LEXINGTON COUNTY — Eight years after West Columbia accused a neighboring town of stealing both customers and resources from its water system, a judge ordered Lexington to pay out $5.7 million in lost revenue, calling the town’s record keeping “sloppy at best and fraudulent at worst.”
The lawsuit, first filed in 2018, stemmed from a disagreement over which municipality has the right to serve a clutch of water customers west of Interstate 20, a dividing line between the two largest municipalities in Lexington County.
The Post and Courier reached out to representatives for West Columbia and Lexington, who didn't immediately provide responses to the ruling.
What the court decided
The dispute came down to whether a map drawn up in the initial 1997 agreement, showing properties that were grandfathered into West Columbia’s water system, carried over into an updated 2007 contract.
Through years of investigation and testimony, the 11th Circuit court found that Lexington had illegally been providing service to 263 properties located within West Columbia’s service area, stole $1.2 worth of water from unreported taps into West Columbia’s water lines, and “considered withholding providing sewer services to properties unless the property owner agreed to switch the water service from West Columbia to Lexington.”
Lexington’s legal strategies were at times puzzling, with their latest defense hinging on an April Fool’s Day discovery of a long-lost contract by a former town employee “randomly stacked by the door in the office of a former assistant town attorney,” and shifting testimony from a former mayor. The court found these arguments were neither plausible nor credible.
While the court did not find sufficient evidence to officially charge the town with fraud, Judge Frank Addy, Jr. ordered Lexington to audit its accounts and field connections to identify every customer in this shared distribution area that’s not currently included in monthly reports to West Columbia.
The court found that West Columbia lost $3.8 million in revenue from stolen customers.
The town is also permanently prohibited from constructing any lines to serve, or otherwise provide service to any properties in West Columbia’s jurisdiction, including six subdivisions:
How did the dispute start?
While a 1997 contract sold the service rights in the disputed area to the town of Lexington for $2.8 million, the municipalities agreed that certain properties already serviced by West Columbia would be grandfathered in to continue receiving that service, including six subdivisions that were in the process of construction. That equated to over 1,400 customers worth tens of millions of dollars, or about 10 percent of West Columbia’s entire water-service revenue.
In 2007, the municipalities entered into a new contract, sparked by the expansion of West Columbia’s Lake Murray water plant. The agreement kept their respective service areas unchanged, and stipulated that neither town would construct lines or service customers within the other’s area except as allowed by the agreement.
Those properties were marked on a map in 1997, and that map was included, unchanged, in the 2007 agreement.
It wasn’t until 2016 that West Columbia’s senior assistant city administrator and treasurer, Justin Black, pointed out that several Lexington properties that were demarcated for West Columbia’s water service had been redeveloped and were now being serviced by Lexington.
In 2018, West Columbia sued for their rights back to the properties, and asked for an accounting by Lexington of all other properties it was servicing that belonged to West Columbia, and how much revenue it had cost the town.
West Columbia took matters into their own hands to investigate, an arduous process that involved inspecting aerial and satellite photographs and tax parcel data alongside decades of water service records. West Columbia also investigated properties within the six subdivisions that the agreements had granted them access to.
In the end, West Columbia identified 104 properties that had been redeveloped and were now being serviced by the town of Lexington. The investigation also found that an additional 158 properties within the subdivisions were being serviced by Lexington.
Under those agreements, West Columbia had also given Lexington the right to tap into West Columbia’s existing water lines to serve its customers without needing to duplicate infrastructure. Each month, Lexington provided a report to West Columbia accounting which customers Lexington served from the other municipality's water lines and how much water they used so that West Columbia could calculate Lexington’s wholesale bill.
But when West Columbia cross-checked the data they had uncovered throughout the investigation alongside those monthly reports, it revealed that Lexington had reported 15 percent fewer customers than it should have – omitting 226 houses. In court filings, West Columbia also alleged that Lexington withheld sewer service to certain properties to force West Columbia customers to switch their water service to Lexington.
While Lexington acknowledged the omission and added 211 customers to future reports in 2023, neither party could agree on the total amount of customers who should be added to the report or the amount of money Lexington owed for past omissions.
“Lexington denied that it had knowingly or deliberately done so and maintained that any omissions, if they existed, were inadvertent and not made in bad faith,” the order reads.
Lexington’s defense
The lawsuit dragged on so long, in part, because of complications from counterclaims brought by the Town of Lexington and a switching legal narrative.
Lexington’s first argument was that, apart from the subdivisions, West Columbia lost its rights to any of the properties grandfathered in by the 1997 agreement when the property was redeveloped or changed hands.
“Lexington consistently urged the Court to declare that West Columbia made a ‘bad deal’ in 1997 and 2007,” the order reads, which made the municipality susceptible to unpredictable reductions in revenue.
West Columbia argued that its rights belonged to the property, not the owner. In the lawsuit, the municipality pointed out that the term “customer” is universally understood in the water service industry to mean the location and parcel of property being served, not the identity of individual account holders.
A large swath of customers are nestled in Settlers Point, a subdivision that was originally known as Hegmans Place. Lexington claimed that because the subdivision changed hands between developers, West Columbia lost its service rights.
The court rejected that argument, and found that Settlers Point is “coterminous” with Hegmans Place, and therefore did not materially change with new developers or names.
The court agreed with West Columbia’s definition, stating that the municipality's service rights do not change when the identity of the individual name on the account changes or the property is redeveloped.
Last May, as the argument dragged on, Lexington “fundamentally changed its position,” according to the court. In their new argument, the town asserted that in the 2007 agreement, West Columbia had relinquished all of the customers that were grandfathered in previously. The town claimed the new agreement did not carry over the old map with it’s exceptions.
However, the order notes that would have meant Lexington would have gained the right to serve 1,400 new customers, but had taken no steps to do so in the last 18 years.
Former Lexington Mayor Randy Halfacre confirmed in his own testimony that the intent in 2007 was to keep the service territories the same. While he attempted to change this testimony during trial, the court did not find him credible.
Current Lexington Mayor Hazel Livingston testified during trial that the town didn’t expand its service to those customers because of financial costs and the difficulty in installing meters, but the court found that Lexington’s own publicly available documents showed there were no such financial constraints.
Instead, Lexington had conducted an extensive and expensive systemwide meter replacement during that same period. And, the town had already installed and regularly reads meters on the water lines to each of the subdivision customers so that it can prepare sewer bills for those customers.
The court ultimately found Lexington was not able to prove any of it’s counterclaims, including allegations that West Columbia had improperly serviced an additional 87 customers not outlined in the original 1997 contract.