The Arizona Court of Appeals decided Thursday that Marana doesn't have legal authority to own or operate the Pima County sewer plant the town seized in January.
The ruling raises questions about the town's ability to run the plant, which the Legislature forced the county to hand over, and will likely require Marana to get voter approval to be in the sewer business.
The court also said the annexation that allowed the town to take over the county plant in north Marana is invalid.
The court backed Pima County in the ongoing dispute over the town's attempts to take over the county sewer infrastructure within the town limits.
"The relevant statutes provide the Town with the paramount authority to provide sewer service to its residents, but they do not permit the Town to seize the County's wastewater treatment facilities without providing appropriate compensation," Judge Philip Hall wrote in a unanimous decision.
But that doesn't mean the matter is settled.
Marana will likely take the case to the Arizona Supreme Court, another lawsuit over the plant is still pending, and more legal actions are being threatened.
County Administrator Chuck Huckelberry said he is pleased with the appeals court decision and said the Board of Supervisors will discuss next steps in an executive session on Tuesday.
The latest round in the ongoing fight began in 2007, when the town annexed the wastewater-treatment plant and tried to claim ownership. When the courts rebuffed Marana's move, the town asked for - and won - a new state law that allowed it to take over the plant by paying only the outstanding debt.
The town previously contracted with the county for sewer service.
Both the Maricopa County Superior Court and the appeals court say Marana has authority under state law to be in the wastewater business, but it can't get into the business through annexation.
The appeals court decision overturns the Superior Court ruling that a 1988 vote authorizing Marana to own and operate a sewer system allowed the takeover. The appeals court said voters gave general approval, but not approval to run specific facilities.
Marana Town Attorney Frank Cassidy said he will recommend the town ask the appeals court to reconsider that point because of a series of cases in Arizona that said general approval is adequate.
Cassidy said he will also recommend the town hold another election while also pursuing the case in court.
"We certainly believe that the court erred in terms of its decision on the vote. We think the voters gave us full authorization in 1988," Cassidy said. "But we have no qualms about going back to the voters. We have all confidence that if all the facts are laid out before the voters, they'll agree it makes total sense for a town to operate its own wastewater facilities."
Muddying the waters even more is a new state law forcing the Arizona Department of Environmental Quality to take operating permits away from the county and give them to Marana.
The state agency should not transfer the permits to a town that doesn't have legal rights to operate the plant, Huckelberry said, and the county would likely sue the DEQ if it does transfer the permits.
Marana's position is that the permits are a normal part of ownership and operation, and the county should have transferred the permits long ago, Cassidy said.
Pima County still has a case in Maricopa County Superior Court challenging the constitutionality of the new state law that allowed Marana to take over the plant by paying only the outstanding debt.
The county told Marana a $540,000 principal payment is due July 1, but the Superior Court said Marana doesn't need to pay that bill until Aug. 31, so arguments can continue.
It is not yet clear how this appeals court ruling might affect that case.
Marana also must pay the county's legal costs in the original case and the appeals case, the court ruled.
Huckelberry said: "It's time for all this legal action to end. It's been a waste of taxpayers' money."
Cassidy said the expense will be worth it if the town can use effluent to offset groundwater pumping, creating efficient and affordable potable water and sewage systems.
"What people need to understand is that effluent is a very important element of Marana's water portfolio," he said, "especially as we grow."
Questions decided by the Appeals Court
• Does Marana have the right to provide sewer services to its residents and prohibit Pima County from providing such services? - Yes
• Does Marana's 1988 special election ballot measure satisfy the voter-approval requirement to acquire and operate a sewer system? - No
• Is the treatment plant county property? - Yes
• Was the town's annexation of the sewer facility valid? - No
Contact reporter Becky Pallack at email@example.com or 573-4346.