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1998-07-28 Special Meeting NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 SPECIAL MEETING WITH CITY COUNCIL, JULY 28, 1998PAGE 601 ASSEMBLY The New Hanover County Board of Commissioners held a Special Meeting with the Wilmington City Council on Tuesday, July 28, 1998, at 5:30 p.m. in the City Hall First Floor Conference Room, 102 North Third Street, Wilmington, North Carolina. The purpose of the meeting was to discuss the joint acquisition of the Cape Fear Utilities water systems. Members present were: Commissioner Ted Davis, Jr.; Commissioner Charles R. Howell; Vice-Chairman Robert G. Greer; Chairman William A. Caster; County Manager, Allen O’Neal; County Attorney, Wanda M. Copley; and Clerk to the Board, Lucie F. Harrell. Members present from the Wilmington City Council were: Mayor Hamilton E. Hicks, Jr.; Mayor Pro-Tem Katherine Bell Moore; Councilmember Frank S. Conlon; Councilmember Charles H. Rivenbark, Jr.; Councilmember Harper Peterson; Councilmember J. C. Hearne, II; Councilmember Jim Quinn; City Manager, Mary M. Gornto; City Attorney, Thomas C. Pollard; and City Clerk, Penelope Spicer-Sidbury. Chairman Caster and Mayor Hicks called their respective boards to order. Chairman Caster advised that Commissioner Birzenieks was attending a meeting of the New Hanover Regional Medical Center Board of Trustees and would arrive as soon as the meeting adjourned. City Attorney Tom Pollard presented a chronology of the events in the negotiations between the City and Cape Fear Utilities for the acquisition of the water systems. The initial discussions for the possible purchase of the systems by the City began in October 1992. The City prepared a Water System Master Plan in March 1989, which included a review of not only the incorporated limits, but areas surrounding the City. Later, the Public Utilities Department performed an evaluation of well sites, elevated tanks, pipes, etc. In January 1995, the City requested McKim and McCreed to perform a preliminary appraisal of the system which was valued at approximately $12,000,000 based on information from the Utilities Commission reports. Further discussion occurred, and in April 1995, Cape Fear Utilities offered to sell the water systems to the City for $20,100,000. Discussion continued on the value of the water systems and in January 1996, Cape Fear Utilities hired Dawson Engineering (now W. K. Dickson & Company, Inc.) to perform an appraisal of the systems. The appraised value was $21,800,000. In June 1996, the City Manager recommended adoption of a resolution for the City to offer $20,500,000 to purchase the systems. An additional evaluation was performed by the City Engineering staff and Public Utilities staff for a more detailed look at the pumping systems and elevated storage tanks. By this time, New Hanover County expressed an interest in acquiring the water systems. In July 1996, the City Council adopted a resolution offering to purchase the systems within a period of 90 days. This date was extended for an additional 30 days in September 1996. In October 1996, the City Council approved an extension of the offer for an additional 120 days. The offer was not extended further because of uncertainty about the IRS revenue ruling. In March 1998, the City was advised that Cape Fear Utilities had received a revenue ruling to allow the sale to proceed. This ruling allowed the owners of Cape Fear Utilities to transfer their interest in the company to a charitable trust. Chairman Caster asked who initiated the dialogue in 1992. Attorney Pollard responded he was not sure; however, he did attend two meetings with the Public Utilities Director, the City Manager, and representatives of the Dobo Systems to discuss the value of the systems. Chairman Caster commented on the resolution adopted by the City with the effective date being extended several times, and he questioned the dollar amount in the resolution. Attorney Pollard responded $20,500,000. Commissioner Davis asked if the purchase price in the resolution was based on the appraisal provided by McKim & Creed. Attorney Pollard responded the price was a negotiated amount. The McKim & Creed report was an analysis based upon the information available in the Utilities Commission report. The subsequent report prepared by Dawson Engineering reflected a depreciated value of $21,800,000. The City asked McKim & Creed to review NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 SPECIAL MEETING WITH CITY COUNCIL, JULY 28, 1998PAGE 602 depreciation; however, there was disagreement on how some of the items were depreciated. Further discussion ensued on the McKim & Creed appraisal. Commissioner Davis asked if the appraisal was based on the entire systems, including equipment. Attorney Pollard responded the McKim & Creed appraisal was based on the information contained in the Utilities Commission report. Councilmember Conlon asked if Dawson Engineering performed a better job in appraising the water systems. Attorney Pollard responded that more details were presented because of available information on the nuts and bolts of the systems. Mayor Hicks noted that the firm of McKim & Creed was not associated with Cape