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1998-08-18 Special Meeting NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 SPECIAL MEETING WITH WILMINGTON CITY COUNCILPAGE 647 AUGUST 18, 1998 ASSEMBLY The New Hanover County Board of Commissioners held a Special Meeting with the Wilmington City Council on Tuesday, August 18, 1998, at 4:40 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, Inc. and Quality Water Supplies, Inc. water systems. Members present were: Commissioner Buzz Birzenieks; Commissioner Ted Davis, Jr.; 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. Commissioner Charles R. Howell was absent. 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. REPORT FROM THE CITY-COUNTY UTILITIES COMMITTEE Councilmember Rivenbark presented background information on the debate that occurred during the joint meeting of the Wilmington City Council and the New Hanover County Board of Commissioners held on July 28, 1998. Discussion was held on the joint purchase of the Dobo water systems as well as the need to create some type of governmental entity to bring the city and county water and sewer systems together into an independent entity. It was concluded that the City-County Utilities Committee should begin meeting again to see if some type of an agreement could be reached to combine the water and sewer systems. Commissioner Howell, Vice-Chairman Greer; Councilmember Hearne and Councilmember Rivenbark were appointed to serve on the City-County Utilities Committee. Since that time, the Committee has met four times with the first two meetings being unsuccessful. After discussion, the Committee decided to invite the County Finance Director, Bruce Shell, New Hanover County Water and Sewer District Finance Director, Julie Griffin; and City Finance Director, Brent McAbee. This idea proved to be quite successful. The financial staff presented and explained the financial positions of the current water and sewer services being provided by the City and County. Figures and projections were presented that showed how the two systems could be combined. Councilmember Rivenbark said after the last Utilities Committee meeting, he had learned enough to feel comfortable with continuation of these meetings to see if the group can develop a structure to unify the City and County water and sewer services. If the City and County can agree to jointly purchase the Dobo water systems, it would be the first step in moving forward with a unified water and sewer service. Councilmember Hearne concurred with Councilmember Rivenbark’s remarks, and he remarked on changing his mind after viewing a unified system from a County and City point of view. The major obstacle at this point will be working out the numbers. It appears the figures on the sewer are already in place, but the water issue will be complex. However, a rate structure can be developed to protect the City taxpayer’s investment. Many questions must be answered, but most of these questions are answerable. For the benefit of the citizens, the City and County should jointly purchase the Dobo water systems and continue to pursue an agreement for unifying water and sewer services. Vice-Chairman Greer agreed with the statements made by Councilmember Rivenbark and Councilmember Hearne. He said as an elected official representing all citizens living in the City and County, he believes the time has come for the County to move forward with purchasing the NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 SPECIAL MEETING WITH WILMINGTON CITY COUNCILPAGE 648 AUGUST 18, 1998 Dobo water systems and then continue to work with the City on unifying water and sewer services. This action will provide an answer to the Dobo brothers and at the same time allow the Attorney to begin processing the agreement before the IRS ruling changes. Discussion followed on the appraised value of the water systems. County Manager O’Neal explained that a cap of $22 million has been placed on the purchase offer; however, the County’s purchase will be contingent upon the evaluation by Hartman and Associates. If Hartman comes back with a figure less than the $22 million, the County will enter into negotiations with the trustees. The evaluation from Hartman and Associates should be received within the next week. Councilmember Rivenbark asked if the County decides to purchase the water systems, would the County be willing to sell the portions of the systems that lie within the City. Vice-Chairman Greer explained that New Hanover County does not want to harm the City. Since many parts of the system will serve both the City and County, it will be difficult to split up the responsibility. This is why the two governments should consider a joint entity. But, if this cannot be accomplished, he personally would be willing to do what is best for the City of Wilmington. Councilmember Rivenbark said there are some difficult issues to work out; however, there will be numerous situations to deal with under a joint utility, especially during the first few years. Also, it will be necessary to insure that any