Court of Appeals Rules Cecil County Can Sell Water/Sewer Plants to Artesian; Court Orders ARCA to Pay Some County Legal Fees
The stateâ€™s highest court ruled Tuesday that the Cecil County Commissioners had the legal right to sell water and sewage treatment plants to the private Artesian firm, ending a nearly three year legal battle that cost county taxpayers over $203,000 in legal expenses and up to $1 million in total costs.
The protracted legal battle was initiated by the Appleton Regional Community Alliance, ARCA, an anti-growth group based in the northeastern area of the county near the Delaware state line. Apart from the substantive ruling in favor of the county, perhaps the most important fine-print of the Courtâ€™s decision was its brief directive that the â€śappellantsâ€ťâ€”ARCAâ€”must â€śpay the costsâ€ť of the appeal.
County Budget Director Craig Whiteford has previously calculated that the total legal bills to the county to defend itself against the ARCA lawsuit on Artesian amounted to about $203,543. The costs of the Circuit Court legal fight are estimated at $150,000 while the appeal costs account for the balance. Thus, the county could take action to try to collect about $53,543 from ARCA.
(See previous Cecil Times report here: http://ceciltimes.com/2011/06/arca-lawsuits-cost-county-citizens-up-to-1million-and-counting-on-artesian-sale/
Joseph A. DiNunzio, executive vice president and secretary of Artesian, told Cecil Times Tuesday that the company was â€śpleased with the decision.â€ť He indicated the final sale arrangements, which he said the firm hoped would be concluded quickly now that the court has ruled, would be essentially the same as they were when the deal was initially struck nearly three years ago. That deal called for a $13 million sales priceâ€”despite the fact that the water and sewer facilities are now several years older and have deferred major maintenance while the sale was blocked by the ARCA legal challenge.
In practical political terms, it is in Artesianâ€™s best interest not to change the original sales contract because any changes could result in a new vote by the county commissioners and it is likely that the Boardâ€™s new voting bloc of 3-2 would go against a sale.
A press release issued by the County Commissioners late Tuesday, expressed no opinion or reaction to the ruling, and simply noted that the Commissioners had been â€śadvised today that the Maryland Court of Appeals upheld the Circuit Court ruling that Cecil County has the right to grant franchises for water and wastewater systems and sell county owned water and wastewater facilities to Artesian Water Maryland Inc., and Artesian Wastewater, Maryland Inc. â€ś
In particular, Commissioner Diana Broomell (R- 4) has opposed the Artesian sale and indicated Tuesday that she was concerned that any press release should not welcome the court decision.
The Maryland Court of Appeals ruled, on a 4-3 vote, that the county had the legal right both to grant a franchise to Artesian to provide services in areas where there were no current county-operated water and sewer services and also to sell currently-owned water and sewage plants to a private firm.
The sale would allow the county to pay off about $10 million in bond debt it incurred for the facilities, put $3 million into the county coffers and relieve the county of the ongoing costs of maintenance and upgrades, especially on older plants that will need future repairs to comply with state environmental mandates.
In its decision filed on Tuesday, 6/21/11, (see ruling here: http://mdcourts.gov/opinions/coa/2011/137a09.pdf a majority of the court ruled in a 30-page opinion that the county had the â€śdiscretionâ€ť under the law to both grant a franchise and to sell the facilities and the court noted, in previous cases the Court of Appeals has ruled that such â€śdiscretion signifies choice.â€ť
ARCA had challenged the countyâ€™s right to, initially, award a franchise to Artesian to provide water and sewage services and the group then also challenged the countyâ€™s subsequent decision to sell its water and wastewater treatment facilities to Artesian, with the exception of the Seneca Point facility.
A visiting judge sitting in the Cecil County Circuit Court ruled against ARCA on all counts. For the appeal, ARCA stipulated that the county had the right to grant a franchise to Artesian in the first place, but still challenged the countyâ€™s power to sell the facilities to Artesian.
The appellate court agreed with the countyâ€™s argument that ARCA â€śwould permit the Commissioners the power to grant exclusive franchises to Artesian but would deny them the statutory authority to convey the very systems which would allow Artesian to carry out the services attendant to those franchises. Further, having granted lawful water and wastewater Franchise s within the franchise area, the County would be constrained to own and to operate Facilities, â€śfor public use,â€ť in perpetuity, in effect creating two operating and competing water and wastewater systems within the same geographic area. The statute cannot, it should not, and it need not be read to create such an implausible result. â€ś
The majority opinion concluded: â€śWe agree with this argument. It would be unreasonable and illogical to hold that, although expressly authorized to grant the franchises, the Board is prohibited â€¦ from performing its duty â€śto avoid the duplication of [water and sewerage] facilities.â€ť
In the dissenting opinion, a minority of the Court concluded that the majority made a â€śsuccinct analysisâ€ť that failed to consider conflicting interpretations of the phrase â€śno longer needed for public useâ€ť as it pertains to public facilities. The minority said the facilities were indeed still needed for a â€śpublic useâ€ť and should not be sold to a private party.
The minority opinion included detailed discussion of public hearing comments by the opponents of the sale who complained that they might face higher user fees if the facilities were sold to a private company. â€śThe majorityâ€™s attempt at singing that harmony is off key,â€ť the minority declared.
â€śOn the one hand, the Board claims that the County will save nine million dollars, as
well as the twenty-seven million dollars required to make capital improvements to the
facilities. On the other hand, Appleton contends that the franchises will lead to rate increases and high density development in the franchise areas. As a private company, Artesian is held accountable to its investors and not necessarily the citizens using the facilities; therefore, as the argument goes, increasing profits may outweigh maintaining reasonable rates.â€ť
Artesianâ€™s operation of the Cecil County facilities is subject to regulation by the state Public Service Commission, which reviews and must approve rate increases and fees.
Artesian is currently operating some of the facilities in question under an interim services contract that is due to expire soon. The county commissioners put off action Tuesday on a decision on whether to renew the accord or terminate it and hire independent contractors for a brief period. Several commissioners said they wanted more time to digest Tuesdayâ€™s appellate court ruling before deciding how to proceed.