City of Asheville, v. State

• Decision Date: 06 October 2015
• Docket Number: No. COA14–1255.,COA14–1255.
• Citation: 243 N.C.App. 249,777 S.E.2d 92
• Court: North Carolina Court of Appeals
• Parties: CITY OF ASHEVILLE, a municipal corporation, Plaintiff, v. STATE of North Carolina and the Metropolitan Sewerage District of Buncombe County, North Carolina, Defendants.

243 N.C.App. 249

777 S.E.2d 92

CITY OF ASHEVILLE, a municipal corporation, Plaintiff,

v.STATE of North Carolina and the Metropolitan Sewerage District of Buncombe County, North Carolina, Defendants.

No. COA14–1255.

Court of Appeals of North Carolina.

Oct. 6, 2015.

Parker, Poe, Adams & Bernstein LLP, by Daniel G. Clodfelter, City Attorney for the City of Asheville, by Robin T. Currin and Robert W. Oast, Jr., Long, Parker, Warren, Anderson & Payne, P.A., Asheville, by Robert B. Long, Jr., and Moore & Van Allen PLLC, Charlotte, by T. Randolph Perkins, for the Plaintiff–Appellee.

Attorney General, Roy A. Cooper, III, by Special Deputy Attorney General, I. Faison Hicks, for the Defendant–Appellant.

Cauley Pridgen, P.A., Wilson, by James P. Cauley, III, and Gabriel Du Sablon, for Amicus Curiae, the City of Wilson.

Kimberly S. Hibbard and Gregory F. Schwitzgebel, III, for Amicus Curiae, the North Carolina League of Municipalities.

DILLON, Judge.

The City of Asheville ("Asheville") commenced this action against the State of North Carolina, challenging the constitutionality of certain legislation enacted by our General Assembly in 2013. A provision in this legislation requires Asheville to cede ownership and control of its public water system to another political subdivision. The trial court entered an order enjoining this involuntary transfer, concluding that the legislation violated the North Carolina Constitution.

We affirm the trial court's conclusion that Asheville has standing to challenge the authority of the General Assembly in this matter. We reverse the court's conclusions regarding the legislation's constitutionality and its injunction and remand the matter for further proceedings consistent with this opinion.

I. Background

The General Assembly has empowered municipalities to own and operate public water systems and public sewer systems and to serve customers both inside and outside of their corporate limits. N.C. Gen.Stat. § 160A–312.

Asheville is a municipality which owns and operates a public water system (the "Asheville Water System"). Asheville, however, does not operate a public sewer system. Rather, the public sewer system is owned and operated by a metropolitan sewerage district (an "MSD").¹ Like a municipality, an MSD is a type of political subdivision authorized by the General Assembly. N.C. Gen.Stat. § 162A–64 et seq.

The relationship between Asheville and its water customers living outside of its corporate limits has historically been quite litigious, with many disputes resolved through legislation from our General Assembly. See Candler v. City of Asheville, 247 N.C. 398, 101 S.E.2d 470 (1958) ; City of Asheville v. State of North Carolina, 192 N.C.App. 1, 665 S.E.2d 103 (2008).

In 2013, our General Assembly enacted legislation (the "Water/Sewer Act") which withdraws from Asheville the authority to own and operate the Asheville Water System and transfers the System to the Buncombe County MSD as follows:

The Water/Sewer Act creates a new type of political subdivision known as a metropolitan water and sewerage district (an "MWSD"), empowered to run both a public water system and a public sewer system within a defined jurisdiction. An MWSD may be formed either voluntarily or by operation of law. An MWSD is formed voluntarily when two or more political subdivisions (e.g., cities and MSD's) consent to form an MWSD to consolidate the governance of the public water and sewer systems in their region. N.C. Gen.Stat. § 162A–85.2.

A provision in the Water/Sewer Act (the "Transfer Provision")—the provision which is at the heart of this litigation—allows for the formation of an MWSD by operation of law. This provision states that the public water system belonging to a municipality or other political subdivision which meets certain criteria and which happens to operate in the same county that an MSD operates a public sewer system must be transferred to that MSD, upon which the MSD converts to an MWSD. See 2013 N.C. Sess. Laws 50, §§ 1(a)–(f), as amended by 2013 N.C. Sess. Laws 388, § 4.

Though the Transfer Provision does not expressly reference Asheville by name, the only public water system which currently meets all of the Transfer Provision's criteria for a forced transfer to an MSD is the Asheville Water System.

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Asheville commenced this action, challenging the legality of the Transfer Provision on several grounds. The State moved to dismiss, contending that Asheville lacked standing to challenge the General Assembly's authority to enact the legislation. Also, both parties filed cross motions for summary judgment.

Following a hearing, the trial court entered an order recognizing Asheville's standing. The trial court enjoined the application of the Transfer Provision, concluding that it violated our state constitution on three grounds.

