City-Paid Attorney Playing on Both Sides in Columbia Water-Sewer Fund Controversy

July 30, 2014

Investigative Reports

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SewerUpdate: 8/13/14 – The city of Columbia paid the McAngus Goudelock & Courie law firm a total of $248,082.57 from Nov. 7, 2011, through July 7 of this year to represent the city in the legal case detailed in this story, according to the city’s response to a request by The Nerve under the S.C. Freedom of Information Act.

On the McAngus Goudelock & Courie law firm’s website, Columbia attorney M. McMullen Taylor is listed as the board chairperson of Congaree Riverkeeper, a nonprofit environmental organization dedicated to protecting Midlands rivers.

Taylor also is one of two lawyers from the 137-attorney firm representing the city of Columbia in defending a lawsuit that claims the city for years has been illegally transferring millions of dollars from its water and sewer fund to the detriment of its aging sewer system, which the federal government has identified as a polluter of area rivers.

The city last September entered into a consent agreement with the U.S. Environmental Protection Agency requiring the city to make upgrades to its sewer system under certain timelines or face penalties. The city also was required to pay a $476,400 civil fine and spend $1 million on stream restoration projects.

Congaree Riverkeeper has ranked the city as the No. 1 worst polluter in the area.

Contacted this week by The Nerve, Joe Azar, a city activist and one of the plaintiffs named in the lawsuit against the city, which is now before the S.C. Court of Appeals, said he wasn’t aware of Taylor’s connection to Congaree Riverkeeper.

“That is quite odd, and it seems quite contradictory defending the city’s raiding of the water-sewer fund and defending their right to pollute, and you’re sitting on a key board that is very vocal against pollution,” he said.

“I would suggest,” Azar continued, “that she resign from one or the other. It seems like a conflict of interest and a hypocrisy.”

S.C. Rep. James Smith, D-Richland, and a Congaree Riverkeeper board member, told The Nerve when contacted this week that Taylor remains as a charter member of the board, though he added she recently stepped down as board chairperson.

“She’s done a superb job,” Smith said. “I consider her of unquestionable ethics. We’ve benefited by virtue of her knowledge.”

Asked about the apparent discrepancy between Taylor’s board position and her defending the city in the lawsuit, Smith, who is an attorney, replied, “She’s a lawyer who has duties to her client. … I don’t think there’s an issue there.”

Conflicting Roles

Taylor’s background information on her law firm’s website says she “focuses on municipal law, constitutional law, water law, energy and natural resources law, land use law, and appellate practice.” It also notes that her practice includes “defending a city against challenges to its use of water and sewer revenues,” though it doesn’t name the city; and lists her as co-chair of the “City of Columbia Mayor’s Transition Team Environmental & Sustainability Committee.”

Yet in a post on the website of Sustainable Midlands, which describes itself as leading a coalition of Midlands organizations “dedicated to the principles of sustainable communities,” Taylor wrote this about water issues facing the state:

“Crumbling water and sewer infrastructure results in leaking drinking water pipes, escalating replacement costs, and untreated wastewater discharging into our rivers and streams. … No one wants to pay more in water and sewer rates, yet state and federal funding is woefully inadequate to meet the challenge we face. This is a problem that we cannot ignore any longer.”

In a written response Monday to The Nerve, Taylor declined comment on her dual roles or on the lawsuit in general, saying only, “I forwarded your email to the City for response, as I am not authorized to speak to the media on behalf of the city.”

Thomas Lydon, another McAngus Goudelock & Courie attorney representing the city in the suit, and Columbia attorney C. Dixon Lee III, who represents the plaintiffs, didn’t respond to written or phone requests from The Nerve seeking comment.

The Nerve this week asked the city for the total city payments made so far to Lydon and Taylor in connection with the lawsuit, but was informed to submit the request under the S.C. Freedom of Information Act. City spokesman Jared Glover also indicated in a written response that any public comment by the city about the suit would be treated as an FOIA request.

No response from the city was received by publication of this story.

The city has until Thursday to submit its formal response to the plaintiffs’ appeal before the Court of Appeals, court records show.

The 2011 suit, which names Azar, Richland County anti-tax activist Michael Letts and Columbia resident Frank Cumberland Jr. as plaintiffs on behalf of all Columbia water and sewer customers, contends that the city for years has been transferring millions of dollars annually from its “Water and Sewer Enterprise Fund” to the city’s general fund, four economic development corporations and other city divisions for “non-water and sewer services and expenses,” in violation of state law and previous court cases.

“At the same time the City neglected its water and sewer system which fell into a state of disrepair and ultimately resulted in the United States Environmental Protection Agency and the South Carolina Department of Health and Environmental Control successfully suing the City of Columbia to force repairs and improvements to the City’s sewer system,” the plaintiffs’ appeal states.

Raiding the Water-Sewer Fund

According to court papers reviewed by The Nerve:

  • The city in recent years has collected about $100 million annually in water and sewer fees, which is just below 50 percent of its total annual budget.
  • Between 1999 and 2010, the city transferred a total of $78.6 million from its water and sewer funds for other uses.
  • As of two years ago, the city provided water to 137,066 customers and sewer to 69,910 customers. About 55 percent of all water and sewer customers live outside the city; their fees are co-mingled in the water and sewer fund with residents’ fees. The plaintiffs contend that transferred funds spent on “city-only activities” do not benefit non-residents.
  • For years, the city has transferred $4.5 million annually from the water and sewer fund to its general fund. The city’s budget director in a sworn statement estimated that city property tax bills would go up by about 10 mills if the city couldn’t use the $4.5 million for general operations.
  • From fiscal years 2009 through 2011, the city transferred a total of more than $1 million annually from the water and sewer fund to the city’s four development corporations – the Columbia Development Corporation, Eau Claire Development Corporation, Columbia Housing Development Corporation and the TN Development Corporation.
  • In addition, the city during those fiscal years transferred collectively more than $1.5 million in water-sewer funds annually to the city’s Economic Development Department and Office of Business Opportunities, and for “economic development special projects.”

But in a ruling last September throwing out the lawsuit, Circuit Judge G. Thomas Cooper said the transfers don’t violate state law, writing, “Transfer of some portion of water and sewer revenues from a city’s water and sewer utility to its general fund is a common practice in South Carolina.”

“Adequate water supply is an important economic development tool,” Cooper wrote. “The City’s utility attracts businesses to the Midlands region. New businesses locating in the region help grow the City’s water and sewer customer base.”

Cooper also ruled that neither Azar nor Letts had legal standing to be part of the lawsuit, and denied the plaintiffs’ request for class-action status.

The appeal before the Court of Appeals seeks to:

  • Reverse Cooper’s ruling;
  • Require the city to return all monies that were transferred to the general fund from the water and sewer fund, as well as all water and sewer funds “spent directly” by the city’s development corporations, over a three-year period before the suit was filed; and
  • Prohibit the city from raiding the water and sewer fund going forward.

“The water and sewer system needs to be an independent system out of the control of City Council,” Azar told The Nerve. “Then we’ll have real truth in accounting.”

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.