying, “I believe this proposal is best for our citizens and best for our community.” The board then unanimously approved the plan.

“Send it [to the city] this afternoon, if you can,” urged Stanley.

After the meeting, Ramsey predicted, “They won’t accept it.” But he added: “The differential tap fee is new. It accomplishes some of what they want to achieve through differential rates. I hope they will consider it.” The county plan would charge developers outside the city more money to tap into the system unless they accepted voluntary annexation.

First responder

Council member Brownie Newman — speaking both at the Asheville City Council’s formal session later that evening and via an open letter to the press — described what he sees as “major problems” with the county proposal.

Among those shortcomings, he said, are: failing to reduce rates for city water customers (who pay the highest water rates in North Carolina); requiring city customers to pay for a water system they already own; failing to reform a divisive annexation process; permanently transferring Asheville’s water assets to an entity that the city won’t control; and “the county’s abdication of most of their tax-equity responsibilities outlined in the present agreement.” (The latter remark refers to payments from the county to the city that are non-water-related but are included in the Water Agreement.)

“The proposal made yesterday contains no real concessions,” Newman declared. “In fact, the plan presented yesterday would require the county to contribute $1.75 million less to a regional tax-equity agreement than they contribute under the present agreement.”

Newman did concede that eliminating the nonbetterment costs is a positive feature of the county plan, and he said he remains open to the idea of an independent water authority.

Greene, however, told Xpress, “Our plan provides $3.5 million to the city and doesn’t tie it to anything.” That contribution, she said, more than makes up for terminating the present tax-equity funding. The $3.5 million annual payment, which the consolidated water-and-sewer authority would make annually to Asheville, would include $2.5 million to reimburse the city for loss of the asset.

As for Newman’s assertion that Asheville residents would be buying a system they already own, Greene said: “They didn’t buy it in the first place. If you go back to the history of the system, 90 percent of the assets that are held by the Water Authority were paid for by system users and developers. Asheville city residents and Buncombe County residents did not pay for that through property taxes.” The city, she concluded, is “going to be paid for something they never paid for.”

With one month to go before the Water Agreement evaporates, both local governments are finally going public with their proposals. But if any resolution is imminent, it remains well out of sight. And while reports from Raleigh suggest that most of the local delegation to the General Assembly supports the county’s position, City Council apparently believes it can prevail in court.

Given that a single day of fruitless negotiations in early May cost the two municipalities upward of $100,000 in outside legal fees, one can only guess what a protracted court battle would cost taxpayers. One thing, however, seems clear as day: Money spent on litigation will not be available for fixing broken pipes.