future expansions accomplished by a joint utility would be paid by the citizens receiving the service, not by a “flat rate” which has been discussed on several occasions. Vice-Chairman Greer said he envisions the cost would be the same for everyone; however, there would be a few inequities for a while. The County is not trying to dump something on the City; however, New Hanover County does have a lower debt balance and a larger fund balance than the City of Wilmington. Councilmember Rivenbark advised that he felt something could be worked out, but he questioned whether seven Councilmembers would be willing to scrap the City’s system and say yes before the details of a unified water and sewer service are fully formulated. He asked if New Hanover County was willing to allow the City to join them in purchasing the Dobo water systems and continue to work on the details of a unified system. Vice-Chairman Greer expressed concern for continuing to drag out this process, and he said the Dobos deserve an answer. The City and County should continue to work on an agreement since time will be involved before the purchase is actually finalized. During this period, an agreement could be reached. Mayor Pro-tem Moore asked if there was time to prepare a structure for the entity before purchasing the Dobo water systems. Vice-Chairman Greer said he thought this question should be answered by the City Council. Councilmember Conlon expressed concern for not having details before voting on an issue of this importance. It appears the City is being requested to buy “a pig in a poke”, and if the City does not respond, the County will buy the water systems. He stated he agrees with the general concepts of a unified water and sewer service, but he needs more information. Commissioner Birzenieks spoke on the progress that has been made by the committee in reaching an agreement for a unified system, and he questioned whether it was fair to ask City residents to pay twice. Councilmember Rivenbark responded when the City could not negotiate with the Dobos to purchase the water systems, the City’s goal was to team up with the County for a joint purchase. This would allow the City to be part of the system and at the same time save money for City NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 SPECIAL MEETING WITH WILMINGTON CITY COUNCILPAGE 649 AUGUST 18, 1998 taxpayers. If the City has to duplicate water lines in an annexation area, that portion of the Dobo system will be useless. When any annexation occurs, the General Statutes require the municipality to have sufficient lines to adequately accommodate the needs of the fire service. Commissioner Davis spoke on frequently hearing this statement, and he asked why the City was interested in purchasing the Dobos water systems if the lines were not sufficient to provide the water pressure necessary for fire protection services. Councilmember Rivenbark replied it would be more cost effective for the City to buy an existing system and perform the necessary upgrades in lieu of installing new lines. At the time an area is annexed, the City is required to provide the same level of services, including fire protection, that are currently received by other City residents. He, again, referenced the knowledge he had gained in the meetings held by the Utilities Committee, and he stated that details were presented on how an entity could change existing inequities in rates and incentives. Interlocal agreements between the City and County have worked well in the past. It is felt the City has expertise in operating water and sewer services; therefore, it would be logical for the City to operate a unified system. Chairman Caster suggested that New Hanover County adopt a resolution to purchase the system and then work with the City in creating a unified system. Councilmember Peterson stated he felt it would be naive to think the City of Wilmington would be invited back to the table on an equal ground if New Hanover County purchases the Dobo water systems. Approximately, two years ago, both boards agreed to create a joint Utilities Committee to examine the issue and develop a structure to create an entity to provide a unified water and sewer service. At that time, two options were presented: (1) an interlocal agreement; and (2) the formation of an authority. However, the compelling reason to move toward unified management is not only the Dobo water systems but future extensions or systems. From the comments made today, it appears an interlocal agreement can be achieved. Councilman Peterson continued by saying if the County purchases the systems, it becomes a bargaining chip for some future political agenda. It would be unfortunate to see this happen. Why not agree to purchase the water systems and create an interlocal agreement between the two governing bodies. When the appraisal comes in, we will accept it, and work out the details. Commissioner Birzenieks suggested including wording in the resolution that will allow the City to become a partner in the system at a future date. Commissioner Davis reminded