Bar Harbor buys water utility for $4.6 million

BAR HARBOR – By an overwhelming margin, residents attending a special meeting Wednesday approved the town’s $4.6 million purchase of the Bar Harbor Water Co.

Voters attended the meeting expecting to make a judgment on municipal takeover of the water company by eminent domain. However, shortly after calling the meeting to order, Town Manager Dana Reed announced that the town had negotiated an amicable purchase of the water company.

Almost immediately, Bar Harbor Water Co. President Richard Collier took the floor and distributed copies of a motion asking voters to approve $4.6 million in bonds, the same total amount cited in the proposed eminent domain warrant, for a purchase of the company

The abrupt move from the advertised meeting agenda to a new purpose pre-arranged by town and water company officials left some residents suspicious.

“Ted Williams said, ‘The worst I could throw at you is a slider low and away,’ and that’s what Mr. Collier just did,” said resident John Hanscom.

“I thought we were voting on condemnation by eminent domain but apparently there’s been a change – I’m standing here in the dark,” added resident Ellen Dohmen.

Negotiations between the two parties began after Bar Harbor councilors signed an order of condemnation Oct. 30, explained Town Manager Dana Reed. Discussions between Lee Bragg, the town’s attorney, and Chad Smith, council for the Bar Harbor Water Co., continued through this week.

The water company’s board of directors finally approved the sale Tuesday, and the letter of intent was signed by municipal and water company representatives at 4 p.m. Wednesday afternoon, said Smith.

The agreement hinged on Bar Harbor’s ability to reduce the tax burden on water company shareholders, Collier said

“Personally, I still think Philadelphia Suburban, in the long run, would do a better job, but I have to give the town the benefit of the doubt,” he said. Philadelphia Suburban, a Pennsylvania-based company, had been negotitating to buy the water company.

The transaction will be conducted as a stock purchase, at the price of $863 per share, Reed said. This will require the approval of the state Legislature. With that approval, shareholders will be able to avoid capital gains taxes at this time.

If the Legislature fails to approve the sale, municipal and water company officials have agreed to a backup price of $950 per share, with the higher price covering the tax liability for shareholders. The $4.6 million bond approved by voters Wednesday would be sufficient in either case, Reed said. If the lower price is approved, however, water company users can expect rate increases less than the proposed 23 percent over the next five years.

While attorneys are still working out the details of the agreement, it will accomplish two important goals – the shareholders will be “made whole,” that is, the Bar Harbor Water company’s outstanding liability will be addressed; and the town will acquire both the company’s real property, such as its building, water rights and pipes, and its private property, such as its records, tools and equipment.

The water company will become a department of the town of Bar Harbor, but it will operate under an independent budget. The $4.6 million purchase price – which includes $1.6 million in immediate capital improvements – and any future improvements will be absorbed not by community taxpayers, but by utility users.

Current water company employees will be invited to continue in their positions with their salaries and seniority intact, according to a decision made last week by town councilors.

The deal could be finalized as soon as Jan. 30, 2001, but at the latest, Bar Harbor will take the reins of its water company by the end of March, Reed said.

When the matter was opened for public discussion Wednesday, a mere handful of residents requested clarifications of the deal’s structure.

Bob Collier asked about the conspicuously absent competitor for ownership of the Bar Harbor Water Co. “It seems to me what’s happening tonight is a sales pitch to buy the water company – is there still a Philadelphia Suburban out there?”

Nonresident Judy Hayes, president of Philadelphia Suburban’s Maine division, was recognized, and said that her company was still very interested in purchasing the water company, and that a previously discussed offer to run the company for five years and then offer the town a purchase option, remained.

But none of the residents present proposed continuing negotiations with Philadelphia Suburban. In fact, when the show of hands was counted, only about 20 of the several hundred residents who packed the Connors-Emerson School Auditorium rejected the town purchase.

Though Wednesday’s swift decision seems a compromise to meet the disparate needs of water company shareholders, utility users and town officials, none were pleased with the means by which the agreement was reached. An atmosphere of suspicion and mistrust abounded on all sides.

Hayes said Wednesday that an open discussion between her company, the Bar Harbor Water Co., and area residents might have resulted in a different outcome.

Though Wednesday’s vote seems to end Philadelphia Suburban’s presence in Bar Harbor, the company has a whole slate of options remaining for the town, Hayes said. It has partnerships with several communities, such as South Freeport and Vinalhaven, in which the community owns a water company’s assets but contracts with her company to run the day-to-day operations.

“I feel like I know the system very well now,” she said. “We’re certainly available to answer any questions. And if for some reason this deal doesn’t go through, our offer is still on the table.”

But today, Bar Harbor residents are simply celebrating the $4.6 million truce that ends their autumn water war.

“We’re satisfied at the outcome,” Smith said. “It’s better not to look back, but to let it go forward.”