Once approved, a link to the official council minutes will be at the bottom.
October 21, 2019
St. Clairsville City Council met in Council Chambers on Monday, October 21, 2019 with the following present:
Perry Basile, Council, 1st Ward Jim Zucal, Director of Public Services
Mark Bukmir, Council 3rd Ward Richard Myser, Law Director
Linda Jordan, Council-At-Large Terry Pugh, Mayor
Beth Oprisch, Council-At-Large Cindi Henry, Finance Director
Frank Sabatino, Council, 2nd Ward Mike Troullos, Police Lieutenant
Mike Smith, Council-At-Large Don Smithberger, Director of General Services
Jim Velas, Council 4th Ward
The meeting was called to order by President Pro-Tem Frank Sabatino: I am going to turn the meeting over to Mr. Myser.
Richard Myser, Law Director: I want to welcome everybody who is here tonight. First I want to introduce Kimberly Bojko and Joshua Peterson. They are the two attorneys that were instrumental in negotiating our two contracts with Aqua, Oh. Our contracts for the water system and the sewer system. They are going to be answering questions from the Council tonight in a give and take discussion. That is what we are going to do first. This type of meeting session normally would be conducted in Executive Session but in order to give as much full disclosure as we can to the news media and too the community and make this as transparent as we possibly can we are going to do this in an open session tonight. There is going to be discussion between an Attorney and the Attorney’s client. I have already discussed with Council some of the answers to some of the questions that may involve privileged communications. If it is the type of communication that should not be divulged, they will not be answering that particular question. This is not intended nor are we going to conduct it as if it were a town hall. We will not be entertaining questions from the news media or from the citizens. This is not an attempt to stifle questions from the Citizens. If you have any questions after the meeting tonight please put them in writing give them too me or too your Council member and we will see to it that they get too legal Council Members and we will see to it that those questions are answered. What we are going to do is the President-Pro-Tem is going to give ten minutes to ask questions of legal Counsel, and time for Counsel too answer those questions. After the question and answer session is completed, the citizens who are on our agenda too address Council will do so. After they address Council we will go ahead with the rest of our meeting tonight.
Frank Sabatino, Council Pro-Tem: As Mr. Myser stated we are going to turn the floor over too our two attorney’s.
Kimberly Bojko: Thank you for having me here today again. I was happy to answer questions last time we were here. Now that the contract is final I am available too answer your questions again. I would caution that if there is something that was confidential during settlement discussions that cannot be explained to the public we will not be able to answer those questions. We will answer all the questions that we can about the contract itself, the transaction and anything that is contained in those documents. Too that end we have in fact received six pages of questions from a Council woman and we have answered those questions in spreadsheet form the same that we received them. We are handing those out too Council. Beth Oprisch: I assume those are my questions? Kim: Yes. I am happy to go through that document and answer any follow up questions you might have. Too speak a little bit about my background and how I became involved in this project. I have over 21 years of experience in utility and energy industry. I started my career in private practice then went too Ohio Consumers Council and represented residential consumers for years, after that I went to the Public Utilities Commission, I actually was an administrative law judge that sat and heard cases in front of the Commission. After that I became Chief of Staff of the Public Utilities Commission. After leaving the Commission I started my own practice working on some renewable projects and because I was not allowed to practice before the Commission for a stay out period. I worked with the City with some electric issues they had and I have worked with many Municipalities, Townships and Counties over the years to help them with utility type issues. I am very versed in public utilities process and am happy to answer any of those questions. I have been in proceedings on the other side of Aqua many times and I am happy to answer questions regarding the industry and the utilities in the State of Ohio and how the Commission regulates those utilities because once Aqua takes over it is important to note that Aqua is regulated by the Public Utilities Commission and anything that Aqua does with some few exceptions will be Regulated by the Commission. Josh Peterson is with me, he heads our Real Estate Corporate. A lot of this contract deals with real estate issues, closing documents and real estate transfer. Frank Sabatino: Thank you, we appreciate you being here. You have done well for the City and we appreciate that.
