Seeking higher ground

The city of Asheville has announced it will appeal its challenge of the Sullivan Acts to the N.C. Supreme Court by Sept. 23. But it is not entirely clear that the court will hear the case.

“City Council feels obligated to proceed with an appeal to the Supreme Court, but we are still committed to seeking a local resolution,” Mayor Terry Bellamy said when the city made the announcement last week. “We would like to continue negotiations with Buncombe County Commissioners in hopes of reaching a positive settlement for the community.”

According to the North Carolina Constitution, appeals to the Supreme Court are granted when the lower court’s ruling isn’t unanimous or there are “substantial” constitutional issues raised by the case. Since the three-judge panel of appellate-court justices unanimously upheld Wake County Superior Court’s ruling against the city, Asheville is making its appeal based on those constitutional questions. Buncombe County, however, could argue that those issues are not substantial enough and file a motion to dismiss. If such a motion were granted, the city would then only have a right to file a petition for review, and the court could, at its discretion, refuse to hear the case.

According to Asheville City Attorney Bob Oast, the city has spent about $240,000 on the lawsuit. (The city also paid Moore & Van Allen, the firm working on the case, about $95,000 for earlier research on the city/county Water Agreement.) Typically, the first stages of a lawsuit are more expensive than an appeal to the state Supreme Court, but Oast said he was “not willing to estimate future costs.”

Sullivan I, which the N.C. General Assembly passed in 1933, barred the city from charging higher rates to customers in some water districts outside the city. For years, the city protested the act—which applies only to Asheville—mounting various legal challenges to it before finally reaching an agreement with Buncombe County in 1981.

In exchange for Asheville’s pledge not to challenge Sullivan I, the county took over the management and maintenance of some city-owned recreational facilities and agreed to reimburse the city for Sheriff’s Department services that city residents paid for in their taxes but didn’t use. The 1981 agreement also established the Asheville-Buncombe Water Authority, which could authorize line extensions and set water policy.

But many tensions remained, and in 2004, the city exercised its right to give a year’s notice of its intention to pull out of the Water Agreement. By that time, the city believed, Sullivan I’s prohibition on higher rates applied only to a small number of customers who hadn’t been annexed by the city and who were still hooked up to the old water districts’ original mains.

In response to the city’s announcement, however—and at the county’s behest—the local legislative delegation introduced Sullivan II and III in the General Assembly. Those acts prohibit the city—alone among municipalities in the state—from charging higher rates to any customer outside the city limits, demanding annexation in exchange for water hookup, and using water revenue to fund anything other than the water system.

In return, the city filed a lawsuit challenging the constitutionality of all three Sullivan Acts. Subsequent attempts to resolve the dispute foundered—in part because state legislators, perhaps even more than the county commissioners, were unwilling to give ground on letting Asheville make annexation a condition for supplying water to new developments.

Public sentiment has long favored working toward a negotiated settlement. And with Council member Holly Jones a strong candidate for election to the Buncombe County Board of Commissioners in November (she received the highest number of votes in the May primary), the county—which has worked hard to iron out its internal differences ahead of time and maintain a united front in negotiations with the city—could prove more willing to agree to a deal that the city feels it can live with. Given this, there had been some speculation that Council might choose to simply give up the legal fight, cut its losses and hope for the best at the bargaining table.

“No constitutional restrictions”

Yet it was also far from clear that the Court of Appeals’ decision, a dense 28-page ruling written by Chief Judge John C. Martin, represented an utter defeat for Asheville. On at least one key point, the court sided with the city. In finding that the Sullivan Acts were “local” rather than “general” laws, the court took issue with the county’s contention that the local water history “is one of ‘manifest peculiarities clearly distinguishing’ Asheville and Buncombe County from other municipalities across the state.” But the court also noted that “municipal corporations, in the absence of constitutional restrictions, are the creatures of the legislative will, and are subject to its control,” and it found that there were no “constitutional restrictions” prohibiting the special local treatment of the city under the Sullivan Acts.

The state constitution describes 14 types of local (as opposed to general) legislation that the General Assembly is prohibited from enacting, including two—one “relating to health, sanitation and the abatement of nuisances” and another “regulating labor, trade, mining or manufacturing”—that the city argued made the Sullivan Acts unconstitutional. Citing a variety of reasons, however, the court found that neither “health” nor “trade” applies to the Sullivans.

