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WV Supreme Court hears Huntington sewer rate dispute

By JOSEPHINE MENDEZ

The Herald-Dispatch

CHARLESTON, W.Va. — Attorneys for Steel of West Virginia, which has challenged sewer rate increases put into effect earlier this year, and the Huntington Sanitary Board on Tuesday debated the meaning of “ordinary course of business” before the West Virginia Court of Appeals.

The court was hearing arguments in the Huntington company’s appeal of a Cabell County judge’s ruling in January that allowed the rate increases to proceed. Steel of West Virginia contends the Sanitary Board did not give proper notice for the type of work supported by the rate hikes before the Sanitary Board proceeded with the increases.

Huntington City Council approved the rate increases at the end of 2016.

The main point of contention between Steel of West Virginia and the Huntington Sanitary Board is whether or not the projects the rate increase will fund are in the “ordinary course of business,” which allows for a shorter period of public notice.

Joseph Ward, counsel for Steel of West Virginia, argued that the projects were outside the ordinary course of business and therefore subject to more public notice than was given by the city, as outlined in state code.

“This is going to result in a 58 percent increase in the rates and a bond issuance that will result in the debt service going up approximately 60 percent,” Ward told judges. “Projects that result in those types of increase in the rates and the debt service hardly can be considered ordinary.”

Robert Rodecker, the attorney representing the Sanitary Board, argued that the nine capital improvement projects totaling $7.5 million, which the rate increase would finance, were in the ordinary course of business and as such were not subject to the notice requirements outlined in Ward’s arguments.

The sewer rate increase also was intended to offset increases in health insurance and sludge removal costs, he said.

Rodecker added that approval from the Huntington City Council in a 7-3 vote further supported his client’s claim that the projects were in the ordinary course of business since a new state code, passed by the West Virginia Legislature in 2015, gives the local governing body the right to determine whether projects are in the ordinary course of business.

“We feel very strongly in our position that we’ve done everything by the proper procedures,” said Brian Bracey, the newly appointed executive director of the Huntington Water Quality Board.

The Water Quality Board is the umbrella agency for the Huntington Sanitary Board, Huntington Stormwater Utility and Huntington Floodwall Division.

Despite approval from the Huntington City Council, Ward said his clients maintained the belief that proper notice was not given.

In its appeals, Steel of West Virginia alleges that proposed projects are “outside the ordinary course of business” and therefore are subject to at least a 30-day notice in accordance with state code, which the city did not provide.

Justice Menis Ketchum questioned Ward as to whether the point of proper notice would be a moot issue since despite alleging that proper notice was not given, representatives with Steel of West Virginia were able to make appearances at public hearings regarding the rate increase.

Ward argued that this point was far from moot since his clients still had many questions regarding the rate increase that went unanswered due to the compressed time frame. He further insinuated that the lack of proper notice also likely prevented others in the public from coming forward and voicing their concerns.

In a statement Tuesday, Timothy Duke, president and CEO of Steel of West Virginia, said, “I am very happy with how the oral argument went today. … The Legislature required that public utilities provide ample notice to ensure affected citizens will have the opportunity to voice their concerns before expensive capital projects and associated large increases in sewer rates are approved. These rate increases will cost Steel of West Virginia $3 million over 10 years. Big decisions like this should not be rushed through Huntington City Council without proper consideration.”

When the rate increase was proposed, the Sanitary Board was looking to tackle 15 capital improvement projects totaling about $75 million.

However, after being advised by Rodecker that a rate increase based on capital improvement projects that were outside the ordinary course of business would require a 30-day notice before being presented to a governing body, the Sanitary Board chose to pare those projects to nine that they said were “in the ordinary course of business” and not subject to the 30-day rule.

While the total cost of the projects was significantly reduced, Ward argued that some, if not all, of the projects remain outside the ordinary course of business since they involve the installation or addition of new facilities.

Ward backed his argument by citing previous cases that went before the West Virginia Public Service Commission (PSC) regarding projects such as these.

In the response from the Sanitary Board, Rodecker asserts that the nine proposed projects “involve routine maintenance and repairs that are essential to avoid catastrophic failure, preserve the system and ensure compliance with federal regulation.”

Another point of dispute between the two parties is whether the PSC has any jurisdiction over the dispute.

Lawyers for the Sanitary Board argue that the PSC has the authority to resolve notice issues and rate disputes involving large municipalities. On the opposing side, Steel of West Virginia alleges that a recent change to state code places large municipalities out of the reach of PSC interference.

The entire proceeding before the five West Virginia Supreme Court justices lasted just over 30 minutes.

The justices did not issue an opinion on the arguments Tuesday; however, Bracey said he was advised by Rodecker he is hoping to receive an answer from the justices before the end of the year.

Bracey said the Sanitary Board will not move forward with its capital improvement projects until after the sewer rate case is settled in the Supreme Court.

“Because of this litigation, we’ve had to be patient in doing some of our normal course of business work not knowing what the outcome of the court is going to be,” he said. “We feel confident in the work that we need to be doing and (the work that) we’re going to be doing when this case is finally settled.”

The second of three sewer rate increases is scheduled to take effect Dec. 31, 2017.

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