5700/2014 18 01 FAK sraTezease vane. sur_coueT_suose (eoe2/010 ‘STATE OF NORTH CAROLINA, IN-THE GENERAL COURT OF JUSTICE ‘SUPERIOR COURT DIVISION] [WAKE COUNTY ‘2-CV8-6601 CITY OF ASHEVILLE, '# muniopal corporation, iil STATE OF NORTH CAROUNA and oe the METROPOLITAN SEWERAGE. : DISTRICT OF BUNCOMBE COUNTY, e 8 ‘Defercants, MEMORANDUM OF DECISION AND ORDER RE: SUMMARY JUDGMENT ‘THIS MATTER is before the Cour upan the State of Noth Carlina's (th State mation to tsi the complain, and uson cross mations for summary judgment pursuant to Rule 68, North Carolina Rules of Civil Procedure, Adatonaly, pati, Cy of Ashevile (Ashevil’) has ‘oc metio for saneion agains the Slate arsing cut of decovary matters. These mations "were heard ata special session ofthe Wake County Superior Court on Fray, May 23, 2014, afore proceeding further te necessary to prove te folowing: Factial Background and Procedural History ofthe Case “The Genonis ofthis tawsut. “The Wator Act of 2013 - Session Law 2013-50 and as antended by Session Law 2013-88, (Tha Water Act") On May 9, 2013 Session Law 2013-50 became the few Inthe manner provided in Anise Il Section 22(7) ofthe Conatuton ct Neth Carolina, having oan adopted by both houses of the North Carolina General Assembly, dy rtd, not vetoed and io unsigned by the Governor. The Water Actor (Act) was atr ride on August 23, 20S after the Inston of this civ actin, by Sess Law 2013-388, For purposes ofthis Meriorancum of Decision and Order (MDO) he Ac, as amandod by the foregoing, wil be referred to asthe Act, cr The Water Act. Sections 1 and 6 of the inl Act purported to Immediately and involuntary transfer al the assets and cette of the Ashovile Water System to detendant Motropottan Seworage Dist of Buncombe County (’MSD", without Ashevie's consent, then tobe porated asa "metcopoltanwater and sewerage dtc (MWSO") over Ashewe's tenuous bjection, and contrary to tre wlahes ofits eltzena as expressed by referendum holdin Novernber, 2012, which ovruhelmingly opposed any sale or lease of he system, Section +06/09/2014 16 01 FAK 9197924068 vane su count woe \ac02/010 wer i cos ot make any poison forthe vastr fhe Wate Sytem HB isang asses 4 Invaluable comroneat wit whieh the Sytem simpy cana incon. Secon 2 of he At rats ano form of poi sbdslon—theso-eed ASD, That tection pers an wo or mare local governments fom an MSD y err among thom ows hee goverment to chavs to corre thier water sup, etme nd tibton stems anh iain sewerage coleton ad eaten peters sich anwuiso, ‘choi, ne aman altzsl goverment in Nth Cana, has ne hole In heater Intend, he New ASD fo operat in Buncombe apd Henderon Countess rest a ot the wate A atthe ests nd debs fh Ashevile Water yen ae vou taken trom Avil and arated te Now MWSD by operat ofa Sexton an 8 Coy parton oa) ofthe At contin anny rane ross which cert apy ony 6 the ashe Water Sten, iced inte des tobe entered are Wt Bods sued by Ale Fron ev twas eq fr exarslon and upgrades tothe Water Stem, ‘sheds haseaed revenue bond (he "War ond) under # Genera Tras Inderture tes December 1, 206th “nde wth The Hark of New Yoke rte). ‘The Water Bonds were al ued pursuant to re Sof Copter 159 of he Gane Stas tecaveaccued by tert overs hee Systm. The Water Bods ar not oad by a separate ety rater, hey Ashes the om ine nd cgoron ach bonds ‘cure, the aggregate pri amt of Water Bonds outstanding aproxmatey 865 570,00, ad the bond cay» erent re ating Aa om Moos ae A om ‘Standard & Poors thas igs rfl bot thera agencies a he genera pub's ‘tong conidneain he org-andng tary o Ashes operation and aragemrt of the Water Sytem We Seaton 1. he At purer to uns the refer tothe New MSO fest dhs fhe Wale Som and te sxcuptonby he New MSD och debby sport ofan ron is made anjuherein the Actor cing te canst of ie ‘nts aha bonceldrto suc ander. The States sly decree Tsar and th hondelsrs mut ok oa rey rete, urate sucResr fo Asta for tepayenent ofthe Water Bs ant ptomanceef he dee obits tho fective dt of act wa ay, 2013. iat exact ous the Ae purport tanafer and takeaway rom the iy of Ashi? Answee: Th entre Aseria Wate System look, aoc, bares pipes, woodlands ad srecntia rns os wottae wanstering the exatng dab ($5,570,000) n Water Bond06/09/2014 16 02 Fax staTezcase vane, sup cour Juaae tothe yw" MSD au described above, “The Ahevile Water Syater, For over a cantry Ashevilshas owned, operated, managed, and maintained system