SPECIAL MEETING
MAYOR AND COUNCIL
OCTOBER 19, 2015
Mayor Cerino called the meeting to order at 6:30 p.m. In attendance were Council members Liz Gross, Linda C. Kuiper, Samuel T. Shoge and Mauritz Stetson, W. S. Ingersoll (Town Manager), Robert Sipes (Utilities Manager), Jennifer Mulligan (Town Clerk) and Kent County Commissioners Ron Fithian, William Pickrum and Bill Short, Shelly Hermann (County Administrator), Jeanne Edwards (Finance), Tom Yeager, Esquire and Michael Wojton (Deputy Director of Public Works), and guests.
Mayor Cerino stated that the reason for this meeting was to discuss a Memorandum of Agreement regarding the Quaker Neck Sanitary District. He asked Mr. Ingersoll to summarize the history of the District.
Mr. Ingersoll gave a brief history of the Quaker Neck Sanitary District agreement with the Town. The first one hundred fifty (150) units granted by the Council in 1982 (before the Charter prohibited out-of-town hook ups) were specifically for the homes with failing septic systems in Quaker Estates and County Club Estates.
Mr. Ingersoll stated that it did not take long for the County to realize that they needed additional hook-ups and the LaMotte family requested twenty-five (25) units. The Town granted those allocations as there was no Charter provisions prohibiting such an action, which brought the number of allocations to one hundred seventy-five (175).
Mr. Ingersoll stated that the first addendum to the agreement was in 1993 when the usage fees were raised per quarter. Mr. Fithian stated that if the in-town rates were raised, the County raised their rates to match. Mr. Yeager pointed out that the original rate was a lump sum agreement for $8,000.00 per year, based on one hundred fifty (150) units, and then it was changed to $9,000.00 and ultimately changed to quarterly payments by addendum.
Mr. Ingersoll stated that around the time Mr. Wayne Morris was hired the rates in town were raised once again and Mr. Morris asked to see three (3) years of the Town’s audits. He said that at that time he asked to see three (3) years of the Sanitary District’s audits. In doing so, it appeared as though Chestertown had become the “cash cow” because Chestertown’s fees were raised to approximately $19.00 per quarter and the County raised their rates to $104.00. Mr. Ingersoll stated that when people complained to the Sanitary District about the higher rates Mr. Morris sent them to Chestertown, telling them that the Town raised their rates.
Mr. Ingersoll stated that in 2010 Kent County decided to expand the Quaker Neck District beyond any addendum recorded, expanding it to the end of Lover’s Lane. The Town had denied the Sanitary District request for this expansion and they were working with a developer who intended to install a package sewer system for a development on Lover’s Lane. He said that the River Keeper and the neighbors to the outfall of the package system objected to a package system installation in Quaker Neck. A meeting was held between all parties and an agreement was forged where Kent County would use their unused remaining vacant lots (which had expanded to two hundred thirty-six) as long as they followed some basic requirements, such as building a system where service could not be demanded by other parties in the future.
Mr. Ingersoll stated that an engineer came to Town Hall shortly after the 2010 meeting to tell him that the system had been built with expansion laterals to go both down Airy Hill Road and Quaker Neck Road. In 2010 the Council decided to impose an out-of-town hook up fee and an Ordinance was passed indicating that there would be a tapping fee for any out-of-town hookup fees from that point forward. A bill was sent to the Kent County Commissioners and a letter was received from Mr. Yeager indicating that the County was not going to pay the bill since the Town had already “given” them the hookups.
Mr. Ingersoll stated that a few years went by, and the Town produced other documents to try and settle the matter with the Sanitary District (now assimilated by the County) including an Addendum Four (4) for the agreement and a Request For Arbitration. He said that he the had a meeting with Mr. Michael Wojton and Mr. Ernie Crofoot at Mr. Barroll’s office to try to work out any form of agreement. Mr. Crofoot indicated at that meeting that there would be no arbitration and he would drag the Town to a courtroom away from Kent County if he had to. Mr. Wojton agreed that the conversation took place, indicating that he was not certain about the location of the suit.