Council Question & Answer: Linda Jordan: My first question is from a constituent and it is regarding liability. If we are to sell, once Aqua takes ownership is the city under any liability at all if something would happen. Kim: Do you mean to the water system? Linda: anything. Kim: There is a closing period however once the closing is finalized the water system is now under the control and ownership of Aqua. So any concerns about water quality, water safety, if some kind of accident would happen causing harm to a person it would be on Aqua not the City. Linda: Have you know Aqua too charge exorbitant rates including fees or surcharges? Kim: Except for the rates that are set by ordinance by law all rates of Aqua have to be approved by the commission. The commissions mission is too charge just and reasonable rates. The commission has rate case proceedings and the statute requires the commission too charge just and reasonable rates. The answer is No. Linda: Have you heard of them having any billing issues? Kim: I would not have been specifically involved in any complaint cases so I don’t think it would be fair for me to speak too that.
Mike Smith: Beth’s questions addressed some of mine. One question I had was about the buy-back period. Kim: There is a buy-back provision in the contract and the buy-back provision is 15 years after the date of closing. You have to provide two years notice before the end of that period and you would buy it back at the cost that you were paid for it. Mike: When would Aqua take over and when would their billing cycle start? Kim: I don’t know that because I don’t know when the PUCO will give an order approving the transfer. There was a new law passed this year that requires rules to be propagated by the PUCO and the PUCO is currently in the rule making process. I did attend the rule making workshop and they went through many provisions and suggestions from the utility companies and consumer groups about what should be included in those rules. Once that rule making is finalized then thy will start ruling on cases. Aqua has filed another case with the commission from the city of Campbell and that case was filed on August 21, 2019 and that case is currently pending. Mike: When you were here previously I asked they have a plan, how much of that will be put into the system and how will we know that they are spending that kind of money? I don’t think there is anything in the contract on whether we can hold their feet to the fire too prove that they spent what they said they were going to spend. Kim: There are provisions in the time track that the city is going to be involved in the planning of those capital improvements and the oversite of those capital improvements so I think there is some ability to insure that those things happen. There is a list that will be made public and considering and the active public here in St. Clairsville I can’t believe that the public won’t hold our feet to the fire on the capital improvements.
Beth Oprisch: I will look at the answers you provided. Is this a public record? Kim: It is in your hands, there is nothing I can do to make it not a public record. Beth: I think you kind of addressed the closing period. There is not a typical time frame? I mean is there a ballpark, a couple of months or it just depends? Kim: This is a new law that was just passed in the spring so there isn’t a typical case yet. Usually the Commission can act within a month too six months it just depends of the type of case and the amount of stake holders that intervene in the case. Cases that are fully settled could be resolved within a month before the Commission, it just depends. Beth: Did I understand that the City is responsible for the water department until that closing date? Kim: Yes because they haven’t submitted the assets. Beth: We only received one bid for our water from Aqua, how are we assured that this is a good amount, a fair market price? Kim: The fact that you only had one bid should in and of itself tell you something. Believe you have to look at the value of the system. I think the City has looked at the value of the system, I think that you have to look at the experts that have been looking at the books of the municipality and have made that evaluation and they believe the price is a fair market value for the system. Beth: When you are talking with Aqua is that Aqua Ohio, Aqua America? Kim: Aqua Ohio is a utility company that is regulated by the PUCO, Obviously Aqua America is the parent company so a lot of the people who work for Aqua America obviously work for Aqua Ohio. I have to say that my dealings are specifically with Aqua Ohio because they are regulated by the PUCO. Beth: If Aqua buys our water can they sell it to someone else? Kim: Aqua in order to sell the system that it purchased from you would have to have permission of the PUCO to transfer the facility to a new owner. There is a greater process that a utility would have to go through it is called abandonment of facilities. So there is a process that has to go on and the Commission would have oversight of that process. Beth: So they could there is just a process. Kim: If the Commission allows it. Beth: If that would happen in the first five years would they assume the rates? Kim: Any good attorney would make sure that your contract is assumed in a transfer. My assumptions are that those contracts would be assumed and the company would have to honor that contract. Those rates are frozen for six years. Beth: A couple of my questions there are pages that say Exhibits would be added but they are blank. Kim: That is typical, you have to go to the Courts to get these old documents they will be included before it is transferred. Josh Peterson: Ultimately the descriptions are already public record so you can pull those descriptions Beth: So that would not be anything that would make the contract not complete. Back too just and reasonable rates. For six years we are locked into these and any rate increases after that will go too PUCO. Kim: Right now the contract says that it may roll into PUCO rates. The benefit of going with PUCO is if the City would need a five million dollar reservoir that cost would be spread among all of Aqua’s customers. If you keep your rates separate then any improvements would be borne only by St. Clairsville’s residents. So it depends on how you choose to have those rates after that six year period. It is more common than not too roll your rates in with other AQUA customers. That is something that will have to be worked out with Aqua. Beth: The contract also refers to two outstanding litigations that the city has. Kim: I wouldn’t call them litigations, one is an Attorney General investigation. It is an investigation of an incident that happened in the water/wastewater department. It is something that is ongoing in the A.G.’s office. The A.G. does not comment on ongoing cases. If you question is when will we know then the answer is we don’t know. The A.G.’s office will not tell us. The other thing is that the City has an insurance claim for the same matter. The City has asked for an extension on that matter so they will not lose their rights too that claim in case there is some kind of fraud investigation that would relieve the City of any liability that would relieve the city of any liability and hopefully strengthen the insurance claim. Beth: Could either of those impact this contract? Kim: No. They have nothing to do with this contract.
