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McGrady retreats on state oversight of water system

State Rep. Chuck McGrady has retreated from a threat to put the Hendersonville water system under the oversight of state financial regulators, saying that bill had the desired effect of bringing warring factions to the negotiating table.

“If the parties are acting in good faith with each other and trying to resolve their issues, which I believe they can largely do through local agreements, then nothing else needs to be done in terms of Henderson County-Asheville and Henderson County-Hendersonville,” McGrady said Tuesday. “Given a meeting I had with all of them, I think they can resolve all their differences. Henderson County has received assurances from the city of Asheville regarding differential rates. I think they can resolve these issues and we don’t need to do anything else.”
McGrady had first expressed willingness to sponsor a bill in the House that would have put city water systems, including those operated by Hendersonville and Asheville, under the jurisdiction of the North Carolina Utilities Commission, which would review rates, capital expenses and operating costs. The Henderson County Board of Commissioners had urged a bill in that form after a failed effort by Commissioner Bill Lapsley to force the city into a countywide water authority. McGrady softened that approach with a bill that would subject city water systems to oversight of the state Local Government Commission, an agency that monitors borrowing and spending of cities and counties. Now McGrady’s bill retreats further, calling for a study of local water and sewer systems statewide.
The proposed legislation stems from two separate but related issues regarding the governance of water systems in Asheville and Hendersonville. Both cities have a large portion of their customers outside the city limits — Hendersonville, at 70 percent, has one of the highest outside user percentages in the state — and both charge a higher rate for outside customers, as most cities do. Henderson County commissioners want Asheville, which has water customers in northern Henderson County, and Hendersonville to charge the same rate to outside customers as they do inside customers.
McGrady’s bill directs the Legislative Research Commission to study whether cities are using water and sewer revenue for uses other than operating the system, paying debt service and investing in capital improvements. It also directs the researchers to study how cities and water authorities set rates, how they report spending, whether regional utility systems would result in more sound financing and lower rates and whether state oversight is needed to ensure aging systems are adequately repaired and maintained.
“I have no fear of a study,” said Councilman Jeff Miller. “If they do a study of our water system it’ll be the model for the rest of the state. We have absolutely no fear of being under the microscope on this.”
Hendersonville City Manager John Connet said he was pleased to see that McGrady had backed off the state oversight idea in favor of a study.
“I’d like to believe he’s seen we’re willing to have a conversation with the county and that basically we’re running the system the way it should be run and that he thinks the best course of action is a statewide study to look at how water systems are being run and that they’re running the way they’re supposed to be,” he said. “With the information we’ve shared with him and in at least one meeting and in different conversations I think he realizes we are trying to run a very well run system.”
McGrady said it’s still possible that the study bill could turn into a version with stronger oversight of the city water systems.
“If they can’t resolve their differences the study bill is out there and can morph into something different,” he said. “This whole thing has been about creating a bunch of sticks and carrots. I would prefer to move people by providing carrots.”
McGrady said he was dismayed at the initial strong pushback from the city when he first introduced the bill. The city mounted a strong lobbying defense and enlisted other cities with water systems to join the fight.
“Inadvertently, because of Hendersonville overreacting — they went ballistic — they stirred up a hornets’ nest and they got other towns and other cities and other legislators interested in the whole issue of differential rates and how monies are taken from these enterprise funds,” McGrady said.
Asked if that was in retaliation for Hendersonville’s, punching back, McGrady said, “Not by me.”
Because McGrady’s bill applied to water systems statewide, legislators begin getting calls about differential water rates.
“Hendersonville managed to make it a statewide issue by reaching out to all these little towns,” he said.