Mr. Ingersoll stated that he and Mr. Crofoot put that experience behind them and agreed that from that point forward, the fees would be forgiven for already built houses (that would have failing septic systems) but any new hook up on a vacant lot to the system would require a hook up fee (presently in the amount of $8,000.00) to be paid by the developer. This agreement was to be memorialized in a Memorandum of Understanding (MOU). Mr. Ingersoll stated that the MOU was sent to the County Commissioners for signing and he was told that he was on an agenda in June by a Town Councilmember. At that meeting, the County Commissioners indicated that they had not read the memorandum and would not sign it.
Mr. Ingersoll stated that it is a fact that anyone with a vacant lot pays a $74.00 quarterly “holding fee” to Kent County. He said that if the County wanted to go back to the original agreement as the basis for all decisions, the district that the County had added on without permission had to be included in it.
Mr. Fithian stated that when the Lover’s Lane development came to the County to run sewer as part of the Quaker Neck system, they needed fourteen (14) allocations and Kent County only had eight (8) allocations left. He said that there was a permit for a package system issued by the State of Maryland. The Chester River Keeper became involved as they did not want another discharge into the Chester River. He said that it was at that time the Mayor offered six (6) allocations in order to include Lover’s Lane into the Quaker Neck system. He said that Mayor Bailey granted the allocations to settle the matter, noting that the County paid for the collection system at Lover’s Lane, not the Town.
Mr. Ingersoll stated that what Mr. Fithian said is true, but allocations and hook-ups were not the same thing. An allocation is a reservation for service. When a person hooks up to the system there is a fee. Mr. Ingersoll stated that the County knew what an allocation fee was because it was their “vacant lot” or “holding” fee. He said that this “vacant lot” or “waiting” fee can be recaptured by the County if it is not used in a timely manner, even after that fee is paid for years, and the waiting fees were not reimbursed. Mr. Fithian stated that the “waiting” fee was a ready to serve fee paid by property owners, but the County did not have a hook up fee.
Mr. Ingersoll stated that in the town of Rock Hall a vacant lot fee is shared with Kent County. Mr. Pickrum stated that how the County ran the sanitation district was up to the County and that municipalities have no say in the matter. Mayor Cerino stated that should not be the case when the County is hooking into the Town’s sewer treatment plant.
Mr. Fithian stated that the only thing the Town of Rock Hall gets from the County was a percentage based on the amount of hook ups into the treatment plant and that there was a formula in place to determine the percentage. Ms. Edwards stated that those figures were actual audited expenses. Mr. Ingersoll said that the Rock Hall formula he looked at considered revenue sharing by both parties as well.
Mayor Cerino stated that Chestertown had costs associated with processing the sewage. Mr. Pickrum stated that the County pays the fees quarterly that the Town charges for the sewer fees.
Mr. Yeager stated that in 1982 the original agreement was executed. He said that the term “revenue units” was used to explain the one hundred fifty (150) allocations granted to Kent County at no charge. As part of that agreement, Kent County was to construct the necessary collection mains and bring them to a point where they would enter the Town facility at its own cost and expense. There would be an annual payment for the treatment of sewage in the amount of $8,000.00 with payments made regardless of whether or not the County collected fees from its users. The County would maintain all collection mains, pumping stations and other equipment.
Mr. Yeager stated that in 1988 there was an amendment that provided for the annual lump sum to increase from $8,000.00 to $9,000.00. In 1993 there was a further amendment where the annual lump sum went to a quarterly charge of $22.50 per unit, which could still be paid on an annual basis.
Mr. Yeager stated that in 1997 the number of revenue units was increased from one hundred fifty (150) to two hundred thirty-six (236). Mayor Cerino asked why the number increased. Mr. Yeager stated that he did not know why the number increased, it just increased. Mayor Cerino stated that was crux of the entire issue. Mr. Fithian stated that the Town had to give the allocations to the County, they could not make the numbers up, and so someone in the Town allowed them the two hundred thirty six (236) hook-ups. Ms. Gross stated that allocations were given not hook-ups.