Perry Basile: One question pertains to the meeting we had with the EPA. Their concern was the water plant, they were not concerned with run-off or sewage. What I was able too ascertain from the conversation was the City of St. Clairsville is going to be on the hook for the repairs to the water plant. From what I understand it is going to be quick. They are not going to sit on their hands. What responsibility will Aqua have during this time period they are going too expect a lot from us very quickly? What responsibility will Aqua have in this period of time? Is there a time period while they close the deal? From what I am hearing from the EPA they are talking like we need to start pretty quick. My question is how long is it going to take too close this and how quick will Aqua start doing the work? Because if they don’t get started pretty quickly all the repairs will be on the city. So where does that fit in Aqsa’s plan? Kim: Unfortunately I was not here for Mr. Butler’s presentation and have not spoken to him. A couple of things can happen. The EPA if they know the City has approved the contract and you get proof of sale, the EPA could wait and provide their plan too Aqua and they could ask Aqua too start working on the modifications. No whether Aqua does that or doesn’t do that prior to any environmental action, I just can’t be certain. One thing Aqua could is ask for expedited treatment in their application because of these issues. I think Aqua has the desire to take care of the plant because anything that is delayed is going to make it worse and probably more expensive. I think we could probably work with them and see if there are things that the City could and Aqua could do. I understand your concern but I don’t know the time limit the EPA has given you. I am not privy to that timeline but I am sure that we can work with the EPA in extending that timeline to insure Aqua can take control. They are used to working with Aqua, they have purchased a lot of the facilities around the State and they purchase distressed facilities. I think that the EPA is comfortable with Aqua. Perry: The other question I have has to do with several of the neighborhoods that are having problems with sewage and drainage. I remember looking at a spreadsheet that gave a breakdown on what Aqua is going to spend yearly at the rates we are charging. It doesn’t seem like the amount they are going to spend yearly is enough to take care of some of the problems we are having in the communities. Kim: You are referring to the 10 year capital investment. It is in the bid package. I think that you all had it the last time I was here because you were asking me questions. I guess I don’t know what you mean. I am a Lawyer not an engineer, I can’t know what it will cost too fix the problem you are talking about. I look at their capital investment plan and it is pretty robust. Now that Aqua owns it they can use their own money. Aqua is a pretty big company and has its own capital. They can get funds and loans. Perry: Say in the first year we required a $10 million investment, is that something they would do or would they put that off until our legislation expired on our rates? Kim: I guess it just depends on what the capital investment is, if it is something the EPA is requiring them to do it of the PUCO is requiring them to do it then they are going to have to spend the money and do it. Just because your rates expire it doesn’t mean you will no longer get just and reasonable rates, remember I told you that after your ordinance rates expire if you roll into the PUCO rates, they have to be approved and they have to be just and reasonable rates. Perry: I think my biggest concern is there are some pretty big necessities with our distribution and our sewage and if I am correct in thinking Aqua is not responsible at all for our drainage it is just sewer and water. Kim: That is correct. Mayor Pugh: Storm water has nothing to do with this bid.