Fear Utilities; whereas, Dawson Engineering was familiar with the company and had access to more information. Chairman Caster emphasized the importance of the City and County working together to purchase the Dobo systems for the benefit of all citizens. He commented on the consolidation process and the failure of the City-County Utilities Committee to work out an agreement for a combined water and sewer system. During that time, the County was considering the construction of a wastewater treatment plant in the northern end of the county. After learning the City was expanding its Wastewater Treatment Plant on 23rd Street, both governing bodies agreed to jointly construct an expanded plant with the understanding that a committee would be formed to work on establishing a combined water and sewer system. Both the City Council and Board of County Commissioners adopted resolutions in October 1996 to combine water and sewer services with some type of entity to operate the utility. After the committee worked for more than a year on this objective, an agreement was never reached. Vice-Chairman Greer referenced the resolutions adopted by the City and County and stated a unified water and sewer system should have been in place by December 1, 1997. When an agreement was reached to jointly expand the Wastewater Treatment Plant, a condition of the contract was the formation of a unified water and sewer system. At the City’s request, this clause was removed from the contract since both bodies had adopted resolutions. Unfortunately, no agreement has been reached with the City to unify water and sewer services. To establish one combined system that is equally and jointly controlled will benefit every taxpayer in New Hanover County. Mayor Pro-Tem Moore agreed with the idea of moving forward with joint acquisition of the Dobo water systems. She spoke in favor of a consolidated water and sewer utility and stated the joint purchase of these water systems will be the first step toward a consolidated utility. Vice-Chairman Greer noted that jointly purchasing the Dobo systems would not accomplish a unified system. The City would still be in business, and the County would still be in business. Under this arrangement, there could be disagreement if a future expansion was needed. Without unifying the water and sewer services, the City and County will be in the same position. Councilmember Quinn commented on the importance of moving forward as quickly as possible because of the change in IRS regulations, and he recommended taking action at the meeting. He voiced concern for feeling that the City and County could not move forward with the joint acquisition of the Dobo water systems unless water and sewer services are combined. He stated as a new member of the City Council, he was not prepared to vote on an issue of this importance without more information. According to the public notice, the purpose of the Special Meeting was to discuss the joint acquisition of the Dobo water systems, not consolidation of water and sewer services. Councilmember Conlon agreed with Councilmember Quinn and he suggested jointly purchasing the Dobo water systems with the City paying for the portion in the annexation areas and the County paying for the remaining portion of the systems. Due to the time frame, it would NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 SPECIAL MEETING WITH CITY COUNCIL, JULY 28, 1998PAGE 603 be difficult to work out an agreement for a unified water and sewer system. With consolidation of the two governments on the horizon, the water and sewer unification problem will be resolved. Both governing bodies should proceed to jointly purchase the Dobo water systems. Vice-Chairman Greer disagreed with Councilmember Conlon’s recommendation and stated unfortunately from past experience with the City, the County cannot rely on events occurring without some form of assurance. For three years, discussion has been held on consolidating water and sewer services so all residents living in the City and County will benefit from the merger. A lengthy discussion was held on combining the water and sewer services. Councilmember Rivenbark reminded everyone that the meeting was called to discuss the purchase of the Dobo systems. He expressed concern for not being prepared to agree on a unified water and sewer system without time to study the structure of the proposed utility. Councilmember Conlon echoed the remarks of Councilmember Rivenbark and stated with the inability of the City and County to agree on a combined water and sewer utility for over a year, it may not be a good idea Chairman Caster disagreed and referenced his letter of April 7, 1998, which in his opinion, was a request by the Board of County Commissioners to move forward with combining water and sewer services. He commented on the resolutions adopted by the City and County in October 1996 and stated the Commissioners feel this action should occur. He suggested re-grouping the City- County Utilities Committee to see if some type of an agreement could be reached. Councilmember Colon requested an explanation of the economic benefit that would be gained from combining water and sewer services when the City already has a