Mr. Yeager disagreed, noting that an allocation and a hook up were the same. Ms. Gross stated that an allocation was much different than a hook up. Mr. Yeager stated that for the purposes of the agreement they were the same. In the agreement two hundred thirty six (236) units could come into the Chestertown Sewage plant and the only cost to the County was the quarterly charge for treating sewage because the County maintains the lines, pump stations, etc.
Ms. Jeanne Edwards stated that currently the County paid the Town $48.00 per unit per quarter for two hundred and thirty six (236) homes. Mr. Ingersoll pointed out that the County paid the Town $48.00 but they charged their customers $148.00. Mr. Pickrum stated that the County’s charge to their customers was not relevant to the Town. Ms. Edwards stated that the County had operational costs to cover.
Mr. Yeager stated that the Town was paid regardless of whether or not their customers were current or delinquent and they maintain the collection system. He said that in 1997 the addendum said that the prior agreement would remain the same and the County would have two hundred thirty-six (236) units that would have their sewage treated by the Town of Chestertown with the cost to the County at a quarterly charge of $22.50.
Ms. Gross asked the most recent annual payment to the Town. Ms. Edwards stated that the County pays quarterly so it was $48.00 times two hundred seven (207) because the full allocations were not in use ($9,936.00 quarterly). Currently there were two hundred forty one (241) allocations and two hundred seven (207) in use. Mr. Ingersoll stated that there were thirty-four property owners not hooked into the system that are each paying $74.00 (or $2,516.00 collectively) quarterly rates for “vacant lot” fees and two hundred seven (207) paying $148.00 ($30,636.00 collectively) quarterly to the County.
Mr. Fithian stated that he was certain of the allocation numbers due to the fact that the MOU wanted hook-up fees for the remaining thirty three (33) or thirty four (34) lots so he assumed that the other lots are hooked into the system. Ms. Edwards added that any time there was a discrepancy in the number of units, it was taken care of and retroactively paid for each time. Mr. Ingersoll stated that the County got paid as soon as someone hooked in to their system and there were delays where four (4) or five (5) homes would be sent to the Town by the Sanitary District years after the original hookup, which did not make sense.
Ms. Edwards stated that discrepancies are often because the customer does not notify the County that they have hooked into the system. Mr. Ingersoll asked how the County determined in the permit process when someone was using the sewer line. Mr. Fithian stated that the County did not collect hook-up fees and rates changed only when the homeowner advised the County that they hooked in to the system. Mr. Ingersoll stated that it was interesting because he asked Ms. Hickman of the County building permits office how many houses had been built and approved and he found out that several of the houses were never given occupancy permits by the County.
Mr. Fithian stated that the first bill received from the Town was for $98,000.00. He said that the MOU indicated thirty five (35) allocations times $8,000.00 which equals $280,000.00. He asked how anyone came to that figure. Mr. Ingersoll stated that the $98,000.00 in charges were for the existing homes in the expanded district that were about to be hooked up at the time.
Mayor Cerino stated that the idea of the MOU was to put disagreements over past fees to rest and pay hook-up fees on vacant lots moving forward, meaning that as each house was developed, the developer would owe the Town the $8,000.00 out-of-town hookup fee. These funds would not come out of Kent County’s budget. Mr. Yeager stated that the parties already have the right to connect as the sewer lines are stubbed out at the vacant properties.
Mr. Yeager stated that a question was whether or not the Ordinance that Chestertown passed for sewer tap fees was enforceable with respect to this area. The other question was whether the properties connected to the Town’s collection system where the Town was not notified.
Mayor Cerino stated that there was a semantic problem where the word “allocation” included hooking up to the system. Mayor Cerino stated that the County was making people pay for the right to hook in, but not a fee when they hook up.
Mr. Yeager stated that the 1982 agreement was pretty clear where the Town gave the County one hundred fifty (150) units that the County had the right to have treated at the Town plant. In exchange, the County would pay the Town a flat fee (now a quarterly fee) but there was no charge with respect to a property connecting to the lines.
