BRUNSWICK COUNTY — The complex lawsuit over who owns Brunswick Regional Water and Sewer H2GO’s involves $60 million in assets and will undoubtedly steer the future of development in the area. To understand the complicated case, it helps to understand the decades-long rivalry between two Brunswick County towns: Leland and Belville.
RELATED: Year One – Seven controversial moments from the $60 million H2GO case
Both towns want to own the utility for themselves. Both towns have accused the other of infiltrating the utility from the inside. And both towns have emptied their pockets to fight the case, with legal costs nearing $1 million. H2GO is just the monkey in the middle.
With this in mind, the confusing multi-party lawsuit starts to make a lot more sense.
Leland and Belville are fighting over millions of dollars in steady revenue, infrastructure designed to service a growing population, and $60 million in assets in the still-undecided case. (To put it in perspective, Leland’s total revenues were $11.7 million last fiscal year, H2GO’s were $10.6 million, and Belville’s were $0.9 million in fiscal year 2015.)
Catch up on the H2GO case here: A timeline of how reverse osmosis broke up a public utility
The legal fight was ignited when H2GO’s outgoing board members voted to dissolve the utility and give its assets to Belville; on the surface, the move was designed to save the planned $30 reverse osmosis plant, which incoming board members had campaigned against. But ultimately the move was engineered by Belville. But H2GO serves thousands of Leland residents, and the town filed to stop the move.
The towns’ two political leaders, Leland’s Mayor Brenda Bozeman and Belville’s Mayor Mike Allen, are actually long-time friends. But on this issue, they can’t agree
Born of competition
Leland is not yet thirty years old; it incorporated in 1989. One hour before Leland’s incorporation vote, according to the Morning Star, Belville scheduled an annexation meeting to absorb what’s now Leland in order to prevent them from incorporating. In 2012, Leland proposed to absorb Belville entirely through a short-lived merger attempt.
Over the years, Leland has grown – increasing its ability to offering services to residents and businesses – while Belville has lagged behind. One notable exception to this trend is liquor sales; Belville’s ABC store, located just 40 feet from Leland’s borders, effectively prevents Leland from having its own store.
Political frenemies, Leland and Belville have a dense history of disputes that have landed in the courtroom: They’ve battled over land, they’ve battled over a water plant, they’ve battled over a sewer plant. Now, they’re battling over a water and sewer utility.
If the court finds Belville’s temporary ownership of H2GO to be legal, it would oversee, among other things, 184 miles of water mains, 157 miles of gravity and pressure sewers, 1.5 millions of gallons in water storage tanks, a boost pump station, a wastewater treatment plant, and perhaps most importantly, 10,300 water and sewer customers, right in the heart of Leland’s town limits. (About 75 percent of H2GO’s service area falls inside Leland.)
“The real battle is not about a reverse osmosis plant,” Belville’s mayor, Mike Allen, said in August. “This whole battle started over — they want their infrastructure, and they want the money. They don’t like anybody else with anything in their city limits.”
If the case goes Belville’s way Leland residents would be stripped of political say over their own utility provider, court filings allege. And Belville could finish building H2GO’s reverse osmosis plant planned within its town limits.
What’s a sanitary district anyway?
H2GO predates both towns. Established in 1976 by the General Assembly, the sanitary district answers to no one but the legislature. Formed to service an unincorporated area where no municipality was able to pick up the infrastructure slack, H2GO now serves about 25,500 people, most living in now-incorporated Leland.
Leland wants to expand its tax base to fund more services, but it cannot sell water and utility services to thousands of its own residents. Further, depending on how Superior Court Judge Charles Henry rules, those residents could pay utility fees directly to the town’s rival, Belville.
It should be made clear that the lawsuit won’t guarantee ownership for either party; if Belville wins, they officially control H2GO — granted there’s no appeal. If Leland wins, it won’t automatically own H2GO, but H2GO’s transfer of assets to Belville could be rendered void. But a victory in court would mean Leland could then pursue its own plans to take control of utilities in the area.
Leland has a clear vested interest in, at the very least, cooperation with H2GO, and likely, in absorbing H2GO for itself. Three years ago, Leland lobbied legislators to dissolve the sanitary district. Calling the utility an “antiquated and redundant services provider,” Leland passed a resolution in May 2015, pledging to assume all of the utility’s service, debts, and assets.
The town asked its residents to write and call Senator Bill Rabon, former Representative Susi Hamilton, Representative Frank Iler, and Representative Ted Davis and tell them to revoke H2GO’s charter (At the same time, Leland was also lobbying legislators for an ABC store, of which it has none, to put the town “on an even playing field” with Belville and Navassa).
