State Government Control Of Local Water Systems

Background

It is impossible to know the internal considerations of the North Carolina Supreme Court when it accepted for review the case of City of Asheville v. State of North Carolina and the Metropolitan Sewerage District of Buncombe County, __ N.C. App. ___, 777 S.E. 2d 92 (October 6, 2015). But the tragedy of the State of Michigan taking over and operating the Flint Michigan water system was prominently in the news.

Under basic law, a North Carolina municipality possesses only those powers granted by the General Assembly. Municipal powers are of two types - (1) governmental and (2) proprietary. Proprietary powers authorize municipalities to establish public enterprises, business-like operations, to provide important public services to local citizens, such as drinking water. Without an express grant of authority, the City of Asheville is powerless to establish, own or operate a public drinking supply system. But, pursuant to proprietary powers granted uniformly to all North Carolina municipalities, the City of Asheville has established, owned and operated a drinking water system for over 100 years. The City supplies drinking water to over 100,000 customers.

Although there was no finding of solvency or water quality problems, the North Carolina General Assembly adopted laws in 2013 which appear to target the City of Asheville's water system. The laws involuntarily transferred ownership and operational responsibility of the City's water system to a metropolitan sewage district and authorized the sewage district to begin operating a water system.

The City of Asheville challenged the validity of the law transferring assets and operational responsibility of its water system (the "Transfer Law"). The trial court declared the Transfer Law unconstitutional and void. The State of North Carolina appealed the trial court's declaration to the North Carolina Court of Appeals.

The Court of Appeals' Decision

Under the North Carolina Court of Appeals analysis, resolution of the legal questions arising from the Transfer Law is elegantly simple. Since the General Assembly possesses discretion to grant powers or withhold powers from municipalities, it possesses the discretionary power to withdraw or modify a proprietary power unless prohibited by a provision of the state or federal constitutions:

[U]nless prohibited by some provision in the state or federal constitution, our General Assembly has the power to create a new political subdivision, to withdraw...