Jim Velas: The understanding I got from the meeting with the EPA, there are considerable mandates that have to be done at the water plant. I think how much we have to spend is going to be determined by whether or not the system is going to be retained by the City or whether or not it is going to be sold. If the city is going to maintain the water plant then we are going to be responsible for everything that has to be done there and that large expenditure is going to fall on us. If we are going to decide to sell the system then the mandates that need to be done immediately will be issued too St. Clairsville and we will work with Aqua on the long term. Kim: That is my understanding. Jim: On the rates, in your experience with just 2,500 customers, do you think it would be better to sell the system and then at the end of the five years go with the PUCO rates so it is spread out. Because if we get into something very expensive and we try to bill the 2,500 customers there will be some pretty big rate increases. Kim: They have it state wide of by regions. Obviously spreading it over 10,000 customers is better than 2,500. There are other components of the Commissions rates so I am not going to sit here and say it is that simple but the commission does balance the interest of the customers and the utility. They have to give the utility a fair return but they also have to be aware of the customers’ bills and they don’t want to see customers’ bills go up Too much. They will be cautious of that in their just and reasonable determination. Jim: If I understand it right the sale of the wastewater system will hold an escrow of $500,000 which will be turned over to the City to go along with the $800,000 that we got on a loan that the sewage problem on Bellview will be corrected and Aqua will pay $500,000 too that million three for the project. Kim: That is correct.
Mark Bukmir: Thank you for coming down too St. Clairsville again. You negotiated the contract on our behalf and I am sure we did not get everything we wanted out of it. What points would you feel you wished you could have got more out of? Kim: I think that goes too confidential Attorney client privilege. I cannot tell you how the negotiation occurred or why one party accepted or declined. Too answer your question more broadly, of course each party askes for more than they ultimately get in a contract. Aqua asked for more than they got in the contract. We asked for more than we got in the contract. A contract is a negotiated document there are pluses and minuses, you win some and you lose some. I will say that above and beyond the purchase price we get more value through the contract then just the boiler plate contract that they gave us initially. I think we were able to get more value to the contract. There are some real good benefits to the city. Those are in the contract I could list them for you what I consider value add items. I think taking over your employees is a huge value, they did not have to do that. That is not typical, particular if they are Union employees. Letting the employees choose if they were going to be consumed by Aqua and the fact that they get go keep their benefits. I think paying an employee what is up to 40 hours now, I think that is a huge win, because during this transition you employees get too help and you get paid for that and it is my understanding the rate for that is it includes overhead and benefits. Mark: Overall do you feel it is a good contract for both parties involved? Kim: I believe that any contract that has been signed by two parties I believe by signing the contract they believe it is fair. Mark: What if Aqua would become insolvent? What happens in our particular case? Kim: Once the assets have been turned over too Aqua it becomes a part of PUCO. The Commission has lots of rules in place to handle an emergency situation. If the commission has an emergency rate case, the commission can order rates too make sure that they are just and reasonable. The commission can raise rates then they would no longer be insolvent. Mark: Would you explain the buyback too me because it seems to me that they are giving us a piece of cake and eating it too. If we buy back the system 10 years from now all we have to pay is the purchase price, we don’t have to pay for any of the improvements that they have made? Kim: Yes. It is pretty rare too have a 15 year buy back for the purchase price. They did agree too that so give kudos too them for doing that at our request. Mark: Once Aqua takes over, I do realize we will still own the real estate, will they be able to sell water to the fracking companies? Or will they be able to use our wastewater plant to dispose stuff from fracking? Kim: Once they have the rights to the water they can sell it as they see fit so the answer is yes, however as a PUCO regulated utility they will be under an obligation to provide reliable service to the residents. So if the sale of the water was affecting the service to the residents. If it affects the water it would not be allowed. There is a big difference in the regulation that he PUCO have too up hold and what a Municipality would do. The PUCO is much more Stringent. Mark: Thank you that is all I have. Frank Sabatino: I had a Citizen call me. His question was also about the buy back. My question is, there seems to be a rumor going around that if our fire department was fighting a massive fire here in St. Clairsville and they had to use a large amount of water that Aqua would charge us for that water. Kim: The contract specifically states that all fire protection services will not be charged a fee. I want to thank both of you for being here. Beth Oprisch: On page five the buy back page. I thought the buyback would be more than what we paid, that there would be other costs. Kim: I apologize you would have to pay the undepreciated amount which would vary depending on what was added. I appreciate being able to come here and speak too all of you, I think that we worked hard to do something considering the current state of the Municipal’s water system and I think that reflected in the purchase price and the contract. I think us added value and too maybe lessen the burden of your EPA requirements. Cindi Henry: When we put this bid packet our only company that actually bid was Aqua Ohio. Are there other entities in Ohio? Kim: As I stated before RCAP-OH is the only other large water utility that I can think of that would come in and purchase a municipal system. Obviously there are other Municipal Systems so a County or a City could purchase your system and operate it with theirs. That would be you’re only other option and who would want to come into your part of the state and take over your system? Cindi: Thank You.