A town newsletter at the time asked residents to contact legislators to help the town dissolve H2GO, in order to “remove a direct competitor.”
These efforts initially gained momentum: the next month, Hamilton and Iler introduced House Bill 516, which would have given a county power to dissolve a sanitary district on a referendum. But that bill died in the house and has not resurfaced.
Belville’s back-door transfer
The transfer of H2GO to Belville met with swift and public criticism.
New Hanover County’s Chairman Woody White called it “shameful.” Brunswick County’s Chairman Frank Williams criticized its lack of transparency. Leland’s Mayor Brenda Bozeman called it “unheard-of and unlawful.”
Leland alleges, and Belville admits, the contentious sale started well before Nov. 28.
Before and after the Nov. 7 election, Belville’s leadership prepared for the inevitable: a power shift on H2GO’s board.
Board members can be divided in simple terms, in favor of a planned reverse osmosis (RO) plant and in opposition to RO.
One anti-RO candidate, Bill Beer, was elected last November, along with newcomer and pro-RO candidate Rodney McCoy and incumbent pro-RO candidate Ron Jenkins. But it was Beer’s seat that swayed the board’s political power and set off the chain of events that followed. Joining sitting anti-RO commissioners Chairman Jeff Gerken and Commissioner Trudy Trombley, Beer’s election meant the board could vote to stop construction on a $34 million RO plant, which H2GO had already spent six years and $9 million on.
Anticipating a power shift on the board, Mayor Allen helped orchestrate a transfer that could be conducted legally, without Leland’s or the anti-RO H2GO commissioners’ knowledge. He said he asked James Eldridge, Belville’s attorney of 18 years, to help advise him on how to lawfully make it happen.
Allen said he talked to his town staff, preparing them for the backlash and lawsuit to come. “I told them if we don’t get in this battle, we’re going to have to sit on the sidelines and take whatever is given to us,” he said.
According to court filings, Eldridge admits preparing the transfer documents, understanding the likelihood they would be legally challenged. Services Eldridge provided, he wrote in an objection to his own subpoena, were provided “in anticipation of litigation.”
Already cleared for construction on Belville’s land with wells that would source water from the Lower Peedee and Black Creek aquifers, Allen knew the reverse osmosis plant was threatened by the new H2GO board. (According to pro-RO Commissioner Rodney McCoy, the anti-RO majority suggested cementing over the already-installed wells to prevent the plant’s construction this summer.)
Belville’s lawyers, mayor, and spokesperson have all maintained that the transfer was conducted entirely in accordance with the law. (Leland argues in court filings that a sanitary district has no authority to dissolve and transfer itself. Further, Belville paid just $10 for the $60 million in H2GO assets, an amount Leland has argued is too insignificant to be considered legitimate. Belville’s spokesperson said this amount for a transfer of assets including debt and maintenance costs is typical.)
When the transfer documents were introduced in the middle of H2GO’s Nov. 28 meeting, neither Gerken nor Trombley had been briefed on the idea, as Belville had planned. The transfer passed 3-2, with Gerken and Trombley voting against. Belville – which had deliberately held open its Nov. 20 meeting – reopened session on Nov. 29 at 8 a.m., and signed the documents necessary to cement the transfer.
In under 14 hours, with no public hearings on the matter, the paperwork was done.
Despite Leland’s restraining order against the move, Brunswick County Superior Court Judge Thomas Lock ordered to freeze things as they were — meaning, to this day, Belville technically still owns H2GO’s assets.
The why
Belville’s last-ditch antics make more sense after considering Leland’s antagonistic efforts to stop H2GO’s planned plant — and the utility’s very existence.
Leading up to the November 2017 election, Leland attempted to stop H2GO’s growth at every chance it sought. In 2013, H2GO bought 105-acres of land off Chappell Loop Road in Leland to build its planned RO plant. Leland later denied H2GO’s rezoning request. So, H2GO moved its plans to Belville. In 2015, Leland lobbied to have H2GO’s charter revoked.
In June 2017, while anti-RO candidates were campaigning against the reverse osmosis plant, Leland furthered its stance against the plant it had deemed “excessive, unreasonable and unnecessary” in 2015. The town passed a resolution to mirror Brunswick County’s, asking H2GO to put off construction on the plant. (Months earlier, in April, Representative Deb Butler and Frank Iler co-sponsored a bill that would have also stalled the plant until after the election.)
