Council condemns water company

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BAR HARBOR – In the words of Bar Harbor Water Co. lawyer Chad Smith, this Hancock County town has gone to war over control of its water.

With council chair and water company vice president Ken Smith abstaining, councilors unanimously approved and signed an order condemning the water company after a two-hour public hearing Wednesday evening, citing the need for local management of the utility. The condemnation order sets the stage for the town to take control of the water company through eminent domain.

“There’s a 150-year history of local control, and people want that to continue,” said Councilor Andre Valenti.

The water company board of directors has considered merging with a larger utility in order to handle growing debt and acquire capital for much-needed repairs and expansion.

With negotiations between the water company and the town exhausted, residents have two choices: vote for condemnation and permit the town of Bar Harbor to manage its water company, or vote against condemnation, permitting the water company to merge with Rockport-based Consumers Maine Water Co. as planned.

Bar Harbor residents will vote on the municipal takeover at a special town meeting scheduled for 7 p.m. Wednesday, Nov. 29, in the municipal building auditorium.

The Bar Harbor Water Co. board of directors signed a preliminary agreement with Consumers Maine in October. If the town of Bar Harbor is unsuccessful in its bid for ownership, the agreement will be completed with a stock transfer and Consumers Maine will take responsibility for managing the water company within months.

Consumers Maine, a subsidiary of multinational utility conglomerate Philadelphia Suburban Corp., operates water utilities for 17 Maine communities, from Millinocket to Freeport.

Consumers Maine president Judy Hayes assured Bar Harbor councilors that local control would be retained through an advisory committee made up of Bar Harbor officials if the merger goes through. But if a legally obtained right of eminent domain proceeds, the company will not fight it in court, she said.

“I understand the issue of local control – I know that the town and its citizens have a choice,” Hayes said. “If the town clearly says, ‘We understand your offer, Consumers Maine, and we don’t want you here,’ – then we’ll be gone.”

Bar Harbor Water Co. attorney Chad Smith pointed out that the decision to merge had already been made by a group of local residents.

“These people represent the same character of leadership that has brought this company through 100 years of history,” he said of the Bar Harbor Water Co. directors and shareholders who attended Wednesday’s hearing.

The water company’s directors approved the merger because they believed Consumers Maine could offer Bar Harbor residents a better future, said both Hayes and Smith.

They promised the engineering and accounting resources of the $32 million company in settling the Bar Harbor Water Co.’s outstanding debt and determining where capital investments would most benefit the utility.

The company has pledged to spend up to $1 million in capital improvements, putting a priority on improving an antiquated filtration system, she said.

Hayes also assured Bar Harbor residents that any personnel cuts necessitated by the merger would occur at the management level and that townspeople currently employed by the water company could count on their jobs under Consumers Maine.

“With every acquisition, we have offered employment,” she said. “I’m not aware that we’ve ever laid anybody off.”

She also said that the degree of capital improvement would determine how much of a rate increase would accompany the merger. Richard Collier, the new Bar Harbor Water Co. president, previously pledged that increases would not exceed 30 percent above the current $40 average bill. The actual increase could be even smaller, Hayes said Wednesday.

But town councilors cited staggering rate increases that accompanied recent Consumers Maine acquisitions in town such as Bucksport and Greenville, where water rates are now in the 70th or 80th percentile statewide.

Hayes countered, saying that Bar Harbor’s rates would be tied directly to the cost of capital improvements funded by Consumers Maine. If the town can acquire grants to help fund some of the work, rate increases can be mitigated, she promised.

“Every system is regulated on its own – Bar Harbor rates will be determined by the capital improvements we do here,” Hayes said. “The buck stops right here in terms of water company rates.”

Town councilors thanked Hayes for her candor, but voiced their concern at a profitable out-of-state company with international ties taking control.

“They’re guaranteed a 10 percent return for every pipe they put in the ground,” Reed said of Philadelphia Suburban, which reported a $44.9 million profit from its five-state operation last year. “They’ve got a profit margin they have to finance.”

Town ownership could guarantee that water company rates, employment and service would remain in local hands, councilors said.

And most importantly, Bar Harbor would run the utility as a nonprofit enterprise councilor, Tom Burton said, citing a successful town acquisition of the municipal sewer system that resulted in a recent profit sharing with customers.

“Go look at your last sewer bill to see how the town handles extra money,” councilor Tom Burton told residents and Consumers’ Maine representatives. “We appreciate the fact that you want to partner with us, but really, I don’t think we need ya.”

Councilors said that residents of Bar Harbor were best qualified to determine where capital improvements – particularly those to increase flow for fire suppression purposes – should be made. The town has also committed to spend up to $1.6 million in capital improvements.

With a creative tax strategy designed by town attorney Lee Bragg, the ownership change and capital improvements would cause rates to rise no more than 23 percent, Reed said.

Representatives from both sides traded jabs throughout the hearing as they shared their differing histories of the water company dispute, each claiming that the other was to blame for the impending legal battle.

“You’re condemning a water company without a valid reason to do so,” Smith said. “You’re going down this road to eminent domain without negotiating in spirit. Where’s the exigency here? I don’t see why you have to rush to judgment.”

Municipal leaders responded with allegations that Consumers Maine and the Bar Harbor Water Co. had withheld information and misled the town, refusing to explain the genesis for setting a $5.5 million value on the company. That price was set in October when Consumers Maine offered to take over the company and sell it back if municipal officials were unsatisfied after five years.

“I’m dealing with public funds here,” Reed said. “I can’t just give away $5.5 million without justification.”

Few impartial Bar Harbor residents chose to attend Wednesday’s hearing. One man present without water company ties commented on the futility of taking the matter to court for a formal eminent domain takeover.

“Why fight?” resident Paul Paradis asked the council. “I see it [eminent domain] as a very expensive process. The town could be on shaky ground. I don’t see any reason to turn this into a battle of wills. We can test drive this company – I’d like to see the town adopt a wait-and-see attitude.”