for he suppy, Pantment, and sibution of water fr eink cooking, and cleaning purposes, and forthe operation of sanitary dsposal systems. Tie Water ‘System supples water toa dverse customer base, Incuding Asheviles own residents, residents ving in unincorporated areas of Buncombe County, increcty by wholesale to residents of ether municipalte in Buncombe County, and more recent, to some residents of Henderson County. The Walt System has been bul and maintained over the past centry using combination of taxes serie fees, conection charpes, bonded! de, varius federal ‘and stto grant, contrbators rn Buncombe County, and donations ram property owners ‘and develope, Ashavlle owns, operates, and maintains is water system as a pubis enterprise Under N.C, Gan, Sta, § 1604-311 through § 1802-826, By resolution of he Board of Commissioners of Buncombe County (he "Courty’) and by deed, dated May 15, 2012, the County vointarly conveyed Ashevie al ofthe Cauniy's ownership intrest in various water lstibuton lines and related faites tnat had been previously wned by the County. The Water ‘System sno cfferent ints coveance and operation fom other municipal water systems serous North Catalina “The Water Syateninclades protacte watershed area consisting of over 17,000 ares of mountainous foretiands in Buncombe County, al oft owned by Ashovila, tis one ofthe largest munieipally ommed watersheds inthe United States, The watershed contain a number cf nor-navigale streams, nding Left Frk Bee Tree Creek, Wolfe Branch, Bell Branch, Right Fork Bee Tree Greek, Sugar For, Shute Granch, Long Branch, Sarock Branch, Noth Fork ‘Swannanoa River, Glasemire Branch, Stony Fork, Dry Branch, ite Fork, Big Branch, Morgan Branch, as well as other smaller, unnamed reams. None ofthe streams feeding ether of tho ‘no racervoirs In Asinevil’s Water System, Bee Treo Reservoir and North Fork Reservors is avigable by even the erat of watereraft, such as a canoe or kaya, ‘within he watershed area ara two impoundents, each of which supports water treatment plant and which together are capable of treating and supplying a total of 26 mitlon galons of ‘water per day. Ashevile uns a third water toatmentplantlcsted atthe confluence ofthe Freneh Broad and Mis Rivers in Henderson County wth a dally treatment capacty of 7 millon ‘lone of water The system als includes an adtional wenty-nne treated water storage reservoirs, some 1,660 ries of tibtlon Snes for rated water, and more than fry Bump salons. The system auretl serves approximately 124,000 customers, some 48,000 of wham e ocated outside Ashevil's iy iit6709/2014 18 02 Fax steTszaaee vane sur count _wuo0e “The Water System also compovedof intangible assets that are estonia! tot proper ‘unetioning but that are net, are eannot bo, transfered to the Now MSD by the Water Ac. The ‘system has approximately 147 tained and certified employees; numerous lesnses and permits required by stata and federalaw, wholesale water aupoy contracts with ater municipal enttes operating contracts forthe suply of goods and series; and revere accounts of more than '$2,218,000.00 hed fo the benef cf outstanding public bonds In aditon to the experienced. and skiled werkforce, other essential components of he system include well developed ‘operating procedures and peices, a srong and experienced management structure, ane Insurance coverage provided by poles hed inthe name of the City, alowed to go into tit, ‘Ashevile coords that the Water Act would braak the inks between the physical asses ofthe system, which would be transferred fo the New MWSD, and these intangible assets, which ‘would remain with Ashevile, thereby destroying the unity and integrity ofthe Ashevie Water system. “The Lawsuit by Asheville to stop the Act from golng into effect Procedural history up to and Including the May 23,2014 hearing. ‘This insu was fied before May 18, 2013, The Honorable Donald W. Stephens entered @ “Tempormy Restraining Order "TRO" Blocking the Act goirg int effect The case was than assigned to this Court pursuant to Local Rule 2.1 Wake County. The partes, by agreement, ‘exonda the TRO paniing a hearing on Ashevite's Motion for aProiminayInunction. Inthe inti the State of Nerth Caaina didnot file an arawar but instead, fled mation to amiss pursuant to Rue 12, Nr Carona Rules of Civil Procedure. In September, 2013, the Court held a hearing an Asheuie’s