A federal judge has thrown out a lawsuit the city of Birmingham filed challenging a state law that reorganized the metro area’s water utility and its board of directors last year.
U.S. District Court Judge Anna Manasco issued her 18-page ruling Thursday. In it, she wrote that the city did not have standing to sue, but she left the door open for future legal actions.
Shan Paden, general legal counsel for Central Alabama Water, said the court’s action validates the state law and lifts three heavy burdens from the public utility.
“The question is now settled as to CAW being a legal entity as it was restructured by the Legislature, and that that is a major burden,” he said. “The second burden that was lifted was the ability to go to the bond market and finance projects that are needed. The third thing is the litigation costs that you have to continue to fight all the time.”
The law stripped majority appointment power from Birmingham city officials and gave appointment power to the governor and lieutenant governor. It resulted in five of seven Central Alabama Water board members being from suburban areas. While CAW serves residents of five counties, 44% of them live in Birmingham, and 92% live in Jefferson County.
City’s reaction
City officials filed the lawsuit almost a year and a half ago, when the state law took effect.
Birmingham City Council President Wardine Alexander said in a statement the council is waiting on the city’s legal team to assess the ruling before deciding next steps.
“We continue to have grave concerns regarding what this precedent means for local ratepayers and future economic development in Birmingham,” Alexander said.
The city could appeal Manasco’s decision. Paden said her ruling “without prejudice” also means the city could ask the judge to rehear the case, it could refile the lawsuit and it could file a similar suit in state court.
Effects on CAW’s borrowing power
The bond market has been CAW’s preferred avenue for financing large capital projects such as pipeline replacement and stabilization of a dam that supports a major water supply. New leadership at the utility stopped the latter project earlier this year.
Bond financing had been off the table when it was unclear whether the new board had legal authority to borrow money, Paden said. He made a homeowner analogy.
“If you're a person in your home, but you can't borrow money against it, or buy a house because you can't pay cash for it,” he said.
He said if the city appeals the lawsuit’s dismissal, files a new one or if the case otherwise continues, bond market financing might be in jeopardy again.
“But as we sit here today, I don't see any [current] litigation that would prohibit that,” Paden said.
Judge’s reasoning
Manasco ruled that neither the city nor the mayor or city council members who sued in their official capacities and as ratepayers had legal standing to do so. That’s because, according to the ruling, their complaints are general grievances rather than specific harms caused by the named defendants. Those defendants include state and county officials and five CAW board members.
“Ultimately, because the alleged harm is ‘undifferentiated and common to all members of the public’ in the City of Birmingham, it cannot provide standing,” Manasco wrote. “The injury that the plaintiffs allege is neither traceable to the defendants nor redressable by them.”
The judge also said municipal governments and water boards are subject to the state Legislature's authority.
Phillip Wiedmeyer, one of the board members named in the suit, said he’s glad the judge has made a decision.
“It's been a long time coming, and we're pleased with the ruling and that she's issued it,” Wiedmeyer said.
Paden said he hopes the dismissal can give CAW’s leaders the ability to concentrate on what they need to – producing water at reasonable rates.
“That's what we need to be focused on, not the legal existence of CAW,” he said.