Mr. Yeager stated that it did not matter what the County charged a customer and said that the fees the County collects go towards maintaining the collection system and the lines. He said the costs were higher because the line goes a much further distance.
Mr. Ingersoll stated that the one hundred fifty (150) units were for a specified district where there were failing septic lines, which no longer existed. He said that the person who said the Town could impose hook-up fees was Wayne Morris (Kent County’s Sanitary District’s previous director), so the Town pursued that tact. Mr. Fithian stated that if the Town imposed hookup fees before the Lover’s Lane development they may have gotten them, but said it was the County’s position that the Town could not retroactively collect fees.
Mr. Yeager stated that all of the allocations were granted prior to 2010, when the ordinance pertaining to out-of-town hookup fees was adopted. He said that at a 2007 meeting there was a motion for six (6) additional allocations with a denied access line. According to Mr. Morris, prior to 2010 all two hundred thirty six (236) allocations were approved. There were two hundred forty two (242) total allocations in the County before a tapping fee was imposed in the 2010 ordinance.
Mr. Yeager stated that there should have been a fourth addendum in 2007, but it did not mean that the agreement was not enforceable because the parties acted upon it as if the only change was that the number went from two hundred thirty six (236) to two hundred forty two (242). He said that the Town does not have a legal basis to collect a sewer tap fee from any of the two hundred forty two (242) revenue units that were previously granted. He said that if there were any future allocations or revenue units was when those discussions should take place.
Mr. Fithian stated that he did not want anyone to think that the Quaker Neck Sewer was being treated with no payment because the Town was given $48.00 per quarter for each property sending sewer to the treatment plant. He said that the hookup fees in all of the other districts in the County are put in place to pay for the lines going by their property, which the County pays for. Mr. Short stated that the County government charges over $140.00 quarterly because the lines were sometimes five (5) or six (6) miles to the treatment plant.
Mr. Pickrum stated that he wanted to make it very clear that how the County runs their system is the County’s concern and not the Town’s. Fees are different than what Chestertown, Galena, or any other Town pays and those figures have no bearing on this discussion.
Mr. Fithian stated that Kent County still owed $750,000.00 for the collection system at Quaker Neck. Mr. Ingersoll asked if ARRA funds were used to build that system. Mr. Pickrum stated that ARRA funds were not used to build the system. Mr. Ingersoll asked if Mr. Pickrum was sure that ARRA funds were not used for the construction of the Lover’s Lane system. Mr. Pickrum stated that he did not think so. Mr. Ingersoll stated that ARRA funds were used to build that system.
Mr. Ingersoll stated that the County expanded the district with a one paragraph letter but refused to sign an MOU. Mr. Yeager stated that the MOU involved payments of costs that the County was not legally obligated to pay. Mr. Yeager stated that there was no legal basis for the County to pay the sewer tap-in fee and that was the issue with regard to the MOU.
Mr. Sipes stated that he agreed that it was not the Town’s business to know how other jurisdictions pay for their projects, but the point was that other jurisdictions did pay for their projects through user fees. He said that the $9 million dollar plant has all of Chestertown’s residents paying hook-up fees when they go into the system, so they are paying for something that the out-of-town hookups that that the Quaker Neck residents are not.
Mr. Sipes stated that if the County tied in five hundred (500) houses, the plant would be overloaded and the Town would be left paying for the upgrades. Mr. Fithian stated that they would only ever hook up with the Town’s permission. Mr. Sipes said that, with all due respect to Mr. Fithian, that is not what has happened. Mr. Fithian stated that it was in the Town minutes that it was approved. Mr. Sipes stated that the County forged ahead with a project without an addendum to the agreement.
Mr. Yeager stated that the County had two hundred thirty six (236) revenue units and requested six (6) additional units because the County and the Town both did not want a package plant. The Town voted and approved six (6) additional revenue units and the County acted as if the terms and conditions of the original agreement and the subsequent addendums were in full force and effect, with the only change being that the number went from two hundred thirty six (236) to two hundred forty two (242). He said that between 2007 and 2010 there were communication issues and concerns over properties being hooked up and not reported which led to the Ordinance for the sewer tap fees and to this meeting tonight.
