Wednesday, June 19, 2024

Settlement offer expiration date: Leland wants to resurrect old proposal, finger-pointing ensues

Northern Brunswick County governments continue the expensive and nasty legal battle over ownership of H2GO’s $60 million assets. (Port City Daily photo/Johanna F. Still)

BRUNSWICK COUNTY — On ‘settlement offer expiration day,’ the Town of Leland responded to Brunswick Regional Water and Sewer H2GO’s proposal to end the years-long utility lawsuit with a sharply worded five-page letter.

What’s clear from the letter is that an agreement between Belville, H2GO, and Leland isn’t coming anytime soon. There are at least two minor silver linings: at least the parties are talking, and Leland hasn’t completely ruled out H2GO’s planned aquifer-based reverse osmosis plant.

Related: H2GO sends settlement offer to Leland to drop lawsuit, would pay $800K in attorneys fees

All three government entities entangled in the case (that’s on its face about rightful ownership of H2GO’s assets) have spent at least $2 million in legal fees combined since it began in 2017. Taxpayers and ratepayers have borne the brunt of these costs while officials who can’t get along harbor decades-long grudges against one another.

Before a new board took office, H2GO illegally (a superior court judge ruled) and secretively transferred all of its assets, valued at $60 million, to Belville in November 2017 to “save” the RO plant. Leland quickly sued to undo the transfer. Belville appealed.

About 70% of Leland’s residents are served by H2GO, a politically independent sanitary district. Now, that district is led by a 4-1 majority of elected officials that are generally in line with the Town of Belville, Leland’s longtime rival. Two of the new H2GO officials, recently elected in November 2019, campaigned on building the reverse osmosis plant and maintaining political and operational independence from Leland.

In an apparent reference to the appeal, which stalled the immediate transfer of H2GO’s assets back to H2GO past the November 2019 election, Leland accuses the “pro-Transfer contingency” of manipulating and abusing the court system to “try to gain an advantage.”

Now that clean water issue has been urgently reintroduced to the region following a per- and polyfluoroalkyl substances (PFAS) study that made national headlines, Leland isn’t ready to let H2GO and Belville off the hook that easily (to quote an earlier town legal filing: “You don’t get caught with your hand in the cookie jar and still get to keep the cookie”).

Still, the town said it wants H2GO’s RO plant built immediately. The hold up? According to Friday’s letter, it’s H2GO and Belville.

“The important point is this: For those who want a reverse osmosis plant built immediately, the Sanitary District and Belville are the ones standing in its way,” the letter states, in bold type.

Leland characterized the letter as putting a “renewed focus on dialogue” and “collaboration” in a town press release. Late Friday, in a press release responding to Leland’s letter, H2GO was clearly unnerved by the town’s apparent rejection of the offer.

“Leland’s leaders should be ashamed of themselves. It’s stunning to think they would put money over public health. Our proposal provided $800,000 to go towards the payment of almost all of their legal fees. For this to remain as a reason to prevent the construction of the RO plant from moving forward is shameful,” H2GO’s Chairman Ron Jenkins is quoted as saying.

(Read all letters, arranged from start to finish, at the bottom of this article)

Expiration day

Late January, after a series of back-to-back closed session meetings for Belville and H2GO, H2GO sent Leland a proposal: Belville will drop its appeal, H2GO will pay Leland $800,000 in legal fees to cover the town’s expenses prior to the appeal.

The proposal came with a catch; it expired Feb. 21. Though the expiration date (imposed by H2GO — not legally binding) got a response out of the town, the move clearly irked Leland officials.

To start, the town unambiguously stated that $800,000 is not enough. By excluding fees incurred by the town to respond to an appeal — an appeal the town did not file — “doesn’t the Sanitary District’s offer leave Leland’s citizens in a financially worse position than they are without it?” the letter asks.

Leland asserts H2GO cannot be trusted with what it estimates will be a $40 million reverse osmosis plant (H2GO long estimated the plant cost at $35 million but that figure may have changed as construction costs across the region have inflated). Trust issues could be assuaged, the town asserts, if a cooperative mechanism “to prevent future lawlessness arising from loyalty to factions” is established — but that currently doesn’t exist. It’s worth pointing out that back in August when Leland still had a friendly H2GO board, it trusted the district enough to propose transfering all $66 million of the town’s assets to H2GO.

Also in the letter, the town alleges H2GO caused Brunswick County’s sewer moratorium. In a separate letter to Brunswick County in August, Leland Town Manager attributed the moratorium to Brunswick County’s mismanagement. H2GO and the Town of Navassa were consistently sending more flow than allotted to the county’s plant during the time frame of the moratorium, while Leland was consistently under its assigned allocation.

