Atlanta may have to find new ways to pay for its huge sewer upgrades if Sandy Springs prevails in upcoming mediation proceedings — the latest turn in a three-year legal dispute over how much Atlanta charges its smaller neighbor for water.
The 11th U.S. Circuit Court of Appeals in Atlanta on Monday overturned a federal judge’s decision that barred Sandy Springs from pursuing mediation in state court.
The ruling means Sandy Springs should have more say-so over the cost and quality of water service it gets from Atlanta, Sandy Springs city attorney Wendell Willard said. “We’re very happy with the court’s ruling,” he said.
An agreement in October 2005 designated Atlanta as the direct retail water service provider for all of unincorporated Fulton County, including the area that incorporated as Sandy Springs just a few months later.
Sandy Springs’ creation triggered a provision in Georgia law that can allow new cities to revise service delivery agreements with other counties or cities. Some of the changes sought by Sandy Springs to the service contract could reduce the amount or the price of water it buys from Atlanta.
Sandy Springs, for example, wanted Atlanta to cut the 21 percent surcharge Sandy Springs residents and businesses pay for water. Atlanta officials fought that change, saying the differential was justified.
Monday’s ruling means that, if a decision is reached to reduce the rates Sandy Springs is currently paying for its water, Atlanta may have to find ways to offset that lost revenue.
But Mayor Kasim Reed has already vowed not to raise rates inside Atlanta, where combined water and sewer rates are already among the highest in the nation.
The financial impact of Monday’s appeals court ruling on Atlanta’s finances could be muted because of a recent ruling by U.S. District Judge Thomas Thrash. In September, he granted Atlanta 13 years of breathing room on mandatory sewer upgrades, approving the city’s request to push out deadlines on some remaining work to 2027.
The city had faced a deadline of July 1, 2014, to finish construction projects to prevent sewage spills. Atlanta’s request for extra time was pitched as a way to reduce the strain on ratepayers and the city’s finances.
Atlanta is under strict orders to abide by court-approved consent decrees to upgrade its sewage system.
Those consent decrees stem from a Clean Water Act lawsuit filed against Atlanta in 1995, after sewage spills repeatedly contaminated the Chattahoochee River and its tributaries. Thrash, the federal judge assigned the case, has been monitoring requirements that Atlanta prevent sewage spills.
Atlanta has spent more than $1.5 billion on sewer updates and improvements, and it plans to spend about $445 million more. Meanwhile, the average resident’s bill has spiked by more than 250 percent in a decade, from $49 to $152, according to city data.
Atlanta officials said the 13-year extension would prevent water and sewer rates for the city’s residents from rising for the next four years, and would also help reduce the strain on the city’s finances.
As Atlanta worked to comply with federal demands, negotiations over drinking water created a sometimes rocky relationship with Sandy Springs.
In a statement, Atlanta City Attorney Cathy Hampton expressed disappointment with the ruling that determined Thrash did not have jurisdiction to resolve service delivery disputes between Atlanta and Sandy Springs.
“The city of Atlanta remains confident that it will prevail on the substance of all claims in state court,” Hampton said in a statement.
Sandy Springs’ negotiations with Atlanta over water service delivery stalled in October 2009. Sandy Springs then filed a petition in Fulton Superior Court, citing a state law that requires mandatory mediation to resolve water service disputes between local governments.
Atlanta then asked Thrash to block Sandy Springs from pursuing the state court mediation. Thrash granted Atlanta’s request, enjoining Sandy Springs and Fulton County from pursuing mediation in state court and bringing the two governments in as parties in the Clean Water Act case he was overseeing.
Thrash said that step was necessary “to avoid the uncertainty and substantial and immediate threats” to Atlanta’s ability to comply with the consent decrees.
Sandy Springs appealed, saying Thrash had overstepped his authority. On Monday, a the 11th U.S. Circuit agreed.
The court noted Thrash was motivated by the fear that the state court proceedings could impede Atlanta’s efforts to comply with its obligations because its water revenue is pledged as part of collateral for bonds the city issued to finance its upgrades.
But the 11th Circuit said it was Atlanta’s decision to issue bonds to finance some of its compliance efforts and pledge its water and sewer revenue to pay off those bonds.
“If the water system revenue declines for any reason, the problem will affect the bond holders and the city of Atlanta,” the 11th Circuit said. If the potential revenue reduction is large enough, “Atlanta may have a problem paying off the bonds that have already been issued, but that will be Atlanta’s problem.”
If additional revenue is needed to offset the lost revenue from Sandy Springs, it’s Atlanta’s responsibility to find it, the court added.
The 11th Circuit said it could not blame Thrash for trying to make sure Atlanta meets its obligations, noting the vast amount of time and effort he has devoted to the case.
“But no amount of good motives and no amount of expended time or effort can bestow on a federal court the authority to interfere with a sovereign state’s proceedings,” the 11th Circuit said. “Only the Constitution and Congress can do that, and neither has done so here.”