Mr. Yeager stated that the County recognized that there needed to be good communication and if there was a property that is hooked up and processing sewage that the Town should be getting the quarterly payment for it. He said that the County was taking steps so that when a property was hooked up the Town would know about it.
Ms. Gross asked if the Town could have an accurate list of who was hooked in to the system and sending sewage to the Town’s treatment plant. Mr. Ingersoll stated that the Town now has an account for each property that it is aware is hooked up.
Mr. Ingersoll stated that he failed to understand how the vacant lot fee like the one that was shared in Rock Hall would not be the model for all jurisdictions. Mr. Fithian stated that they did not have a vacant lot fee in Rock Hall. He said that hookups are on a 60/40 split as far as the operation is concerned on a yearly basis for the revenues.
Mr. Ingersoll stated that in the formula there was Rock Hall revenues and Sanitary District revenues, which were added together and divided percentage wise per EDU. Ms. Edwards stated that was for expenses only, and payment to Rock Hall is separate from the revenue they take in. The County pays audited expenses from the Sanitary District and the EDUs for the County and Town of Rock Hall and split it up by percentage, with a 10% administration fee added on top. That agreement is so that the entity that is using the plant pays for it, so if the Town had 60% of the hook ups, they paid 60% of the costs.
Mr. Yeager stated that the agreements were negotiated separately. The Chestertown agreement is different and not based on percentage of the total sewage treated at the plant, rather the County pays a certain amount for each unit that was depositing sewage in the plant. He said that the agreement in force was approved by both the Town and County.
Mayor Cerino stated that the first one hundred fifty (150) allocations that the Town gave the County were for use by those who had failing septic systems. There are an additional ninety two (92) allocations and he asked why growth was being encouraged in an area where the land did not perk and a County funded sewage treatment plant did not exist. He said that he would be hesitant to give the County additional hook ups if they asked for them in the future.
Mr. Fithian stated that when the State gave the Lover’s Lane developer permission for a package plant, the owner was going to build it whether the County and Town liked it or not. Nobody encouraged that growth, but nobody wanted a package system either.
Ms. Edwards stated that it was not economically feasible for the County to build a sewage treatment plant in Quaker Neck when there was access to Chestertown’s plant and they could share the costs. She said in the future if they asked for allocations, she was sure that the County could not take them, but they could share costs of upgrading the plant if the Town and County were to come to an agreement.
Mayor Cerino stated that what he was hearing was that Chestertown got about $200.00 annually a unit for two hundred and forty two (242) units of sewage being pumped through Chestertown’s system. Mr. Ingersoll stated that the agreement was for 1.5 times the in-town rate because it was meant for failing septic systems in Quaker Estates and County Club estates for the first one hundred and fifty (150) units.
Mr. Ingersoll stated that there needed be a new agreement or an addendum 4 for the expanded district. He thought that the MOU would be a simple solution, but now understood that there was no solution.
Mr. Yeager stated that the County was not going to pay for fees that they were not legally obligated to pay. Mr. Ingersoll stated that was something that he thought the Town would have to find out, whether or not the tapping fee could be applied. Mr. Fithian stated that nobody honors retroactive agreements. Mr. Ingersoll stated that a proposed addendum to the agreement was sent to the County in 2010 regarding thirty five (35) lots that have not been built. Ms. Edwards stated that the thirty-five (35) lots already have the allocation. Mr. Ingersoll stated that some of those thirty-five (35) allocation holders have already paid thousands of dollars in “waiting fees” which could actually be recaptured by the County leaving the property owner with nothing.
Mr. Fithian stated that the waiting fee was paid for the purpose of hooking in at some point. Mr. Ingersoll asked why those fees did not have a cap and what would happen if the Town recaptured the County Sanitary District allocations. He said that people were paying money for nothing. Mr. Pickrum stated that was not Mr. Ingersoll’s concern. Mr. Ingersoll stated that he was a County taxpayer and that it was his concern. Ms. Edwards stated that those people were reserving their right to tap into the system.
