The Birmingham Water Works Board gave a contract worth more than $3 million to its longtime lawyer just before it ceased to exist.

Just one day before Gov. Kay Ivey signed a law kicking them out of office, the old board unanimously approved a series of contracts for senior water works employees.

The board, which has since been replaced by a regional authority, approved employment contracts for the four current assistant general managers and an executive assistant in addition to creating a new full-time position for attorney Mark Parnell.

The five-year contract makes Parnell the utility’s deputy general manager and general counsel, a post that pays him a base of $660,000 a year.

By comparison, the utility’s head administrator, General Manager Mac Underwood, receives an annual salary of $446,118.

Now officially part of the utility’s staff, Parnell is eligible for benefits including raises, six weeks per year of vacation pay and immediate participation in the system’s pension plan.

Parnell defended his salary.

“My involvement in almost every major decision at the BWWB since 1988 allows me unique insight and historical knowledge that are valuable to the system as it goes through this period of transition,” he told AL.com. “While I understand I am well compensated, it’s less than I previously earned in legal fees from the BWWB while serving as outside counsel and less than my earning potential if I remained in private practice.”

Employment contracts were approved May 6 after more than an hour in a closed-door executive session.

According to Parnell’s contract, his base compensation “shall not be reduced” so long as he remains employed by the board.

Parnell, as an employee of the water works, will collect about as much as he earned as a contractor when factoring in his benefits.

Parnell and his firm, Parnell and Thompson, were paid $728,358 during the last fiscal year. The water works spent $1.7 million in total legal fees last year to several attorneys and firms.

Parnell said those legal fees would eventually be reduced now that he is on the water works staff.

“For years there have been those that have wanted the BWWB to have a general counsel,” he said. “This arrangement allows for that to occur and should ultimately result in a reduction in the water system’s overall legal fees.”

The board for years has been scrutinized and criticized for spending millions for outside lawyers, including longtime politically connected firms.

Parnell’s contract, approved at the last official meeting of the old water board before the law took effect, also considers the impact of new leadership taking office.

The agreement includes what some would call a “golden parachute” provision, as it requires a supermajority of the five new board members to vote in order to terminate Parnell. And even then, the contract says they would have to pay him the full amount left in his contract – due in 30 days.

At the least, the board must pay Parnell a minimum of two-years worth of his contract to end his employment, regardless of the amount left on the agreement. That amounts to more than $1.3 million.

The contract also says the terms remain valid regardless of a new board or the utility’s configuration.

Parnell’s agreement was signed by then-chairwoman Tereshia Huffman.

No outside attorney was involved in drafting or negotiating the contract. Instead, Parnell said the board unanimously authorized Huffman to negotiate and execute the agreement.

He said his contract followed the same format as the agreements for the other senior leaders, where the board determined the terms and benefits.

“Also, the Board had two directors that were attorneys. Given all of this, they did not feel that they needed the advice of another law firm,” he said.

No board member who voted for Parnell’s contract currently sits on the water works board.

Huffman and other former board members in a recent AL.com editorial defended their last-minute employment decisions, including hiring Parnell. Outgoing board members said the actions were made to ensure stability as the system changed board leadership when the new law took effect.

“We authorized employment contracts for our executive team not out of politics, but out of duty,” the statement read. “This action was never about us—it was about safeguarding the future for our employees and customers.”

Parnell’s agreement also says that if the new board goes to court to challenge the contract, they must pay Parnell’s legal fees.

“How in the world is that looking out for our ratepayers,” said State Sen. Dan Roberts, R-Mountain Brook, one of the lawmakers who sponsored the law to oust the old water board.

Roberts said these contracts are an example of the kind of spending that made him want to replace the board. He said he was concerned about infrastructure needs while the board was spending ratepayer money on lawyers, lobbyists, and marketing firms.

“Whose best interest was that?” Roberts asked.

Jeffrey Brumlow, a new board member from Shelby County, said the board is still in the evaluation phase as they learn the system, its operation, and challenges. Everything will be evaluated, he said.

“We’ve got to look at everything top to bottom,” he told AL.com. “We can’t come in like a wrecking ball. We have to figure out where things are before we start making major changes.”

Brumlow said the group’s first work session earlier this week provided a detailed primer on the utility.

“Just seeing the capital needs, the current indebtedness, it’s a lot to take in at one time,” he said.

Board member Jarvis Patton, one of two Birmingham appointees, said he is reviewing all the contracts.

“There’s one contract in particular that stands out above all the rest,” he said without elaborating.

Patton noted the natural political tension of the new seven-member group configuration, but said that does not necessarily mean it would result in dramatic confrontations on every issue.

“There can be compromises made, and if we live in the true spirit of what we’re about, then there will be more compromises than fights,” he said. “Fighting doesn’t determine who’s right, only who’s left.”

While some current board members demurred regarding specifics, a longtime water works critic offered a more colorful critique.

“Shame on this former board for continuing to put ratepayers last,” said Paul DeMarco, a former state legislator who sponsored previous legislation regarding the water works. “The amount of self-dealing and taking care of individuals and taking care of managers is absolutely obscene.”

Parnell received another unusual and lucrative benefit with immediate participation in the agency’s retirement plan. Vestment means that Parnell, a new employee, is automatically eligible for retirement benefits on his first day rather than the usual waiting period for all other employees. The utility also contributes cash to this retirement plan.

Parnell is also entitled to longevity pay bonuses based on 18 years of contract work for the water works, even though he was not an official employee there.

Parnell is also allowed to “engage in other employment or contractual activities outside those of the board.” He told AL.com that he would not maintain his private practice.

“I’m in the process of transitioning away from my full-time practice,” he said. “Just like any other employee at the BWWB, my employment contract with the BWWB allows me to continue limited outside work if it doesn’t conflict with my current duties.”

For better or for worse, Birmingham lawyer Johnathan Austin, said Parnell’s contract appears solid with its many provisions in his favor.

“To me it appears Mr. Parnell has received the first ‘NIL’ contact from a public utility in the United States,” said Austin, who is also a former Birmingham City Council member and president.

“You look at the value of the contract, and on its face, it appears as if the reason they hired him instead of continuing him on as a contracted law firm is because of his name, image and likeness. He had a name, they knew him, and at least the previous board liked him.”

Legal fees notwithstanding, the new water board could seek to challenge the contract under the legal doctrine of public policy, which disfavors public servants entering into contracts without considering the best interest of customers.

Entering into such a high-dollar employment contract with its current lawyer without seeking a separate lawyer’s counsel on the merits of the deal could raise questions over whether the board met its fiduciary duty to customers.

Likewise, the lack of an independent attorney for the water works to objectively negotiate Parnell’s contract could raise legal public policy questions.

In addition to salaries and expenses, Parnell and assistant general managers are also given vehicle allowances. Parnell could receive up to $1,000 a month for his vehicle allowance.

However, paying vehicle allowances for senior officials goes against recommendations made in an internal audit report more than a decade ago.

In a 2014 commissioned report, Michael Mason of Forensic CPAs suggested scrapping the utility’s stipend policy and replacing it with mileage reimbursements. Mason flagged the practice as excessive.

Instead, Mason suggested using expense reports for actual miles driven for official use. The 2025 standard mileage rate set by the IRS is 70 cents per business mile driven.

Mason was commissioned by a previous board before Huffman’s term as a member or chair.

Mason’s recommendations at the time were part of more than 200 findings “dealing with weaknesses and deficiencies in internal controls, operational controls, information systems, risk management practices, internal audit and payroll.”

Mason’s report offered a frank analysis of the Water Works after a year-long review. Its results were met with disdain by several board members and leaders at the time.