Wednesday, H2GO issued a supplement letter to its proposal, clearly stating the offer only included the ongoing litigation matters at issue — not regional negotiations previously considered. Also sharply-worded, the supplement letter aimed to separate the unsuccessful negotiations from the legal case.

The two negotiations, local and legal, must be severed from one another for immediate regional relief, H2GO’s offer argues. Plus, earlier negotiations hit a major dead-end, H2GO points out.

“The attempt was unsuccessful because the parties’ interest on fundamental issues are irreconcilably and materially different,” the supplement proposal states.

Leland takes issue with this conclusion, telling H2GO leaders should build on the foundation of progress already established through earlier negotiations. “We do not understand why your letters propose leaving fundamental issues unresolved and claim that our problems are too big for our leaders to solve,” the letter states.

A map of each group's political and service boundaries can explain why the H2GO case arose. In green, Belville's approximate corporate limits. In pink, Leland's approximate corporate limits. Shaded in grey, Brunswick Regional Water and Sewer H2GO's approximate service boundary. (Port City Daily graphic/ Johanna Ferebee, Courtesy Google Maps, Brunswick Regional Water and Sewer H2GO)
A map of each group’s political and service boundaries can explain why the H2GO case arose. In green, Belville’s approximate corporate limits. In pink, Leland’s approximate corporate limits. Shaded in grey, Brunswick Regional Water and Sewer H2GO’s approximate service boundary. (Port City Daily graphic/ Johanna Ferebee, Courtesy Google Maps, Brunswick Regional Water and Sewer H2GO)

Sticking point: annexation

Last summer, utility and government leaders in northern Brunswick County met privately, ultimately arriving at a so-called regional compromise plan that excluded the county.

Former H2GO Chairman Jeff Gerken declared the plan “dead,” blaming now-Chairman Ron Jenkin’s apparent change of heart and Belville’s last-minute tactics to stop an expected H2GO vote to approve the agreement through a majority in October. Jenkins was no longer in favor of the annexation provisions included in the settlement proposal that would have allowed Leland the ability to provide utility service to new developments in a massive service area.

Offering access to utilities to developers functions as a “carrot” for the Town of Leland while seeking voluntary annexation petitions. Without the ability to negotiate utility tie-ins, the town has less to offer developers, and in turn, developers have limited motivations to pass town taxes onto future buyers (note: these are voluntary annexations, typically involving brand new developments, not existing neighborhoods).

In a response to Leland’s letter, Chairman Jenkins describes Leland’s annexation provisions as a power grab. “One reason why the October 2019 proposal died was because Leland vibrantly highlighted their desired takeover of northeastern Brunswick County. Today’s letter confirms this years-long fight has nothing to do with protecting their citizens from the Town of Belville,” H2GO’s release late Friday states.

In the town’s letter, Leland asks H2GO and Belville to reconsider the previous proposal. The agreement itself was never made publicly available, but its basic provisions were, and appear below as reorganized in Leland’s letter:

  • The aquifer-based RO plant could be constructed immediately.
  • Leland would let Belville off the hook for its statutory obligation to pay $1 million in Leland’s legal fees.
  • The three parties “create a partnership and establish guidelines for growth and cooperation for the betterment of the region.”
  • “Efficiencies in service would be increased and confusion of service would be eliminated.”
  • H2GO would provide utility service to all of Leland’s current customers
  • Leland would help H2GO with financing the RO plant.

But H2GO wants nothing to do with the regional negotiations unrelated to the legal case, at least for the time being. The district remains open to renegotiating these items in the future, but “will not do so as part of the proposed settlement. Because of the urgency of the need to supply clean water to its customers, H2GO is unwilling to further delay construction of the RO plant to engage in protracted negotiations over an agreement that has already failed,” the supplement letter states.

View all four documents below:

Read H2GO’s initial settlement offer, issued Jan. 24 below:

Settlement Proposal by Johanna Ferebee Still on Scribd

Read H2GO’s supplement letter, issued Feb. 19 below:

Supplement to Settlement Proposal by Johanna Ferebee Still on Scribd

Read Leland’s five-page response, issued Feb. 21 at 11:43 a.m. below:

2-21-20 Leland Letter to SD by Johanna Ferebee Still on Scribd

Read H2GO’s response to Leland’s letter, issued Feb. 21 at 3:32 p.m. below:

Town of Leland Rejects H2GO’s Settlement Proposal by Johanna Ferebee Still on Scribd

Send tips and comments to Johanna Ferebee Still at

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