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City feels 'kicked in the teeth' by McGrady water bill

Hendersonville City Council members said they were surprised that state Rep. Chuck McGrady filed a bill subjecting city water rates to state regulation just three days after a seemingly constructive two-county summit on utility issues.

McGrady orchestrated a meeting Friday with officials from Henderson and Buncombe counties, Hendersonville and Asheville and other legislators from both counties, including state Sen. Chuck Edwards. Hendersonville officials came away from the meeting confident that McGrady would hold off moving ahead on any plan that would heavily regulate the city water system.

McGrady filed a bill that bars cities from charging differential rates unless they get state approval.

“We thought we had a good meeting Friday but obviously Chuck has escalated things,” said Hendersonville mayor pro tem Caraker, who represented the city along with Councilman Ron Stephens. “We’re going to work on bringing our inside and outside rates closer together. And we would welcome continuing the conversation with the county to get our water utility and our sewer utility more responsive according to the county’s criticism.

“Chuck told us he was going to file a bill as a placeholder. He didn’t indicate it was going to be this bill, which is quite a surprise,” Caraker added. “We were perfectly willing to have the rate structure conversation but obviously Chuck thinks about it over the weekend and decides this was not quick enough.”


‘Productive in tone and substance’

The City Council had been bracing for an attack in the form of legislation ever since the Board of Commissioners failed in an effort to force the city into ceding its water system to a countywide authority. McGrady’s bill bars cities from shifting water revenue to any other purpose. The proposed law would allow the expenditure of enterprise fund revenue for things like construction and new pipelines, repaying debt and paying into a city’s general fund for officials’ time devoted to utilities management and other shared costs such as vehicle maintenance.

Cities could charge outside users a different rate only if the Local Government Commission, a state board that oversees local government finances, approved the rates after a public hearing. Instead of targeting Asheville specifically, as McGrady and the Legislature did two years ago with a bill invalidated by the state Supreme Court, or targeting Hendersonville, the bill applies statewide.

“It does (apply to Hendersonville) to the extent that it’s a statewide bill,” McGrady said. “It applies to everybody.”

Like Caraker, McGrady characterized Friday’s meeting as positive.

“We had an all-parties meeting on Friday with representatives and managers and it was productive in tone and substance,” he said.

McGrady said he hoped that the cities and counties would be able to “deal with some of the representation issues that Henderson County has put forward,” possibly through an interlocal agreement.

His bill subjecting differential rates to Local Government Commission approval is lighter in oversight than a version that would have subjected the city’s utility system to control of the North Carolina Utilities Commission. That was an idea McGrady had raised after a Hendersonville officials rejected the idea of joining a countywide water authority. The commissioners endorsed the idea of Utilities Commission jurisdiction over the city’s rates and capital spending after negotiations with the city collapsed.

“I call that a hard oversight,” McGrady said. “This is what I would call more soft oversight. There are cities across the state that are functionally bankrupt” and are extending water lines well beyond the city limits to capture water customers and balance their budgets. Because of that, he said, he found that the idea of restricting out-of-city rate differentials was gaining wide appeal. He characterized the water legislation as a work in progress, a draft that could effectively keeps the parties at the negotiating table.

“I told the parties based on their good faith I will stand down on what I called the nuclear option,” forcing a water authority. “My bill does have a study provision in it. It’s not a heavy handed approach,” he said. “I think all the parties recognize I have plenty of other options if they can’t work it out themselves.”

City Manager John Connet said the staff was still evaluating the consequences of McGrady’s bill. He said the city likes oversight by the Local Government Commission better than the Utilities Commission idea. “We know them. We work with them on a regular basis,” Connet said.

As for the impact of the bill statewide, Connet said there’s no doubt that many cities have tuned in to a power struggle that started here.

“There are a lot of cities and a lot of systems that charge a rate differential so obviously it’s going to affect them and I expect they’ll have questions,” he said. “I think our folks are willing to sit down and talk to the county. Exactly what the topics will be is yet to be determined. Obviously, we heard from Rep. McGrady that rate differential is something he’s concerned about.” McGrady and county officials are also pushing for some form of representation for outside users, Connet said.

A constructive meeting on Friday did not mean, McGrady said, that the city has signed off on the bill.

“They’re not going to be OK with the bill but they’re certainly OK directionally and I’ve also told them this is not a take it or leave it,” he said. “I’m quite open to input and willing to make changes that make sense. But I do intend to move the bill.”


‘Kicked in the teeth with this’

Caraker and Miller say they’ve been stunned by the way the water war blew up.

“They act like they’re the only people that have any moral authority and have the wellbeing of the people in the county in mind and that’s just not true,” Miller said of McGrady and the county commissioners. He said he could understand the county’s position if the city was not running its water system properly and communicating openly.

“But as long as it’s going as nicely as it is now and we’re inclusive, why go in there and stir it up if it’s not a grudge or heavy-handed politics,” he said. “No one can come in and look at our books and say we are pulling money out of that enterprise fund and spending it inappropriately…. It’s a huge business and we are not good ol’ boy networking this.”

Caraker agreed.

“He’s going to be affecting the pocketbooks of a lot of people,” he said of McGrady’s proposal. “I don’t see that he’s making a lot of people statewide happy. It’s kind of astounding to me that all this is going on.” The city signaled that it was willing to work toward equal rates, involve the county in long-range planning and look at some form of representation to outside users. “And all of a sudden we get kicked in the teeth with this. We had such a good relationship with the county up until very recently, with the high school thing and this water situation. I feel like I just walked by Rod Serling and he pointed me to the ‘Twilight Zone.’ I took the lead in the meeting Friday because somebody had to come forward and come toward the middle. But forcing the issue in legislation is kind of nasty.”