motion for preliminary injntion and the State's metion to siemiss the complaint. The TRO entered bythe Honorable Donald W. Stephens in May, 2013 estaiing the implementation ofthe legistation a ave rrnined in cect by content ofthe pares and Order ofthis Court. Prior othe September, 2073 hearing the parties cubmitid memoranda offaw, ext, affdevts and authori, al of which the Court raviewod rar tthe Fearing Flowing that hearing the Cou consultation wits he patos, eacher! an accord thatthe paris woul engage in discovery, be permited to fle an amended complaint and pleadings, ‘and continue the origina! TRO in effect in order fo have this matter come before the Court upon cross moticns for summary udgment based Upan undisputed material fac. This procedure rade good sense because his oaee, no attr what tho eutoome, wl be appesed othe appellate dvalon and a decsion on summary judgment declaring the righ ofthe parties undor the law would bo n essence final judgment on most, not a issues. aensso1006/09/2014 18 02 Fax steTe24960 axe, suP_eovaT_sunoe a006/010 (On September 30, 2012, shove fed its Verflad Amended Complain (On Oetobor 34,2013, the MSD fed ts Answor. ‘On November 6, 2013, the State of North Cartna fed a Motion to Dismiss and Anawer in response tothe Verled Amended Complaint. on February 27,2014, Ashu feds Motion For Patal Suma Judgment and Motion for Discovery Sanctions against the State of North Carolina ‘On February 27,2014, tho State of Noth Carolina td is Motion for Summary Judgment ‘On tarch 14, 2014 the State of North Carolina fed its Response to Asheuile’s ation for Partial Summary Judgment (on Apr 44, 2014, he State of North Carolin fae a Reply in further supert of ts Motion for ‘Summary ddgmert In Addon, bth parties have subited memorandum of aw and various reps tothe mations {or surmary jdgment “The partes requested thatthe Court hold hearing onthe motions for summary judgment and the State's mation to damiss on May, 23,2014 “Tho Cour, n preparation fr the May 28, 2014 summary judgment hearing, spent over 12 hours reviewing the memoranda ow, exhibit, afdauts an the legislative Act ut saue and ‘other materials submited ty the Stato ar Ashouilo, the total combination of which exceeded “approximately one fot in he ght nobwihtandng the case law submited ty "Mash dive." Con May 23, 2014, coun! fer all partes were present and counsel forthe Sate and Ashesile presented oal arguments, The Court, atthe conclusion ofthe hearing, requested that counsel forthe State and Ashevile saben by Friday, May 30, maximum two-page submission setting {for tha rot requested by ech pay (except nominal defendant MSO) and fom Ashovile, copies of cited decisions in he N.C. Reports preceding Volume 288, These were tmaly served, “The Court ha now hed he ime nd opportunity, uninerupted by other court business, to throught review the argurrents, record! and aupporing authorities for al sides in this dispute about the Achovile Water Sestem, From a rview ofthe memoranda of both the State and AAshevile and statements of counsel a the May 23, 2014 hearing as well a6 he record her is ro genuine ice ato any Tater facts in thi matter that would prevent this Court rom ruling onthe fsues pesented esa matter of iw pursuant to Rule %6, North Garona Rules of Civil Procedure. This matte s row tie for spoon. Decision: “The Cou has reached 3 dsiaion onal of Ashovi’s Claims Fer lit except forthe hwo atm rlating to the Water onde. The Cours decision on each eam follows06/08/2014 8 60 Fax srerencces ‘ane sur count _Ju08e \go0r/010 Fiat Claim for Rollet: “Tho Watoe Act vclates Artic I, Seaton 24(1)(a) ofthe Constution of Noch Garona which provides a follows: that “ha Ganatal Assembly shall ol enact any local, privat, or special ‘actor razolution: (a) [lating te heath, sanitation andthe abatement of nuisances” Artie, Section 242) ofthe Constiaion of North Carona provides a fll “nor shal the General ‘Assembly enact auch local private, or speci! act by the partial repeal of «general aw, but the General Assembly may at ary time repent focal, private or special laws enacted by R* Artie I, Seetion 24(8) ofthe Consitton of Noth Caratna provides as follows: ‘ely loca, private, or special acto solution evacted in violation ofthe provisions ofthis Section shal be vod ‘Ail, Section 241) ofthe Conatitution of North Carolina provides that "atthe Gana ‘Asuembly