Five things you should know from the MSD water system report

In the latest chapter of an intense controversy, locals packed a room at the Metropolitan Sewerage District’s Riverside Drive office in Woodfin yesterday, Nov. 14, to hear what consultants had to say about the agency taking over Asheville’s water system. Although the report from Arcadis focused on technical matters such as staffing and infrastructure, it did provide a possible glimpse into the future. 

Led by Rep. Tim Moffitt, state lawmakers have pushed for a merger, sparking heated complaints about what some say is 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 — paid for by MSD — is part of that effort. The city will present its own merger analysis later this month, and 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 could 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, each representing different staffing levels. In one, a merger would actually cost more in the first year, reflecting new office space and personnel costs. However, after those one-time expenses — which are, mainly, construction costs — are finished, the consolidated system would save anywhere from $2 million to $4 million annually, the study predicts, while enabling better coordination of water and sewer projects.

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, noted MSD General Manager Tom Hartye, the city has ramped up its infrastructure spending, with plans to increase it to $12.2 million annually. That means MSD wouldn’t need to raise rates more than the city projects for replacing the water lines at a fairly aggressive pace. In the first few years, the new system would raise rates at roughly the same pace as the city of Asheville plans to, the study estimates, but subsequent increases would be smaller. Both the consultants and board members, however, said these are rough projections that 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

Arcadis’ report considers only system operations, leaving out the most controversial questions: how the system would be governed, who would own the considerable assets and whether the city would be compensated for losing them. 

Local activist Barry Summers, a vocal critic of the merger, asked how the report could say there would be savings without tackling those 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 is 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 the agency’s Planning Committee and the consultants to incorporate those larger issues. The consensus was that if the Legislature forces a merger, MSD should be prepared with some suggestions regarding those concerns.

To view the entire report, click here.

(photo by Bill Rhodes)


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8 thoughts on “Five things you should know from the MSD water system report

  1. Santa

    If they combine the water system and the sewer system, won’t the tapwater taste like poo?

  2. bsummers

    David, not meaning to quibble, but maybe you missed the point of my 10 minute exchange with Steve Aceto, and the central misrepresentation of this ‘study’. It isn’t just “flawed”, it is a work of fiction.

    Arcadis confirmed that in preparing this study, and the proposed budgets within, they were instructed by MSD to assume that the City of Asheville would retain ownership of the watershed and the reservoirs, catchment systems, and other facilities within. (I asked why they assumed that, rather than Raleigh taking everything, & got no solid answer). That assumption, and the need to arrange a lease of the watershed, is mentioned repeatedly throughout the document. As Xpress reported last month, there have already been informal talks between MSD and the City on that very subject. Should Raleigh seize the water system, but allow the City to retain ownership of the watershed, what would a fair price be to allow MSD total access, operations and management of the City’s 20,000 acres?

    That cost could be considerable, but it is conspicuously absent from the bottom line. And we’re not talking about “compensation”, which if it were to occur, would presumably be done as a capital expense, funded by debt. Leasing the watershed would be a recurring, annual operational expense, right there on the ledger next to salaries. And it would potentially push these mythical “savings” firmly into the red, leading to rising water rates.

    Leaving that major expense, which they have already acknowledged is likely to occur, off the balance sheet, is well… creative bookkeeping to say the least. And reporting that as “MSD takeover could save money”, is (with all due respect) not fair to the readers, ratepayers, and taxpayers who will be impacted by this.

  3. Meiling Dai

    For those who want to read the MSD report referred to in this article, go to:
    MSDPHASE1.pdf. The Legislative Research Commission’s Metropolitan Sewerage/Water System Committee’s report dated April 19, 2012 is posted on under the title: “The water: Our Report to the North Carolina General Assembly.”

  4. Bjorn

    The only reason to privatize a public resource is to control & to profit from it. Privatization is irresponsible. By privatizing water and sewer systems, local government officials abdicate control over a vital public resource. nvestor owned utilities typically charge 33 percent more for water and 63 percent more for sewer service than local government utilities. Food & Water Watch compiled averaged statewide water and sewer rates survey data from dozens of states and found that typical annual household bills were much higher when service came from for-profit, private utilities. Private ownership increased drinking water bills by 4 percent in Alaska to 75 percent in Delaware; and sewer bills by 7 percent in West Virginia to 154 percent in Texas.

  5. “By privatizing water”

    Where did that come from?

    The LRC recommended a merger into a regional authority managed and operated by a governmental body.

    Legislative Research Committee Report
    Metropolitan Sewerage/Water System
    April 19, 2012 Municipal Sewerage FINAL REPORT.pdf

    “Committee recommends that the 2013 Session of the North Carolina General Assembly consolidate the Public Utility Water System with the Metropolitan Sewerage District of Buncombe County. Should the interested governments craft their own solution for consolidation, which achieves all the objectives of the Committee, before the 2013 North Carolina General Assembly convenes, due consideration would be given to the local plan. Action will not be taken if the parties are engaged in good-faith negotiations on this matter.”

    The General Assembly is not asking that the city sell or lease the system. Nor is it calling for privatization. It is mandating a merger. If the city does not accomplish this voluntarily, they will accomplish it involuntarily.

  6. tatuaje

    It really is interesting to see folks who are vehement, outspoken opponents of involuntary annexation, such as Timothy Peck, be such vocal supporters of this involuntary merger.

    Partisan much?

  7. bsummers

    “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 the agency

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