viable water system. Mayor Pro-Tem Moore stated if the City and County continue to run two separate water systems, everybody will lose. If the County purchases the Dobo water systems and the City annexes an area served by one of the systems, new lines would have to be constructed, which would be quite costly to City taxpayers. A lengthy discussion followed on the impasse reached between the two governing bodies regarding the unification of water and sewer services. Chairman Caster asked what the next step should be? Vice-Chairman Greer stated he was not against the City; however, he was not prepared to deal with a joint acquisition of the Dobo water systems until the unification of water and sewer services had been addressed. He read the resolutions adopted by the Wilmington City Council and Board of Commissioners and, again, reiterated the number of years spent in trying to establish a combined system. Councilmember Peterson commented on hearing frustration from Vice-Chairman Greer and stated he felt that jointly purchasing the Dobo water systems would be the first step toward a unified water and sewer authority. Chairman Caster advised that the Board was supportive of jointly acquiring the Dobo water systems; however, the Commissioners strongly feel that water and sewer services should be combined. Mayor Hicks stated that he could not agree to a unified water and sewer utility because there was no reason to create another bureaucracy level or authority even though elected officials would serve on the board. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 SPECIAL MEETING WITH CITY COUNCIL, JULY 28, 1998PAGE 604 Discussion followed on the appraisal price of the system and the request for proposals submitted by New Hanover County. County Manager O’Neal informed the governing bodies that proposals would be received July 29, 1998, at which time staff will review each proposal and make a recommendation to the Board of County Commissioners. The firm selected will perform an appraisal based on the inventory initially presented by Dawson Engineering. City Manager Gornto reported that 50% of the customers are in the 1995 and 1998 annexation areas. The remaining 50% are outside the two annexed areas. Approximately 40% of the lines are in the annexation areas and 60% are outside the annexation areas. Two months ago, the City Attorney wrote a letter to the County Attorney outlining a proposal on how the joint City- County purchase of the Dobo water systems could be negotiated on a 50-50 undivided interest between the City and County. This plan would provide a mechanism to later separate areas and customers when annexation occurs. Councilmember Rivenbark inquired as to the amount of money needed to duplicate the Dobo water systems in the proposed annexation areas? Mayor Hicks responded approximately $13,700,000. A lengthy discussion followed on the need to work out an agreement to jointly purchase the Dobo water systems, particularly with the establishment of a charitable trust which will return substantial contributions to UNCW and other community organizations. MEETING RECESSED FOR A BREAK Commissioner Howell requested a break. Chairman Caster called a break at 6:50 p.m. and reconvened to Special Session at 7:00 p.m. Motion: After discussion of the importance of moving forward with the purchase, Mayor Pro-Tem Moore MOVED for the City Council to purchase the Dobo water systems jointly with New Hanover County. Mayor Hicks SECONDED the motion. Upon vote, the MOTION CARRIED UNANIMOUSLY. A lengthy discussion followed on requesting the City-County Utilities Committee to meet to prepare recommendations to assist the City and County to reach an agreement so the joint acquisition could occur and the unification of the water and sewer services could be addressed. After further discussion, Mayor Hicks requested to be removed from the City-County Utilities Committee since the Chairman of the Board of County Commissioners was not serving on the committee. He suggested filling the vacancy with Councilmember Rivenbark. Councilmember Rivenbark agreed to serve on the City-County Utilities Committee to see if an agreement could be negotiated. After further discussion, Vice-Chairman Greer and Commissioner Howell agreed to call a meeting of the City-County Utilities Committee. The Committee will be comprised of Councilmember Hearne, Councilmember Rivenbark, Commissioner Howell, and Vice-Chairman Greer. Motion: Chairman Caster MOVED, SECONDED by Commissioner Howell for the City-County Utilities Committee to meet to discuss the joint purchase of the Dobo water systems and the formation of a unified water and sewer system with recommendations being presented to the City Council and Board of County Commissioners on August 18, 1998 at 4:30 p.m. Upon vote, the MOTION CARRIED by a 4 to 0 vote. Commissioner Birzenieks was not present. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 SPECIAL MEETING WITH CITY COUNCIL, JULY 28, 1998PAGE 605 ADJOURNMENT Motion: Commissioner Howell MOVED, SECONDED by Commissioner Davis to adjourn. Upon vote, the MOTION CARRIED UNANIMOUSLY. Chairman Caster adjourned the meeting at 7:30 p.m. Respectfully submitted, Lucie F. Harrell Clerk to the Board