MSD offers $57 million water system deal to Asheville

The Metropolitan Sewerage District has proposed a $57 million deal to the city of Asheville as part of a possible takeover of its water system.

State legislators, led by Rep. Tim Moffitt, have pushed the merger, with a controversial legislative study committee endorsing the idea, but claiming the general assembly won’t force the issue as long as MSD and the city are engaged in “good faith negotiations.”

MSD’s report earlier this month, which focused on operational matters, found that both systems are well-run. But it claimed that if MSD took over the city’s water system, ratepayers would see a slower increase in rates, and that MSD can save money from having water and sewer operations under one roof. The board, however, wanted issues such as governance and compensation for the city addressed, and that resulted in this proposal.

Att the Nov. 27 Asheville City Council meeting, City manager Gary Jackson called MSD’s proposed compensation “modest.” No word yet if the city will accept the deal.

The city will release its own report Dec. 11.

Here’s some important points from MSD’s proposed deal:

• $57 million to Asheville, and MSD takes on the system’s debt MSD proposes paying the city $57 million for the system, spread out over 50 years, amounting to about $1.1 million a year. MSD also agrees to take on $71 million in debt attached to the system. The proposal estimates the value of the water system’s total at $169 million, but deducts “outstanding debt, developer contributed assets, and cash transfers to General Fund” from the total to arrive at $57 million.

• The city’s budget stays about the same Asheville’s water system is currently constrained by a series of state laws known as the Sullivan Acts, dictating that it must spend the vast majority of water revenue on the system itself. However, those laws do allow the city to use three percent of its water revenues for infrastructure projects. Right now, that amounts to about $1 million a year, and the city would face a major shortfall if that disappeared. MSD’s proposed compensation would make up that gap, leaving the city right about where it is now, financially speaking.

• The city will still own the watershed, but MSD will lease it — for almost two centuries The city will retain its title to the Bee Tree and North Fork reservoirs, but MSD will lease them for 199 years “for the sole purpose of providing clean, safe drinking water” and will maintain them in accordance with the city’s conservation easement on the site. Compensation for the lease is figured into the $57 million MSD is offering.

• The city would have a say through MSD board, but that’s it The proposal doesn’t change how a new combined system would be governed. Currently, MSD is run by a board appointed by local governments. Asheville City Council appoints three members to the 12-person board, and that would constitute the city’s representation in a consolidated system.

• The deal commits MSD against any privatization of the water system “MSD to officially oppose privatization of assets and of operational control” the proposal notes. However, public-private partnerships are possible, as it is also notes “water to be eligible for same MSD financial incentives and partnerships for new public and private development currently available for sewer.”

• MSD’s proposal differs from the state legislative committee’s findings The state report asserted that the ratepayers, not the city, owned the system and that “customers should not pay for them twice” i.e. no compensation for Asheville. MSD, on the other hand, proposes “to pay the city of Asheville the Book Value [the original value] for all water assets.”