shall not amact any focal, private, or special acto resolution: () eating to non- navigabl creams." Decision on Frat Clalm For Relief, The Court based, upon the undisputed material facts of record, concludes at a mater of aw thet 4 The Water Acts alocal act which was specially drafted and amendesto apply eniy 0 ‘Ashavile and the Asveuilo Water System 22 Thm Water Ac is a eal act eating to he treatment and suppyof water for dining, ooking and clearing purposes, an forte operation of saritary disposal systems which ‘i apoicable onl to Ashovile and the Ashovle Water System an therefore socal fact which clas to health an sanitation in lation of tile I, Section 24(() of the ‘North Carolina Consittion, 3, The Water Actis a loal act relating fo non-navigale streams ais sppicable only to ‘Ashevile andthe Acheile Water Systm in violation of Ate I, Section 24(1)(0) ofthe Nerth Carona Conttion. 14. Tre Water Act, local act, was enacted in volaton ofthe provisions of Arie I, Section 24(1(0) and Section 24(4)9) and pursuant to Atle i, Section 243) ofthe Neth ‘Carlin Constant vol, of no force and ete. ‘Second Clalm For Relief: “The Water Act volates Artie I, Section 19 of the Constitution of North Caraina In that the Act takes, without Ashevike's consent, the Water Syetom and transfers the Water System to another cenily without any cational tase fr dolng 90. Decision on Second Claim For Rellaf, The Court based, upon the Uncsputed mato facts cof record, coneludos asa mater of la that 4. raneulle, ints ownership and operation of the Water Systern, puruant to Atle 148 of06/08/2014 18 09 Fax srerezesea vane sur cover unas aen0ze10 chapter 1608 of the NC. General Statutes, ate in proprietary capacity and function. ‘Acting in pronrataryeapaely with respect tothe WatarSystom, Asheville sented 0 the protections of Atl, Section 19 ofthe North Caratina Gonstizion asa private Individual or earporatin engaged ina sinlar business enterprise, Ashbury v ‘Albemarle, 462 NC. 47(1919}; Candler v. Cy of Ashovile, 247 N.C. 2981958. 2 Ths Water Ac, by operation of aw, transfers the asots and debts of he Asheville ‘Water System without consent and over the objection of Ashevile, the Water Systems camer. The transfer th entre Water System required by the Water Acresuits inno change inthe exsting uses or purposes curently servod by the Asheville Water systems, 8, action ofthe Act ace a rtenal basi for selecting the Asheville Water Systerm ane subjecting the Water System to treatment éifferent from that provided under the Act for al ther pubilycnned water systems in North Carolina and fal to make a reasonable slassificaon a requited by lw. ‘4. Te Water Act lacks rational basis, leuding, but not ited to the fact that) the use ofthe assets ofthe Water System wil not change under the transfer, 2) tho transfer to the naw “una he NSIVD, wil pt recut in any higher ually of water that snow rovided by the Ashorlle Water Systom (che Water Aet does not oxpand or imerove protection af health and sanitation boyond that now being provided bythe Ashevila ‘Water System; (2) the new “owner” of the Ashevile Water System isan ety that has never owned or operated a public water supply and delivery system: (e); The Water Act removes ounership oa propriety function of leal goverment which operates sir toa pudlic corporate ety by simply taking the Water System avy fom the City of Asheville by force of law and witout a atlonal basis. |5. The Water Act ls corrary to the aw of he lan invioatin of At |, Section 19 of the North Carolina Gontutio asthe mans uta o achieve what the legislation sought to obtain bears no relafon, rational bass or other, to the An's stated purpose. “The Third Calm for Rolle: “The Water Act violates Article, Sections 19 and 26 of he Constitution of North Carona in that Ine Water Act tranafrs the Waler System, a propria function ofthe City of Asheville, tothe MWD, resting an unit taking of the Ashevile Water System, which system ito be used forth same purposes 2s the Azhevila Water Sytem Is prosontly being used DDeclsion on Third Ciaim For Rellet, The Court based, upon the undisputed maria facts of record, eels as 9 mater of aw thatou/0e/2014 16 02 Fax storezeses axe sur _couRt woo 1. Ashowile ins onnership ane operation of the Water System, pursuant to Article 14A of Chapter 1608 ofthe N.C. Ganeral Statute, ae in a propritary enpacty and