The Gospel According to Jerry

Well, the fire finally put the water out. Water am I talking about?

If you can stand it, here is another postpartum analysis of the aborted water negotiations between the city of Asheville and Buncombe County. You might find it somewhat surprising that Gospel Jerry has some particular insight into the excruciating process that plagued our county commissioners and City Council members.

A few weeks before the Water Agreement was to be washed down the drain, I was asked to help negotiate a settlement. Here is a thumbnail version of how we got into this quagmire.

Since 1985, the local water supply has been under the administration of the Asheville-Buncombe Water Authority, which became the Regional Water Authority of Asheville, Buncombe and Henderson after Henderson County joined.

Asheville city has always run the day-to-day operation of the Water Department, developing the budget and controlling the hiring and firing. The Authority was primarily in charge of policy and rate-setting.

At the Asheville City Council winter retreat of 2004, the Council decided to reclaim its birthright and take back the water system from the Regional Water Authority in order to appropriate additional water revenues to increase city income and control growth. I doubt that any of the City Council members envisioned that this act would become a battle of Cain and Abel proportions. It is also doubtful that any of the parties involved were prepared for the ensuing firestorm that resulted from this action.

The rest of the discussion has to be prefaced by the assertion that all parties in this kabuki dance were absolutely sincere and felt they were representing their constituencies to the best of their abilities. It is my opinion that the Water Agreement broke down because of three things: AFFRONT, VICTIMIZATION and POLITICS.

Unfortunately, North Carolina is a “may I” state. Cities and counties in North Carolina cannot pass such things as new taxes or other revenue sources, change annexation regulations and a whole host of other ordinances without express permission of the state Legislature. The city’s failure to recognize this fact and consult with the Legislature before making this draconian move was a fatal mistake.

Notification to the Authority by the city of its withdrawal was viewed by Buncombe leadership as a hostile act, and they were seriously AFFRONTED. They immediately began to look around for defensive measures that they felt would protect the county residents from paying a higher rate on their water bills and threatened to invoke the Sullivan Act, which prohibited a differential water rate between city and county.

The city immediately countered by declaring that the Sullivan Act only applied to the water customers and lines that were in existence at the time the Legislature passed the act 70 years ago. The county then appealed to the local legislative delegation to pass new laws that would clarify the matter with acts known as Sullivan II and Sullivan III prohibiting differential rates between the city and any part of the county.

The city was outraged at this action by the county, and they felt VICTIMIZED. I must say that if I walked up to the biggest guy in the bar and punched him in the face, I could hardly feel that I was a victim if he then wiped up the floor with me. Such action might also preclude further negotiation.

One might then ask why would the legislative delegation want to get into this act? After all, several of them live in the city. The answer is that they were loath to even touch this third rail and were hoping against hope that this would be settled by negotiation between city and county. And they brought considerable pressure to bear on both sides.

The problem the delegation had was POLITICAL. These legislators have to run again next year. They are savvy enough to understand that if they failed to act and the city raised county water rates, the county residents would hold them responsible and might vote against them, while the city dwellers would give credit to City Council for lowering their rates.

When I came onto the scene, I recognized that the city was really dealing from weakness, and the only reason the county was negotiating at all was public pressure and a sincere desire to bring about what they thought would be a fair settlement. The city was also disadvantaged by the fact that there was no overwhelming groundswell of support from city voters, because they were quite aware that the city had controlled the water system for many years and they had a very negative attitude toward the city Water Department for its handling of maintenance, repairs and customer service.

My first recommendation to the city was to withdraw notification, thus leaving the status quo. This would have allowed the incoming city manager and the new City Council to take a fresh look at the problem and would have precluded the Legislature from passing Sullivan II and III for at least two years. If the city couldn’t work a compromise with the county, they still retained the option of withdrawing again and starting the process over.

One of the Council members who recognized the difficult position the city was in made the statement that sometimes you just have to go with the hand that is dealt to you. As an old poker player, I would have been more inclined to go along with Kenny Rogers, who said, “You have to know when to hold ’em and know when to fold ’em.”

There were two positions that were carved in stone. The city was adamant that they did not want the water system placed under a water authority, and they must get revenue from the water system. The county was not going to stand for the city to charge a differential rate, and they were opposed to using water as an annexation tool.

I suggested that in order to get an agreement from the city not to enforce their position, the county should make an annual payment to the city of $3 million for a period of 10 years to offset the revenue that the city would have gotten from charging county residents the differential rate. This would have been revenue-neutral for the county, since that is what they were spending in cash and in kind for parks and law enforcement in the city under the present agreement.

This proposal received some serious consideration from some of the county commissioners. Even though they recognized that they had the upper hand, they sincerely wanted a negotiated settlement in order to keep peace in the valley. I also was talking to the legislators, who also desperately wanted a compromise so they could avoid this controversy. I had hoped to get a sweetener from them to give the city the right to impose an additional room tax to provide a permanent revenue source for the Civic Center (remember, I told you that N.C. is a “may I” state).

It was obvious that obtaining any settlement was a daunting task, and yet the county and city were very close on several occasions. I would get commitments on one side and then the other side would slip away. It was like herding cats. Even with my hat, boots and spurs, I was just not a good cat herder and could never get all the pieces together at the same time.

I tried again at the last moment before the deadline to get the city to withdraw their notice, so that they could live on to fight again. Unfortunately, the city cats eventually found themselves down the well. Now they face the difficult task of trying to bail themselves out with a golden well bucket that has a $3.5 million hole in it.

The city lost the portion of the revenue that they were getting from the water income under the present Authority, plus the $3 million county subsidy. The city has now filed a lawsuit against the state of North Carolina to declare that the Sullivan acts are unconstitutional and invalid. This will be a long and expensive process, and the outcome is highly problematical. In the meantime, the city will suffer revenue losses in the millions of dollars, and this will do little to heal the rift that exists with both the county and the legislative delegation.

I can’t imagine how much agony and soul-searching the Council members have gone through to arrive at this decision, and I am firmly convinced that they feel this is the proper course of action. The fact remains, however, that the city has managed to turn water into red ink. Now they need to find a way to turn it into wine.

(After all, this is a gospel!)

[Longtime local gadfly Jerry Sternberg has been active on the political scene for many years.]