BIRMINGHAM, Ala. — A federal judge has dismissed Birmingham’s lawsuit seeking to undo the state-led restructuring of the Birmingham Water Works Board into Central Alabama Water, closing the latest major legal challenge to the 2025 law that stripped the city of majority control over Alabama’s largest water utility.
U.S. District Judge Anna M. Manasco dismissed all nine claims in the case Thursday without prejudice and ordered the case closed. She did not rule on whether the law was constitutional, instead finding that Mayor Randall Woodfin, the City of Birmingham and several City Council members lacked standing to sue.
The ruling is the second federal defeat for opponents of the restructuring. In August, Manasco dismissed with prejudice a separate lawsuit filed by former Water Works board members William Muhammad and Brenda Lewis.
The Alabama Legislature passed Senate Bill 330 in 2025, and Gov. Kay Ivey signed it into law May 7 as Act No. 2025-297. The measure dissolved the Birmingham Water Works Board and created a new regional governing structure for the utility, which voted June 24, 2025, to do business as Central Alabama Water.
The new seven-member board includes appointees of the governor, lieutenant governor, Birmingham City Council, Birmingham mayor, Jefferson County Commission president, Shelby County Commission and Blount County Commission. Central Alabama Water serves customers in Jefferson, Shelby, Blount, St. Clair and Walker counties.
Birmingham leaders argued the law unfairly reduced the city’s influence over a system whose customers include more than 40% Birmingham residents. Woodfin said in May 2025 that the measure was unconstitutional.
Manasco found the plaintiffs had not shown the specific, concrete harm required for federal standing or that the officials they sued could remedy the alleged injury.
The restructuring followed years of criminal investigations, audits and public criticism of the former Birmingham Water Works Board.
In 2017, then-Attorney General Steve Marshall and the FBI announced felony ethics charges against board Chairwoman Sherry Lewis, former Arcadis Vice President Jerry Jones and Global Solutions International owner Terry Williams. Prosecutors alleged corruption involving the utility, its independent engineer of record and a subcontractor.
Lewis was convicted in 2019 on two felony counts of violating Alabama’s ethics law. Prosecutors said she used her official position for personal gain and participated in matters involving a financial interest for herself or her family; investigators said she obtained jobs for her son through subcontractors and accepted meals and entertainment from an Arcadis executive.
Also in 2019, a federal grand jury indicted Jones and Williams on charges that they conspired from December 2014 through January 2016 to submit false invoices to the Water Works Board for work purportedly performed on the Shades Mountain Filter Plant project.
The allegations were not directed at every board member or employee, and an indictment is not a finding of guilt. But the cases became part of a broader record of concerns about transparency, procurement practices and oversight at the utility. A 2026 federal complaint filed in related litigation described the board’s reputation for “lack of transparency, misuse of funds and the awarding of non-competitive contracts.”
More recent findings also shaped the debate. In December, the Alabama Department of Examiners of Public Accounts released a limited audit of the utility covering May 1, 2023, through May 31, 2025 — a period largely before the entity adopted the Central Alabama Water name.
Auditors found the former board lacked adequate policies and internal controls, did not consistently comply with Alabama’s Competitive Bid Law, and paid some directors meeting allowances for meetings they did not attend. The audit also said weak inventory and purchasing controls contributed to at least two known employee thefts.
The audit said former General Manager Michael Johnson received more than $245,000 in accrued sick leave after retiring in June 2024, even though auditors said the payment was not permitted under board policy adopted that May.
Central Alabama Water said the findings concerned actions by its predecessor organization before Act No. 2025-297 became law.
Supporters of the restructuring also cited long-term operational and financial trends. A report released by Central Alabama Water in March said the amount of treated water not billed to customers increased 129% from 2001 through 2024, reaching more than 53% of treated water in 2024. The utility attributed that trend to system leaks and billing shortfalls.
The same report said residential rates rose 354% since 2001, while inflation increased 79%, and that the utility’s operating margin fell 27% from 2019 to 2024.
Those figures come from a report prepared by the new utility and should be understood as its assessment of the former board’s performance. Critics of the restructuring have argued that the state law was as much about shifting political control away from Birmingham as correcting mismanagement.
The city’s dismissal was without prejudice, meaning Birmingham could attempt to refile its claims. The city told WVTM 13 that its legal team was reviewing Manasco’s order.
Central Alabama Water General Counsel Shan Paden said the utility was pleased with the ruling and would continue building “a world-class water utility that focuses on serving its customers.”
Other challenges remain in Jefferson County Circuit Court, including cases filed by Jim Hicks in April and Birmingham activist Eric Hall in September.
For now, the state’s restructuring remains in place, and the utility once controlled by a Birmingham-dominated board continues operating as Central Alabama Water.