CITIZENS HEARING: Gabrielle Fillon & Kathy Wood
Both Women made many derogatory and untrue remarks about the Mayor and Council that we deemed inappropriate for City Council Minutes which are the City’s permanent record. The President Pro-Tem asked them to please refrain from personal attacks.
Service Director, Jim Zucal
At previous council meetings since July of 2016 I have outlined the condition of our 90 year old water treatment plant and distribution system. I think most of you now understand the dire condition of our water/wastewater systems and realize no matter what it needs tens of millions of dollars in investment. For each of the last three months I have informed you that we have lost more treated water that we were able too deliver too our customers thanks too leaks that plague our distribution system. We don’t have the funds too pay for the work that is needed and we must at a minimum double our rates too be able too pay back any loans and maintain the system if we try too do it ourselves. Again I shared we are not eligible for grants. In a Council meeting last week with EPA Chief Craig Butler he said “They expect to see drastic action from the City” within a short period of time. I have stressed every time that we must double our rates if we intend to take it on ourselves. Tonight our legal team was able to answer your questions about our legal agreement. If passed it will get our residents out from under the burden of paying the debt of updating the plants and systems. There are other important elements too the agreement. It requires Aqua too invest one million dollars in our system each year. It assures that programs to improve efficiency and repair our crumbling distribution and collection systems can begin as early as next summer. It dictates manageable rate increases a dollar or two until 2026. One thing is clear the City needs too take decisive action now too update both our water and wastewater systems. This is not just about selling the water. Our residents deserve better than what we have been able to deliver too them. They deserve better.
Mayor, Terry Pugh
The water tank at the commons was completed last week. They started filling it on Friday, gradually. I heard today that it is about half full.
Tonight I expect Council will vote on a resolution too slow down our decision on our crumbling water system. Last week four officials from the Ohio EPA met with the administration and most of City Council. They covered several important points that I would like to summarize for those of you who were not there. The Ohio EPA won’t express an opinion on whether or not St. Clairsville should privatize or try too dig ourselves out of our current situation. Their concern is that our systems are brought into compliance as soon as possible too insure the health, safety of our water and protect the environment. They will be involved in bringing us into compliance whether Aqua of the City is paying the bill. While there are loans available too help fund our needed projects in order to qualify the City would have too show an ability to repay those loans and our current rates are close to what they need to be. They said clearly that the time for studying and deliberation is long past. The EPA expects to see dramatic action and they want to see general engineering plans, not studies. I have said it many times over the past few years, the city has neglected the systems for decades. If you won’t listen to me, I hope you listen to the state EPA. Now is the time too face the facts? It is time that each of us be leaders and take action.
Police Chief, Jeff Henry: Not Present
Finance Director, Cindi Henry: No Report
Planning and Zoning Administrator, Tom Murphy: Not Present
Finance, Mike Smith: I gave Council some papers too look at
Utilities, Frank Sabatino: No Report
Police, Mark Bukmir: No Report
Street North Side, Jim Velas: Several alleys being patched
Street South Side, Beth Oprisch: No Report
Safety, Jim Velas: Meeting Thursday at 9:00 at City Garage for employees or any Council
Building and Grounds, Perry Basile: Where are we with the Rec. Center doors? Jim: Will Check with Shawn
Planning Commission, Mike Smith: No Report
Fire District, Frank Sabatino: Met last Wed. Took one man from part time too full time.
Received an ODNR grant too replace equipment. New squad should be in by Thanksgiving.
