CULLMAN — After being ordered to rule on one count of a water utility lawsuit that defendants had appealed to the state Supreme Court, Circuit Judge Don Hardeman heard testimony Monday ahead of issuing a final opinion on the matter.

Monday’s hearing was the latest chapter in a series of legal maneuverings in the civil suit over the Cullman County Commission’s creation in April of the Governmental Utility Services Corporation of Cullman County (GUSC) and the South Cumberland Cooperative District (SCCD). The two entities, which were initially deeded the assets of the county water department and given control over the department’s revenues, have been embroiled in litigation almost from the outset, with commission chairman James Graves and six county residents filing the suit in hopes of reversing the actions of the two associate commissioners—Doug Williams and Wayne Willingham—that brought the two corporations into existence.

The defense called one witness Monday—water department manager David Bussman—hoping to use his testimony to demonstrate that Cullman County is not in danger of suffering financial loss if, as the defense has requested, Judge Hardeman reverses part of an injunction order he issued in late May ordering the SCCD to re-transfer the department’s real assets back to county oversight, as they had previously been for 30 years.

The high court ordered Monday’s hearing after the defendants filed a motion June 11 requesting a stay of part of the May 28 injunction order, which—among other things—directed the SCCD to transfer its ownership of the water department back to Cullman County until the suit is resolved. That injunction was issued after Hardeman heard testimony from both sides relating to the plaintiffs’ claim that the two associate county commissioners had violated the Alabama Open Meetings Act by allegedly deliberating in secret to create the GUSC and SCCD.

To date, the SCCD remains the nominal owner of the department, even though it is presently not allowed to manipulate water revenues or deliberate on the dispensation of the department’s material and real assets.

Under questioning from defense attorney Barry Mullins, Bussman testified that “there has been no effect” on water services delivered to county customers since the department was transferred to the nominal ownership of the SCCD.

Under redirection from plaintiff attorney Steve Griffith, Bussman was questioned about whether he knew in advance of the county’s responsibility to potential bond investors who were courted as part of a $7.4 million bond issue for water infrastructure upgrades the county passed in early April.

While Bussman’s role in the bond issue was not substantial enough to provide plaintiffs with damning testimony on the validity of one of the lawsuit’s allegations—that the county commission willfully withheld information about its intentions to place the water department under new ownership just days ahead of courting potential primary investors with its bond prospectus—the topic opened a discussion attorneys further pursued with an expert witness called to testify on the manner in which municipal bonds are marketed and regulated ahead of sale.

That witness, Birmingham-based investment banker David Hooks, was called upon to help plaintiffs demonstrate their allegation that the commission’s failure to disclose the pending transfer of the water department’s assets from the county to the SCCD potentially places the county in financial jeopardy.

Hooks explained to plaintiff attorney Todd McLeroy that the county, which took advantage of its A+ bond rating in early April when it began negotiating the bond issue, is in danger of losing both its favorable rating and its legal right to control the water revenues required to repay its debt to bondholders, should the defendants’ motion to stay the injunction order be granted. In addition, said Hooks, the county’s failure to mention the possibility that it was only days away from relinquishing its ownership of both the department’s physical assets—as well as its access to water revenues—can accelerate investors’ demand for repayment.

“If material facts are intentionally withheld, it gives the [bondholders] the right to come back to the county and demand payment,” said Hooks. “The [disclosure to investors of the] management of the system is very substantive in terms of material fact—especially in light of what’s happened in Jefferson County.”

Another of the plaintiffs’ three witnesses, engineer Chris Cousins, was asked to follow up on a letter he wrote to Bussman in late May expressing concern that the county might run into complications in upcoming contract agreements over water department-related work—work that has since been bid to contractors—if it had to re-transfer department ownership from the SCCD back to the county after Judge Hardeman ordered the move in his May 28 injunction ruling.

Cousins, who works for Municipal Consultants, a Birmingham-based firm that contracts with the water department on strategic issues, said those fears had since been allayed. A number of projects involving field work, including a Morgan County pipe relocation project that had to be rebid last month after the injunction temporarily stripped the SCCD from undertaking financial obligations, have since gone through the rebidding process without a hiccup, Cousins testified.

That assertion favored the plaintiffs, who sought to refute the defense’s argument that re-transferring the department’s assets from the SCCD to the county would be too time-consuming, expensive and cumbersome a task to allow for economical and timely action on project work initiated by the department.

The plaintiffs also attempted to repudiate the defense’s claim that Hardeman’s order to re-transfer the assets to the county would initiate another wave of attorney-furnished paperwork, creating unnecessary and costly legal expense. 

The plaintiffs called upon Cullman-based attorney Fess St. John as an expert witness to explain the extent of effort and expense that would be involved in a law firm’s creation of documents to convert deeded ownership of the county’s water holdings in Cullman, Morgan, Walker and Winston counties, along with a new bill of sale, from the SCCD to the county.

“It’s almost a clerical matter,” said St. John, explaining that, for valued clients, such work is typically done for free—or for a token sum, typically no more than $500. “It would be hard to think of a way for it to cost more than that,” said St. John.

Both plaintiff and defense attorneys will file closing statements in the hearing by Wednesday, leaving Hardeman the rest of the week to issue a ruling. The deadline set by the Supreme Court is Monday, August 2, after which the Court may decide whether to proceed with the defendants’ appeal on the Open Meetings Act.



‰Benjamin Bullard can be reached by e-mail at bbullard@cullmantimes.com or by telephone at 734-2131 ext. 270.