Mr. Ingersoll stated that Mr. Clarence Hawkins lost between $20,000.00 and $30,000.00 when the County recaptured his allocation and he was never given a refund. The same thing happened to Mr. Jim Huber. He asked how the County thought that was the right thing to do. Mr. Yeager stated that it was consistent with other jurisdictions and there were policy reasons for doing so, one of them being there were only so many allocations to go around.
Mr. Yeager stated that if it got to the point where people were holding on to allocations the allocation became a commodity and the County did not want trading of allocations amongst property owners. He said it was not unusual for an ordinance to be in effect when there is a right to connect, but there is a certain period of time to do so. If connection is not made within that time frame, there is an extension period, and then the allocation could be forfeited and there was no refund.
Mr. Fithian asked if the Town customers only paid for a certain number of years and then stopped receiving bills. Mr. Ingersoll stated that the Town residents did not have to pay a vacant lot fee for future water and sewer services. Mr. Fithian stated that the people in Quaker Neck are paying that fee because there was a line to maintain. Mr. Pickrum stated that if Mr. Ingersoll wanted to ask questions regarding the fees as a private citizen he could, but it was not appropriate in this particular forum. Mr. Yeager stated that Mr. Ingersoll’s questions should be done through a citizen inquiry not as a Town official.
Ms. Gross disagreed and said that the Town was entitled to ask these questions. Ms. Gross stated that the Town had approximately two thousand (2,000) units in Town and the County had approximately two hundred (200) units or 10% of the waste. She said that she could guarantee the amount received from the County was not 10% of the cost of running the sewage treatment plant.
Ms. Edwards stated that if the Town thought they wanted more than 1.5 times the in-town rate, when the allocations were extended so should have been the terms of the agreement. Mr. Ingersoll stated that the l.5 rate could not be changed as it was part of the original agreement.
Mayor Cerino stated that it sounded as though it was the opinion of the County that the two hundred forty two (242) units were done and if the County was ever to ask for more allocations that would be the time to change the terms. Mr. Pickrum stated that the agreement could be renegotiated. Mayor Cerino stated that it did not appear as though it would be a well-received argument. Mr. Pickrum agreed.
Mr. Fithian stated that water and sewer was a complicated issue. The real disingenuous part of it was the bill for $98,000.00 which he assumed if the County had paid it would have been the end of the story. Then the Town sent an MOU which had been honored would have increased from $98,000.00 to $240,000.00.
Ms. Gross stated that was totally incorrect as proven by the fact that the Town later agreed to drop the $98,000.00 bill in favor of only charging for the remaining vacant lot hookups as the lots were developed.
Mayor Cerino stated that the County could collect the fee from the developer and pay the Town of Chestertown. Mr. Fithian stated that the agreement that the County had with the landowner was that there was sewer available on their property and it was given to them free by Chestertown and that there were no hookup fees. The County does not charge hookup fees.
Ms. Edwards stated that when the County expanded into a new area the customers were not charged an allocation fee. The project itself pays for all of the hook ups, the collection system and treatment plants. Once the project is complete and existing, those people then pay an allocation fee.
Mr. Ingersoll questioned the statement that there has never been a hook up fee collected by the County. He asked the County if they were sure of that assertion. Ms. Edwards and Mr. Fithian both said there were no hookup fees. Mr. Ingersoll asked if there was a $500 fee in Quaker Neck. They both answered no. He asked if there was ever a $1000 fee and they both indicated there was not. Mr. Short stated that the only developer that had hookup fees in the District was the Lawrence property. Mr. Fithian stated that there were no allocation fees in Quaker Neck. Mr. Fithian stated that there were hookup fees in the County that were like $14,000.00.
Mayor Cerino stated that he did not think any progress was being made but he did appreciate the time that everyone took to express their take on the issues.
The meeting adjourned at 7:25 p.m.
Submitted by: Approved by:
Jennifer Mulligan Chris Cerino
Town Clerk Mayor