Recreation, Linda Jordan: Next meeting Monday, November 18th
Park District, Linda Jordan: Next meeting, Monday Nov. 11th at Home Savings Bank
Law Director, Richard Myser:
Tonight we have three pieces of legislation too consider. First is Resolution No. 2019-22. That is the piece of legislation that is on its third reading and up for action tonight. The second piece of legislation is Ordinance No. 2019-25 on its second reading. The last piece of Legislation is Ordinance No. 2019-26 also on its second reading.
There was presented and read to Council on its third and final reading by title only, Resolution No. 2019-22 A RESOLUTION RECOMMENDING THE CITY ADMINISTRATION WORKING WITH THE CITY COUNCIL UTILITY COMMITTEE, EXPLORE FURTHER OPTIONS WITH WE. QUICKS ALL ENGINEERING COMPANY AND THE OHIO RURAL COMMUNITY ASSISTANCE PROGRAM FOR THE FUNDING AND IMPROVEMENT OF THE CITY WATER AND SEWER SYSTEMS AND DECLARING AN EMERGENCY. Beth Oprisch moved that the rules requiring Ordinances and Resolutions too be read on three separate readings be suspended and declaring an emergency; Perry Basile seconded the motion.
ROLL CALL VOTE:
Basile Yes Sabatino No
Bukmir No Smith Yes
Jordan No Velas No
Roll Call Vote: Three (3) yes Four (4) No Motion Not Approved
There was presented and read to Council on its second reading by title only, ORDINANCE NO. 2019-25; AN ORDINANCE AUTHORIZING THE MAYOR TOO ENTER INTO AN ASSET PURCHASE AGREEMENT BETWEEN THE CITIES OF ST. CLAIRSVILLE, OHIO. AS SELLER AND AQUA OHIO WATER, INC., AS PURCHASER, AND AUTHORIZING THE ASSIGNMENT OF THE CITY’S RIGHTS AND OBLIGATIONS THEREUNDER AND DECLARING AN EMERGENCY.
There was presented and read to Council on its second reading by title only; ORDINANCE NO. 2019-26. AN ORDINANCE AUTHORIZING THE MAYOR TOO ENTER INTO AN ASSET PURCHASE AGREEMENT BETWEEN THE CITY OF ST. CLAIRSVILLE, OHIO, AS SELLER AND AQUA OHIO WASTEWATER, INC., AS PURCHASER, AND AUTHORIZING THE ASSIGNMENT OF THE CITY’S RIGHTS AND OBLIGATIONS THEREUNDER AND DECLARING AN EMERGENCY.
We will go into Executive Session tonight as authorized by the Ohio Revised Code Section 121.22 (G) (1) providing that we can discuss the election of our new President of Council due to the October 10, 2019 resignation of Tim Porter. Beth Oprisch: I don’t know if it is necessary to go into executive session. Richard Myser: You are absolutely right and if you want to vote not to go into executive session we don’t have to. If you want to vote on filling the vacancy it has to be done in open session. A motion to nominate Jim Velas as Council President was made by Beth Oprisch and seconded by Linda Jordan.
ROLL CALL VOTE:
Basile Yes Sabatino Yes
Bukmir Yes Smith Yes
Jordan Yes Velas Abstain
Roll Call Vote: Six (6) yes One (1) Abstain Motion Approved
Richard Myser: We just voted to replace the President of Council, at our next meeting Mr. Velas will be our presiding president. What that does is create an open seat for one of our members. According to our Charter, Council has 30 days starting today to replace that vacancy.
A motion was made by Beth Oprisch and seconded by Perry Basile to accept applications for the vacant 4th ward seat. They should be in by Monday, October 28th by 4:30 p.m. Applicants will be interviewed by the entire Council.
ROLL CALL VOTE:
Basile Yes Sabatino Yes
Bukmir Yes Smith Yes
Jordan Yes Velas Yes
Roll Call Vote: Six (6) yes Zero (0) No Motion Approved
NEW, OLD & OTHER BUSINESS:
Trick or Treat Night on Wednesday, October 30th from 6:00 to 7:30.
Next Meeting will be Monday, November 4, 2019
There being no further business too come before Council a motion to adjourn was made by Jim Velas and seconded by Mark Bukmir.
Council approved the October 21, 2019 Council Minutes at its regular scheduled meeting on November 18, 2019.