Garland County Attorney Ralph Ohm said Monday night that litigation to challenge the city's water rate structure would be the "nuclear option."
The possibility of litigation was presented Monday night at the Garland County Quorum Court's Public Health, Welfare and Safety Committee as a means to loosen restrictions on the city's policy of limiting water access outside its municipal boundaries.
Ohm requested, and was granted, authorization by the committee in the form of a resolution to meet with City Attorney Brian Albright before the county considers legal action.
Albright said Tuesday that he's waiting for direction from the Hot Springs Board of Directors before agreeing to a date. The resolution, which was approved unanimously, calls for the meeting to occur before the committee's April 20 meeting.
County Judge Rick Davis said he would attend and that an invitation would likely be extended to a director on the city board.
Ohm said the county could challenge the city's rate system under the Civil Rights Act by arguing that higher rates paid by county-owned facilities violate the equal protection clause of the U.S. Constitution. He said county residents could join the suit and possibly recoup the 50-percent premium they pay for water. He said the statute of limitations would prevent plaintiffs from collecting more than three years' worth of payments.
"You have to treat equally situated people equally," Ohm told the committee. "There's a state statute that authorizes a tiered-rate system. It wouldn't take priority over federal litigation."
Albright said the city has prevailed against similar lawsuits, citing a 2009 Arkansas Supreme Court ruling that affirmed a Garland County Circuit Court decision in Skallerup vs. The City of Hot Springs. The high court ruled the city had supported its justification for charging county residents higher wastewater rates.
A 2004 city ordinance increased wastewater rates over a three-year period by 52 percent for county residents and 9 percent for city ratepayers. The plaintiffs argued the city was bound by agreements written during the development of sewer districts formed in the 1970s and 1980s to stem the flow of pollution entering lakes Hamilton and Catherine.
Federal money and property tax assessments built the infrastructure that connected the districts to the city system. According to court filings, the city pledged it wouldn't impose a rate differential if those areas agreed to tie into the municipal system and improve the pollution problem, which had led to a state-issued building ban.
Ohm said litigation could make it difficult for the city to find investors willing to buy its debt. The resulting obligation that could ensue would have to be disclosed in the marketing materials given to investors before capital improvement bonds are issued, he said.
"Bondholders are not going to want to be in the middle of massive litigation," he told the committee. "Because if (the city) loses the lawsuit, you're talking about a huge refund. The county residents would be entitled to get money back."
J. Shepherd Russell III, an attorney who has done bond counsel work for the city and county, said a lawsuit would affect a city's ability to sell bonds at a favorable interest rate.
Litigation was one of several options Ohm offered the committee. He said the county could seek a legislative remedy, noting that a bill akin to what state Sen. Alan Clark, R-District 13, filed last month could be revived in the next legislative session.
Clark's bill stalled in the House after passing the Senate. It called for water providers to satisfy all requests for new service inside the service territory set for it by the Arkansas Natural Resources Commission. Ohm said attorneys for Central Arkansas Water, Little Rock and North Little Rock's water system, added language that protected providers, specifically the requirement that adequate infrastructure be in place or that the customer provide it at their expense.
Ohm told the committee the county could continue to work toward a compromise with the city, explaining that the meeting he's proposed with Albright might prove more productive than the Community Water Committee.
County representatives didn't attend the water committee's March 18 meeting, the first gathering of the panel since its initial meetings last fall. Committee Chairman Larry Stephens said the group can still be a vehicle for compromise.
"I said (March 18) could possibly be the last meeting we would have," Stephens said Tuesday night. "The reason I said possibly, because I was hoping something else might break, something might be on the table so that we can continue our discussions. If that happens, we'll continue to meet."
Ohm said the cost-sharing agreement he and Albright negotiated for the new county detention center shows they can forge a compromise, making litigation unnecessary.
"I have enough confidence in my ability and in Brian's ability that if we can't come up with a deal, we're not going to come up with one," he told the committee.
Ohm distilled the county position into one of fairness, saying county and city residents shouldn't be treated differently in respect to rates or access.
"We want everybody to be treated alike," he told the committee. "Forget about the county line, if you're going to supply water supply it across the board. If you're going to cut back on the expansion of your water system, say you will give 300 meters this year on a first-come, first-served basis whether you're in the city or the county."
The city adopted a compromise proposal relaxing restrictions in the planning area once an additional water source is brought online. It wouldn't provide water for retail development but pledges to consider each request separately.
The county's proposal offers to approve requests for voluntary annexations in return for the city liberalizing a policy that restricts water connections in unincorporated areas to single-family homes.
Local on 04/01/2015