By Bridget Doherty
The U.S. Sixth Circuit Court of Appeals rejected the city of Cincinnati’s attempt to unilaterally withdraw from the Metropolitan Sewer District of Greater Cincinnati and create a separate sewer district. The ruling by a three-judge panel affirms Judge Michael Barrett’s decision to extend the MSD operating agreement by court order and prevent the city from backing out of MSD, taking MSD assets and revenues, and creating a separate sewer district.
The opinion repeatedly states that, under both the MSD operating agreement and the consent decree, the county is the principal and the city is the agent subject to the county’s direction and control. In other words, the county is the owner of the utility, the city is the operator, and the city must follow the county’s directions.
“This decision is great news for all the ratepayers in the county. It maintains the integrity of the county sewer district,” said Denise Driehaus, county commission president. “As the owner and principal of MSD, we will continue to work with the city of Cincinnati and the court to keep the sewer district accountable to ratepayers, and we look forward to finding a long-term solution to our collective challenges.”
Stephanie Summerow Dumas, commission vice president, said, “Hopefully this ruling will help to spark a fresh collaboration between the county and the city. Instead of fighting each other, we need to be fighting for the people and the environment.”
Commissioner Todd Portune said, “Two years ago, we announced an historic agreement with the city that was to have cleaned up the mess at MSD. The Sixth Circuit’s decision affirms our ability to have implemented that agreement. The city’s two-year-long refusal to accept the true legal relationship we each have with MSD deprived ratepayers from realizing the benefits of that agreement. We can now move forward with the complete confidence that we will be able to implement the basic tenets of that agreement and keep rates low while providing the fixes to the sewer system that we proposed be done, eliminating the environmental hazards that have been perpetuated by the city’s refusal to work collaboratively with us as required by law.”
In 1968, the city consolidated its municipal sewer district into the county sewer district, which the county renamed the Metropolitan Sewer District of Greater Cincinnati. Separately, the city and county entered an operating agreement whereby the city would operate MSD for a period of 50 years, subject to county governance, oversight and control. Prior to its expiration in September 2018, the MSD operating agreement was extended by a federal court judge, preventing the city from following through on its threat to unilaterally withdraw from the agreement and set up a separate sewer district in violation of the consent decree.
The consent decree is divided into two phases. The first phase cost an estimated $1.1 billion (in 2006$) after 10 years and ended on Dec. 31, 2018; 2019 is considered a bridge year. Phase 2 is set to begin in January of 2020 and is estimated to cost $2.3 Billion (in 2006$).
Contrary to Board of County Commission directives and in violation of the MSD operating agreement, the city submitted a Phase 2A consent decree plan to the federal regulators last year that would raise rates 30% over a 10-year period. The Phase 2A consent decree plan submitted by the board would only raise rates 3% over a five-year period. The county board, as the principal, requested that the regulators accept its lower cost plan.
In September of 2018, the city restricted county access to MSD information, data and personnel, and stated that MSD would not design, advance or construct board-directed projects, and would only advance projects desired by the city.
Recently, the county submitted a long-term solution to Federal Court Judge Michael Barrett that would end the dispute with the city by transferring up to 20 positions within MSD’s executive staff to the county while more than 600 city employees would remain with the city. This move aims to eliminate the fighting, and would restore accountability and transparency by putting ratepayer interests first by ensuring key policy decisions are made by county employees and the commissioners directly responsible for how ratepayer dollars are spent, while preserving the stability of the city retirement system.
Since 2015, commissioners have been able to hold sewer rates flat with no increases.