With regard to Sullivan I, the court referenced the doctrine of “res judicata” (“a matter already judged”), arguing that the city, having failed to raise these issues when it challenged the constitutionality of Sullivan I in the 1950s, could not now make that argument.

As for the city’s claim that Sullivan II and III related to “trade” because they interfere with the city’s “proprietary capacity” to set fees and conduct its business, the court noted that “‘trade’ refers to commerce engaged by citizens of the State and not a restricted activity conducted by the State itself.” (All italics are in the original.)

Asheville had argued that Sullivan II was related to “health” and “sanitation” because water is “vital” to “health and clean living,” but the court concluded that clauses explicitly giving the city the right to discontinue water service to those who were in arrears on their bills supported the position that “Sullivan II relates only to matters which are purely economic in nature.”

With regard to Sullivan III, the court provided more of an opening for an appeal, noting that “restricting the use of revenue to the limited purposes of growing and maintaining the water system could ‘provide for … healthful conditions in the [community] by means of an adequate water supply.’” But the court also noted that “any reasonable doubt must be resolved in favor of presumed constitutionality” and consequently ruled that Sullivan III is not related to health either.

The power of precedent

As for whether or not Sullivan I was “good law when it was decided,” the court simply cited the N.C. Supreme Court’s 1958 ruling about Sullivan I (Candler v. City of Asheville). That, in turn, might leave room for a reversal if the current Supreme Court decided to re-evaluate its earlier decision. “Asheville argues that Candler ‘incorrectly decided the issues’ that were before the North Carolina Supreme Court at the time, was ‘not good law when it was decided,’ and ‘cannot be dispositive of any issue’ in the present case,” Judge Martin wrote. “Nonetheless, this Court ‘has no authority to overrule decisions of [the] Supreme Court and [has] the responsibility to follow those decisions until otherwise ordered by the Supreme Court.’”

The city had also asserted that a 1975 state Supreme Court ruling (Piedmont Aviation Inc. v. Raleigh-Durham Airport Authority) had “overruled” Candler when it determined that an airport authority had the right to act in a “proprietary capacity” in determining landing fees and rents. Piedmont had, in fact, explicitly corrected Candler, noting that its argument that “a municipality in establishing rates it will charge for water is a governmental function … overlooks the distinction to be drawn between municipal action fixing rates to be charged by a public utility to its customers and municipal action fixing rates which the municipality, itself, will charge for its service. The former function is a governmental function. The latter is a proprietary function.” In Piedmont, the Supreme Court ruled that this particular element of Candler “may no longer be deemed authoritative,” but the ruling nonetheless stated that the distinction was “not necessary to the decision” in Candler. Citing that phrase, Judge Martin ruled that Candler is therefore “still binding authority regarding the constitutionality of Sullivan I.” But if the Court of Appeals must abide by the letter of previous Supreme Court decisions, the Supreme Court would not be so bound.

The city also challenged the Sullivan Acts for violating the 14th Amendment to U.S. Constitution, with its famous “equal protection” and “due process” clauses, as well as for violating that amendment’s closest equivalent in the N.C. Constitution, the “law of the land” clause. Because of the challenge on 14th Amendment grounds, it is at least theoretically possible that the city could appeal to the U.S. Supreme Court if the N.C. Supreme Court turned Asheville’s case down.

Déjà vu all over again

Council member Brownie Newman hopes the city and county will restart water talks despite the fact that the city has decided to file its appeal. “People really want to work this out and find a fair solution,” he says.

Holly Jones also emphasizes the importance of restarting talks and says she doesn’t find the prospect of switching to the other side of the table particularly daunting—or awkward. “At the end of the day, I just want to do the best thing for the community.”

The two sides, says Jones, will have to take the most controversial things off the table, with the county accepting that the city will retain ownership and control of the water system and the city giving up on rate differentials. They will then be able to focus on the issues of “tax equity” and annexation.

“We need to accept that we cannot press for differential rates,” Newman agrees. “We can anticipate that the county won’t accept anything but that.”

But in return, he argues, the county must provide some kind of voluntary annexation agreement so the city and its tax base can “naturally grow.” And since Asheville is being treated differently than other North Carolina municipalities, he maintains, it’s only fair that it receive some kind of tax-equity benefits, like those included in the 1981 Water Agreement.

There would be some irony if an agreement wound up getting hammered out along those lines, since in the years leading up to the city’s pullout, the Water Agreement was widely criticized because it was a mishmash involving so many things besides water.

[Freelance writer and translator Jonathan Barnard lives in West Asheville.]