everyone that Attorney Shanklin has no idea when the IRS ruling will be changed regarding the tax incentive. Attorney Shanklin reported once the IRS ruling changes, the Dobos will have 30 days in which to finalize a contract. When the contract is in place, the transfer must be approved by the Utilities Commission and the application filed with them before the stock can be transferred into the trust. For example, if an application is filed with the Utilities Commission by this Friday, it could take two to three weeks to receive approval. Then Judge Traywick has to go through a due diligence period when he negotiates the contract. We do not know when the 30-day period will begin. It will be difficult to accomplish all of the necessary transactions within 30 days. The Dobos have spent three years working on an agreement. Discussion followed on the meaning of a binding agreement. Attorney Shanklin explained that a binding agreement could not be finalized until the trustee was appointed. The actual closing of the deal will not occur for a number of months because the Local Government Commission must approve the agreement. Mayor Pro-Tem Moore asked if the agreement could be amended up to the date of closing, and if the ownership could be amended at a later date. Attorney Shanklin responded the agreement could be amended. For example, if the IRS ruling was not changed for another 45 days and during that time, the City and County reached an agreement, the City could be added as a purchaser. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 SPECIAL MEETING WITH WILMINGTON CITY COUNCILPAGE 650 AUGUST 18, 1998 Mayor Pro-Tem Moore said if the County proceeds with the purchase and the City decides to join at a later date, she would like to see an official agreement based on a 60/30 split because otherwise the City residents would pay twice. Mayor Hicks advised the figure of 66/33 was agreed upon last year; however, unless the City and County agree on a structure for a joint water and sewer entity, the County will proceed with purchasing the Dobos water systems. Councilmember Peterson said the County does not need to be in the water and sewer business. The City has years of experience in providing water and sewer, and if anyone should be purchasing the water systems, it should be the City. It would be a better approach for the City and County to jointly purchase the water systems. If both boards want to protect the City and County assets, control growth, and represent the taxpayers, the joint purchase should be made. If the County moves forward with purchasing the water systems, the City will be left out. That was not the intent of the Utilities Committee. Commissioner Davis disagreed with Councilmember Peterson. He noted that if the County adopts a resolution to purchase the Dobo water systems, the County will work with the City to form an entity to manage a unified water and sewer system. Councilmember Quinn asked if a motion was made to jointly purchase the water systems on a 66/33 basis, would the County agree to this arrangement. Mayor Hicks asked if the County would consider a joint purchase on a 50/50 basis. Mayor Pro-Tem Moore advised the offer by Commissioner Birzenieks to amend the resolution to indicate the City could become a full partner at later date should be given consideration. Mayor Hicks interrupted by saying if the City and County reach an agreement, the resolution would be redundant because the City would be a partner. He, again, asked if the County Commissioners would agree to jointly purchase the systems on a 50/50 shared basis. The response by the County was no. Mayor Pro-Tem Moore noted that two years ago the City voted with the County to form a joint utility. She stated, for the record, the process was derailed by a Councilmember who no longer serves on the City Council. In her opinion, the City and County should continue to work on establishing a joint water and sewer entity. Councilmember Conlon said the City Council voted to jointly purchase the Dobo water systems; however, this action has been turned down by Vice-Chairman Greer because the County Commissioners want an independent authority. Further discussion followed on the fact that the City and County have been discussing the possibility of establishing a joint water and sewer authority since 1983. Commissioner Birzenieks suggested requesting the members of the Utilities Committee to continue to meet and work toward creating a entity to provide a unified water and sewer system. Councilmember Hearne stated he would like to continue to crunch the numbers to see if an agreement could be reached. After further discussion, it was generally agreed the Utilities Committee should continue to meet. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 SPECIAL MEETING WITH WILMINGTON CITY COUNCILPAGE 651 AUGUST 18, 1998 ADJOURNMENT Motion: Commissioner Birzenieks MOVED, SECONDED by Commissioner Davis to adjourn. Upon vote the MOTION CARRIED. Chairman Caster adjourned the meeting at 5:36 p.m. Respectfully submitted, Lucie F. Harrell Clerk to the Board