Wednesday, December 09, 2015

Asheville's Continued Misinformation Campaign

The Mountain Xpress weekly newspaper has finally broken the extended news black-out of the failing Asheville water lawsuit. But there is a lot of misinformation and a lot is missing, like quotes from MSD.

The article entitled "Under Pressure" states that the water system has an uncertain future. The future of the water system is far from uncertain. No matter what happens in court, the city is certain to lose the water system. (

The article cites Water Department head Jade Dundas saying that the transfer would take "at least a year."That is not true. The transfer would take approximately 24 hours, give or take a few minutes. The inevitability of the system transfer has made it incumbent on MSD to plan for the transfer and those plans are in place and will be activated immediately upon the Supreme Court's dismissal of the City's appeal.

State's Motion to Dismiss & Response to PDR:

Jade continues misinforming the public saying that the issues that need to be resolved include:

-- "Transferring the contracts of the department's 148 employees."

There are no contracts to transfer. Water department staff are not contractors, they are employees. The only difference will be a different logo on their paychecks, and a different signature.

-- "Non-tranferrable federal and state health-and-safety certifications."

Certifications are for people and they are not void in the event of a transfer of the employee.

-- "Transferring the financial, accounting and information technology systems."

MSD is ready to take over these systems as is on day one, to be operated in parallel with the current sewerage operational systems. Data migration will take place over time and under MSD's purview.

-- "Training new employees."

What new employees? Water department employees will do the same job in the same capacity, only under new management. If anything, there will be staff reductions due to consolidation.

-- "The City's water-related bond debt, which is financed by system revenues."

Here we have an admission that Asheville does not own the water system. If it did, the bonds would have been financed by the taxpayers, not water customers. Instead, the are Revenue Bonds. Also note that there is no explanation why this would be an issue. Perhaps that is because it is NOT an issue. The state has an office dedicated to resolving bond transfer issues and this has already been addressed well in advance of the coming transfer. In fact, the bonds themselves anticipate this eventuality and provides for a smooth transference to another political subdivision of the state.

The trial court raised the matter of the issuance of revenue bonds and states that the bonds are “secured by the net revenues of the Water System” and that there is “no provision made anywhere in the Act for obtaining the consent of the bondholder” for any transfer to an “unrated successor.”

The new Metropolitan Water and Sewerage District (MWSD), created by the Act, extends the existing Metropolitan Sewerage District (MSD) by merging the Metropolitan Water District with the currently operating MSD. MSD has as sturdy a bond rating as the City, and the rating would not suffer a loss of strength as a consequence of the Act. Note that MSD possesses the authority to operate a water utility, granted to it by the state in Session Law 2012-103. (See Article 5 - Metropolitan Sewerage Districts. § 162A-69. (13c) “To exercise any power of a Metropolitan Water District under Article 4 of this Chapter not set forth in this section.”)

Debt service on the Revenue Bonds is guaranteed with the continued operation of the water system, which the Water Act ensures. Debt service is further guaranteed by the State in the event of default by the obligor (See State's Motion to Dismiss).

There is no provision in the Act for transfer of debt precisely due to the existence of a longstanding process for handling the inter-governmental transfer of debt obligations as established by the state Department of Treasury’s Division of State and Local Government.

Furthermore, the City's lackluster defense of its claims of the risk to bondholders demonstrates a lack of genuine concern.

The NC Appeals Court, Page 25-26, states in its ruling: "We do not reach any conclusion regarding Asheville’s fourth and fifth claims for relief, in which Asheville contends that the enforcement of the Transfer Provision would impermissibly impair obligations of contract in violation of our state and federal constitutions and in violation of N.C. Gen. Stat. § 159-93. The trial court made no rulings on these claims, and Asheville did not take advantage of Rule 10(c) of our Rules of Appellate Procedure, which allows an appellee to propose issues which form 'an alternate basis in law for supporting the order[.]' Therefore, any argument by Asheville based on these claims for relief are waived."

In other words, the City neglected to raise the issue in Appeals and thus forfeited its right to appeal the ruling on that point. As stated in the State's whip-smart Motion to Dismiss, Page 15, note 3:

Indeed, so great is the City's error, the court's can no longer respond to its late-coming complaint. Citing a controlling precedent going back to 1968, the State's Motion to Dismiss (Page 21) courteously reminds the Supreme Court that it may not consider any matter extraneous to the Appeals Court ruling; to wit, the bond issue.