Cecil County Dumps Artesian Operations Deal–While Still Waiting for Water, Sewer Plants Sale to Close

June 28, 2011

The Cecil County Commissioners voted Tuesday to terminate a contract with Artesian to operate several county-owned water and sewer plants to save money while both sides await completion of a long-stalled sale of the county plants to the private Artesian operation. But a county official warned that there could still be foot-dragging that could delay the sale further.

The long running saga of legal action against the sale to Artesian finally came to an end a week ago when the state Court of Appeals ruled, 4-3, that the county had the legal right to sell the facilities to Artesian. The sale was initially approved in 2008 but lawsuits by the Appleton Regional Community Alliance (ARCA) dragged on for nearly three years.

In the interim, the county has been paying Artesian under a separate “services” contract to operate some of the facilities, at a cost of over $600,000 so far, according to county budget officials. The ARCA lawsuit also cost Cecil County over $203,000 in legal bills. [See previous Cecil Times report here: http://ceciltimes.com/2011/06/arca-lawsuits-cost-county-citizens-up-to-1million-and-counting-on-artesian-sale/

County Public Works Director Scott Flanigan reiterated his view that the county could hire independent contractors to provide operations assistance at a cheaper cost while waiting for the actual sale to go through. But Flanigan escalated his concerns with new warnings Tuesday that Artesian might benefit financially from stalling the completion of the sale.

“I find the timing very curious,” he said of the court ruling, which came just as the county was considering terminating the Artesian operations contract. The final ruling came a year after oral arguments in the legal case were heard in Annapolis.

Flanigan said Artesian “has an incentive” to delay completion of the sale because under the existing sales contract, as time goes by and bonds issued by the county to build some of the facilities are paid off, “the sales price goes down.”

The original contract called for payment of $13 million, with $10 million going to retire bond debt. But the contract included a complex series of calculations that could alter the final figures at the time of actual sale.

Flanigan cited the current dire state of the local economy and said it was unlikely that the Artesian sale would bring water and sewer services to the currently un-served Rt. 40/I-95 growth corridor any time soon. In fact, he said, the prolonged ARCA lawsuit had given Artesian a “reprieve” from having to proceed with expanded services and had “gotten them off the hook” from “laying pipe down Route 40.”

Expansion of services to the growth corridor was a key argument made by the previous Board of Commissioners in favor of the sale.

Although the sales contract called for completion of the sale within 60 days after a final court decision on the litigation, Flanigan said it was “too risky to assume its going to close in six months time… nobody can guarantee that.”

The sale must still be reviewed and approved by the state Public Service Commission, and ARCA activists have filed objections to the sale with that agency.

Commissioner Robert Hodge (R-5) disagreed with Flanigan’s assessment, saying the sales contract was based on “net asset value,” not just the remaining bond balance, and a variety of factors determine the final sales figure. He said that as times goes on, the value of the facilities is “depreciating,” especially since the county has avoided making improvements at the plants while the litigation dragged on.

“I don’t think it would be in the interest of Artesian” to delay unnecessarily, he said, because that would de-value the properties and force them to make costly upgrades to the plants to assure compliance with state environmental rules.

The Commissioners voted unanimously to accept Flanigan’s recommendation to terminate the services contract with Artesian. However, the contract requires four months notice, unless Artesian agrees to end it sooner. The contract currently requires the county to pay Artesian $23,000 a month so a four month period would cost $92,000.

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One Response to Cecil County Dumps Artesian Operations Deal–While Still Waiting for Water, Sewer Plants Sale to Close

  1. Joe on June 28, 2011 at 10:00 pm

    Only in Cecil County can we take something that should be pretty straight forward and make a complex mess out of it. Can you please post a copy of the sales agreement so that we can try to figure it out. Sounds to me like the rate payers are going to get the shaft as normal!

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