LELAND — As part of an ongoing negotiation for a potential settlement agreement, Leland is proposing to convey all of its utilities, valued at $66 million, to its long-time utilities competitor, Brunswick Regional Water and Sewer H2GO.
The move could help heal competitiveness in the region, according to town officials, and clear up utility confusion as growth continues.
In legal filings, Leland’s utilities have never been a subject in the ongoing lawsuit over who owns H2GO’s assets. The prospect of conveying Leland’s assets was first introduced in a second version of the town’s settlement proposal last month, and again this week with the proposed agreement.
Where things stand
Leland first filed its suit against Belville and H2GO’s outgoing majority board members in December 2017 after both parties orchestrated a $60 million asset transfer that Superior Court Judge Charles Henry ruled was illegal, null, and void in an April order.
The Town of Belville, Leland’s economic development rival and neighbor, currently maintains all of H2GO’s assets — despite Judge Henry’s order to return them — because of its pending appeal. However, a proposed settlement agreement announced this week could drop the appeal and work out major utility ownership questions lingering over the region.
As the potential agreement moves ahead, its actualization depends on majority approval from at least three governing boards (Leland, Belville, and H2GO) and the court’s ratification. With the municipal election three months out, each board has seats up for grabs that could impact how — or if — the deal materializes.
$66 million value
Leland provides water to all of Brunswick Forest and a portion of Mallory Creek. The town also provides sewer collection service to mostly all of “old” Leland in the Woodburn area, Brunswick Forest, Windsor Park, residential Waterford, and Magnolia Greens.
These utilities — lines in the ground, pump stations, Brunswick Forest’s water tower, etc. — are worth $50 million, according to Leland Manager David Hollis. Leland’s Utilities Enterprise Fund has about $16 million in cash, which would also transfer over to H2GO under the proposed settlement arrangement. This fund is strictly governed by state law, which limits governments from spending profits earned from utilities for other purposes.
Combined, H2GO would get a $66 million value (this carries inherent maintenance and operations costs). In turn, Leland would not be financially reimbursed. “There’s no direct financial reimbursement,” Hilary Snow, Leland’s spokesperson, confirmed Friday.
“My understanding is, we would no longer be in the utilities business,” she said.
The biggest benefit to the proposed agreement, Snow said, is stopping the ongoing litigation. Next, conveying the town’s utility assets to H2GO will help clear up public service confusion in the region.
“This is more growing in concert as opposed to competition,” Snow said. “Not only were we competing with the sanitary district on providing water and sewer – our lines were competing with each other.”
Redundant infrastructure projects
In northern Brunswick County, utility sevices have been developed in a sometimes inharmonious fashion.
For example, on Highway 17, Leland spent at least $300,000 last summer designing a sewer expansion project in the exact same service area where H2GO had already spent $3.2 million to build an interceptor sewer system.
In April, H2GO’s Chairman asked the utility to stop work on a planned, budgeted $4.24 million lift station project on Hewett Burton Road. Chairman Jeff Gerken said the request came from Hollis, who was concerned services were being duplicated. H2GO’s budget ordinance on the project was deleted, and work stopped on the project.
According to Tyler Wittkofsky, H2GO’s spokesperson, the utility had spent $19,170 on planning the new station.
Manager’s statements
In open session at Thursday’s regular meeting, Hollis addressed Council, presenting the basics of the agreement the town announced in a press release Tuesday.
(Council met in closed session to discuss the ongoing litigation prior to discussing the topic in open session. At both the earlier closed session and the open session discussion on the future of utilities, Leland’s attorney, Brian Edes, did not participate. Edes recused himself from the open session discussion to avoid conflict of interest concerns, as Edes serves as H2GO’s litigation attorney).
Hollis said the change is not one to be taken lightly. A portion of Hollis’ presentation selected for brevity appears below:
“There’s a lot of efficiencies to be gained there. Both administratively, operationally, and physically with the assets in the ground.
And there’s an economy of scale to be gained there as well. With economies of scale come a lot of things. The potential for a larger customer base, better rates, better distribution of financial resources. In addition, it would allow the town to grow in cooperation, and simultaneous with the sanitary district as it grows. So the town would have an ownership claim in the assets within the town and within the town’s possible future expansion area.
So that is the benefit to the town of Leland. It’s again, we’re no longer in a competition with the sanitary district to provide water and sewer as services to areas. We’re in a partnership essentially with them as the region grows. It brings a lot of stability to the area, it eliminates a lot of confusion in water and sewer providers. Currently, we overlap jurisdictions. And there is confusion among developers, there is confusion among general customers about who’s providing what service. So this will help eliminate that and in a bigger picture, it will bring harmony to the region as well. We become allies and partners in working together for the growth of this area, the economic development of this area, instead of butting heads.
Not everybody is getting everything they want, but everybody is getting a lot of what they wanted. And it’s a way for us to move forward, to put the past behind us, and hopefully have a more peaceful region and an area where we are partners in working together for the benefit of all.”
After hearing Hollis’ presentation, Council reached consensus and approved the basic concepts of the proposal: Belville gives H2GO its assets back, Belville withdraws appeal, H2GO builds the partially-constructed reverse osmosis plant, Leland gives its utilities to H2GO.
A big change
This move represents a major position-change for the growing town.
In a May 2015 town newsletter, Leland asked its residents to write to state legislators to dissolve H2GO in order to a “remove a direct competitor.” The town called H2GO an “antiquated and redundant services provider” in a resolution passed that same month, pledging to assume all of H2GO’s service, debts, and assets.
This time last year, Leland was asking H2GO to curb its growth, hand over customers, and pay fees to accept sewer flow. The town did so through a proposed agreement that appeared on an H2GO August meeting agenda — it was then pulled as the meeting began, and has since never re-appeared.
And in May, Leland announced it would build H2GO’s planned reverse osmosis plant (the same plant it made multiple attempts to thwart). The most recent iteration of the agreement marks Leland’s fourth recent stance on the plant.
Hollis addressed these changes at the meeting: “There’s been a lot of talk and a lot of discussion amongst the community of this litigation and where Leland’s position is and has been. Some claim that our objective was to take over the sanitary district and you know, that’s not true,” he said.
“I think what we were truly looking for was a partner and ally in growth and development in the region,” he said.
Send tips and comments to Johanna Ferebee at johanna@localvoicemedia.com