function. ‘Acting in proprietary capacity with respect to te Water System, Asheville s ented to the protections of Artic, Sections 19 and 36 af he North Carona Constitution as 8 private nvidual or corporation engagod in aeimilar business enterprise, Ashbury v ‘Albemarle, 162 NC. 24711913); Candlr v. Gly of Ashevile, 247 N.C. 390(1968) 2, The Weer Ac, by openstion of aw, transfers the assets and debts ofthe Ashevilo Water ‘stem without conser: and ove the ebection of Aahevile, tho Weer Systems carer ‘he tanafer of tho ente Water System eoqure by the Water Actress n 99 changin the axistng Vous or puposes curently nerve uy the Ashevile Water Systems, The Water ‘Act's vaneter ofthe entre Water System, reduced to essertiaa, amounts to taking of all the assets and debts ol a propitary municipal business from Ashevilo and places the assets and des in the ounership of another ently. Consider the impact ofthe enactment ‘ofa statute requiing SAS to transfer ts entte proprietary corporate business and is contol to competitor, another propletary corporate business without SAS’ consont for ‘an alleged public pupese in favor of eutng costs and consolidation of business 1, ‘The Water Acts not aval exercte ofthe soveraign power ofthe legislative branch of {government (or the Stee of North Carling) to take or coneenn property fora pubic use ‘vere bee, the propety (the Water Systm) is belng used forthe same purposes as are intended to be done bythe transfer ofthe Water System tothe MWSD, 44, The Water Ac violates Artie |,Seations 18 and 25 ofthe North Galina Constitution, ‘The Sixth (Alternative) For Rll. “The Water Ac violas Artic |, Sections 19 and 3 of te Constitution of North Garcia by transfering the Water Sysem to MWSO without just compensation. cision on Sixth (Alternativ Claim For Rellof, The Court based, upan the undisputed rata facts of reor, coneades asa mater oflawtatinthe event thariRay ve SES, Vt sarees atte tr Klaas nace othe sovren power athe St ofNotn EN Caulna to take the Ashevile Water Eyetom inthe manner set forth in the Act then Asheville, a8 the owner ofthe Ashevile Water System, seed to be pald ust compensation forthe “Ashovile Water Syatem whe ctarent ated francilwialements asses as ts Net Ascot Value to bo greater than Ore hundred milan daliar ($100,000,000). (Vere Amended Compl, 1.75) State Haghay Commi v, Groonsboro Ba of Educ, 265 N.C; 26, 49 (1869) ‘Tha Fourth and Fifth Clains for Relief aac the consthutonalty ofthe Water Act onthe06/09/2014 16 09 Fax 7924869 ‘see sur count _sv0at eorer010 basis thatthe Ac, mplemerted woul late Att I, Section 10 ofthe United States ‘Constitution profiing stata om passing any law which would impair the ebigaton of contracts and tice | Section 19 of the North Carta Constititon which prohibit the State ram impating te abigaton of coirects. Bronafotv. Cy of Fayettevile, 124 NO, 472 (1895). ‘Because ofthe decisions of the Cout above, the Cout decines io address these two claims, IIs, THEREFORE, ORDERED, ADJUDGED AND DECREED THAT: 1. Thatthe Water Act isin oltin of Atle I, Section 24(1%() an Ate I, Section 24(1(¢) and pursuartte Ati Il, Scion 249) af the North Carolina Constitution I vol ana unenforceable, 2. The Water Act is conkary to the aw ofthe land in lation of tice |, Section 19 of the [North Galina Canaan asthe means ute to achieve what the lasation eought to obtain bears no tion, rational basis or atharwise, tothe Act's stated purpose ad void and unenforceabe. {3 The Water Actis not vali exercise ofthe sovereign power ofthe legislate branch of government (or the Sat of North Carolina) to take or condemn property fora pubic use ahere here, the propery (the Water Syste) is bing used forthe same purposes a8 aro Intended to be done bythe tanster of he Water System to the MWSO. The Water Act voles Ate |, Sectone 19 and 35 ofthe North Carolina Const andi void and ertorcoabe 4. The Gy of Ashes Maton For Paral Summary Judgment as othe Fit, Second, “Third and its Aterate Sith Claims for Rees granted 6, Thal he State of Norh Garota's Motion to Diss the complaints dria 18, That the State of Norh Caroina’s Motion for Summary Judgments oa Cais for Roles denied “1. That the Ciy of Aaherle’s Motion for iacovery Sanctions is dori, ‘That tha State of Norh Carina fs permanerly ented frm imperenting or imping to lnpomant The Wat Act : rate Ais, 204 Hoo. ¢——_ omar E Wanning oa Soper cart ae