The State timely appealed.

II. Standard of Review

As this case involves the interpretation of a state statute and our state Constitution, our review is de novo. See In re Vogler, 365 N.C. 389, 392, 722 S.E.2d 459, 462 (2012).

II. Asheville's Standing

The trial court concluded that Asheville has standing to challenge the authority of the General Assembly to enact the Transfer Provision. We agree.

Our Supreme Court has expressly held that "municipalities [have] standing to test the constitutionality of acts of the General Assembly." Town of Spruce Pine v. Avery County, 346 N.C. 787, 790, 488 S.E.2d 144, 146 (1997) (citing City of New Bern v. New Bern–Craven County Bd. of Educ.,

328 N.C. 557, 402 S.E.2d 623 (1991) and Town of Emerald Isle v. State of N.C., 320 N.C. 640, 360 S.E.2d 756 (1987) ).

In challenging Asheville's standing, the State cites In re Appeal of Martin, 286 N.C. 66, 209 S.E.2d 766 (1974), in which our Supreme Court held that a certain county lacked standing to challenge the constitutionality of a provision contained in a particular statute. However, the Court explained in Town of Spruce Pine, supra, that its holding in Martin was not that political subdivisions lack the authority to challenge the constitutionality of a statute generally, but rather that a political subdivision which accepts the benefits of part of a statute lacks standing to challenge another part of that same statute. Town of Spruce Pine, 346 N.C. at 790, 488 S.E.2d at 146 (distinguishing Martin ). Here, Asheville has standing because it has not accepted any benefit from the 2013 Water/Sewer Act.

IV. Constitutionality of the Water/Sewer Act

The trial court held that the Transfer Provision was invalid under our North Carolina Constitution based on three separate grounds:

(1) the Transfer Provision is a "local law" relating to "health," "sanitation" and "non-navigable streams," in violation of Article II, Section 24 ;

(2) the Transfer Provision violates Asheville's rights under the "law of the land" clause found in Article I, Section 19 ; and

(3) the Transfer Provision constitutes an unlawful taking of Asheville's property without just compensation in violation of Article I, Sections 19 and 35.

We disagree and hold that the Transfer Provision does not violate these constitutional provisions.²

A. The General Assembly has plenary power regarding the political subdivisions in our State, except as restricted by the state and federal constitutions.

The plenary police power of the State is "vested in and derived from the people," N.C. Const. Article I, § 2 ; and "an act of the people through their representatives in the legislature is valid unless prohibited by [the State] Constitution." State ex rel. Martin v. Preston, 325 N.C. 438, 448–49, 385 S.E.2d 473, 478 (1989) (emphasis added). See also Hart v. State, 368 N.C. 122, 129–130, 774 S.E.2d 281, 287 (2015) (stating that the North Carolina Constitution "is not a grant of power, but [rather] a limit on the otherwise plenary police power of the State"); Painter v. Wake County Bd. of Educ., 288 N.C. 165, 177, 217 S.E.2d 650, 658 (1975) (stating that "[a]n act of our General Assembly is legal when [the North Carolina] Constitution contains no prohibition against it").

The General Assembly's power includes the authority to organize and regulate the powers of our State's municipalities and other political subdivisions. See N.C. Const. art. VII, § 1 (recognizing that the General Assembly has the power to regulate our towns and cities "except as [ ] prohibited by [our state] Constitution"). Our Supreme Court has repeatedly recognized this power. For example, in two cases in which Asheville was a party, the Court stated that the powers of a municipality "may be changed, modified, diminished, or enlarged [by the General Assembly, only] subject to the constitutional limitations," Candler v. City of Asheville, 247 N.C. 398, 407, 101 S.E.2d 470, 477 (1958), and that the authority accorded a municipality "may be withdrawn entirely at the will or pleasure of the [General Assembly]," Rhodes v. Asheville, 230 N.C. 134, 140, 52 S.E.2d 371, 376 (1949). See also In re Ordinance, 296 N.C. 1, 16–17, 249 S.E.2d 698, 707 (1978) ( "Municipalities have no inherent powers; they have only such powers as are delegated to them by [our General Assembly]"); Highlands v. Hickory, 202 N.C. 167, 168, 162 S.E. 471, 471 (1932) ("[Municipalities] ... are the creatures of the legislative will, and are subject to its control").

Here, the General Assembly has sought to exercise its power over political subdivisions by enacting the Transfer Provision, which (1) creates a new political subdivision in Buncombe County (an MWSD), (2) withdraws from Asheville authority to own and operate a public water system, and (3) transfers Asheville's water system to the MWSD, all without Asheville's consent and without compensation to Asheville.

Early last century, our Supreme Court recognized our General Assembly's power to withdraw from the City of Charlotte its authority to operate its public water system and to transfer this system to a new political subdivision:

It is clear that the

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