Also in June 2017, Leland appealed the state’s decision to issue H2GO a wastewater discharge permit for the plant. Calling the plant “burdensome,” Leland’s state appeal was heard in Brunswick County in October 2017 but was dismissed.
While Leland has worked to stop H2GO’s service expansion from the outside, many of its critics have accused the town of trying to stop H2GO from within. In fact, both towns have outright accused each other of political influence on H2GO’s board. (Political influence of elected officials, especially when it involves a direct benefit or conflict of interest, can be illegal.)
Court filings by Leland allege H2GO’s outgoing majority was subjected to undue influence from Belville in achieving the contested transfer. Leland argues this claim, citing the fact that Eldridge did not consult with H2GO’s counsel in preparing documents. Belville admits to this action in separate responses, but denies the allegation of undue influence. Leland also claims Eldridge consulted with H2GO’s commissioners to facilitate the move, a claim Belville denies.
Referencing a prior decision that upheld Leland’s standing in the case after Belville challenged it, Bozeman said her town is pleased the court rejected Belville’s attempt to have the case dismissed.
“We believe the court will ultimately rule in Leland’s favor on all of its claims,” Bozeman wrote in a statement. “The case involves an unheard-of, unlawful effort by Belville to disenfranchise the voters who cast ballots in the 2015 and 2017 elections and to transfer H2GO’s political power to Belville. Leland is a freeholder and the largest municipality within the H2GO sanitary district, and it objects to this illegal transaction, which is harmful to Leland and its citizens.”
Bozeman said she is confident that ultimately, the court will side with Leland.
Plants on the board?
Accusations against Leland infiltrating H2GO have been more explicit. Even Belville’s mayor has alleged Leland has placed plants on the board. Citing failed attempts to dissolve H2GO entirely through the legislature, Mayor Allen believes H2GO’s current anti-RO majority answers to Leland, rather than to their constituents.
“There’s only one other way to take over H2GO, and that’s through the ballot box,” he said. “Put their people on the H2GO board.”
In nearly every public meeting this year, public commenters have alleged anti-RO Commissioners are serving Leland’s interests. “Whom do you serve first?” Jane Crowder, an H2GO customer and former Leland Councilmember asked the board in May. “Who is your puppet master?”
Also at that meeting, Steve Hosmer, founder of the Clean Water Team, a community group that advocates for building the reverse osmosis plant, addressed what he called “the Leland connection.”
“It’s time now for you to serve the needs of your customer-owners first and the interests and desires of the town of Leland second,” he said. “Not the other way around.”
in June, Crowder accused Leland’s mayor and mayor pro-tem of being in cahoots with the H2GO anti-RO majority, based on observations at social gatherings. Charles Troll, another H2GO customer, accused the board at that meeting of being “in bed” with Leland.
Absent of evidence of these claims, Gerkens’s actions do appear to be in line with Leland’s interests. On separate occasions, he has introduced resolutions and discussion topics that advocate for curtailing H2GO’s growth.
Gerken said he doesn’t believe the legislature envisioned sanitary districts like H2GO utilities serving 10,000 customers when they were enacted 91 years ago.
“I just do not believe the intent was to have utilities the size of H2GO grow and grow and grow without bound,” he said at a meeting in June.
Gerken introduced a controversial legal agreement between H2GO and Leland, drafted by Leland, in August. The agreement would have required H2GO to curtail its future growth and hand over hundreds of customers it already serves. After Belville challenged the agreement’s legality and potential to violate the towns’ standing court order, Gerken backed down and pulled the agreement from the Aug. 27 meeting before it began.
The topic wasn’t “ripe for discussion,” he said.
In October, Gerken called Belville employees “utterly incompetent.” He said extending H2GO’s services would “improve the financial position” of Belville, using funds Belville residents had not paid into.
“The bulk of H2GO’ assets or what were H2GO assets are in the hands of a municipality that only had 157 votes in the mayoral election,” Gerken said at a meeting in May. Allen was actually elected by 141 votes in 2017, but still, that’s 18 times less than Bozeman’s 2,584 votes.
Allen, reflecting on his tiny town’s position, feels he’s the David to Leland’s Goliath.
“They’re going behind the scenes doing everything they can to internally destroy H2GO,” he said. “I won’t allow that to happen. We have to watch every day, every move, everything that goes on because we know behind the scenes Leland and H2GO, the current board, are trying to do everything to destroy it in case we win.”
Update: This article has been updated to include comment provided by Mayor Brenda Bozeman.
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