Lewes outlines position on BPW authority in motion

Legal fees in the City of Lewes and the Board of Public Works’ power struggle have already surpassed $180,000.

Responses to motions filed by each entity as part of a lawsuit in Superior Court are due within the next week, but the case is expected to drag on until late this year or early 2020.  

BPW officials filed a lawsuit July 17 asking the court to decide whether the city can force the BPW to require a pre-annexation agreement and whether a pre-annexation agreement is enforceable.

The city’s position was outlined in a motion to dismiss filed Oct. 6. The BPW submitted a motion for declaratory judgement the same day.

The squabble stems from the BPW’s intention to grant waivers or completely abandon the pre-annexation agreement, which requires property owners outside city limits who want BPW services to sign off on immediate or future annexation of their property.

Through Freedom of Information Act requests, the Cape Gazette has learned the city has spent just over $51,000 on the lawsuit to date. The BPW has spent about $75,000 on legal fees related to the case in a similar time frame. City Manager Ann Marie Townshend said insurance will reimburse $50,000 of litigation expenses. BPW General Manager Darrin Gordon could not be reached about insurance for the BPW. 

In 2017, the city and BPW each sought legal analysis regarding authority issues and enforceability of the pre-annexation agreement. The city spent about $41,000 on that report, while the BPW’s was about $15,000. 

The city argues the BPW’s charter was modified in 2009 to say city council is the operator of public utilities through its Board of Public Works. The city argues the relationship between the city and BPW is like a franchisor and franchisee.

City officials say the BPW charter confirms that by requiring the BPW to pay over to the city 5 percent of its revenues for utility services in lieu of franchise fees.

The city also argues the BPW president must obtain approval from the city before appointing a board member to fill a vacancy, and any real property purchased with BPW funds must be titled jointly by the BPW and the city.

The city argues the BPW’s charter does not give it the power to sue or be sued. The lawsuit says the BPW is not empowered to appear as a party in civil action except to collect monetary penalties for violations of its own rules and regulations.

In its motion, the BPW argues it has been a party to litigation not involving the city, citing two specific cases – BPW v. Greener from 2005 and Barcroft Co. v. BPW from 1980.

The city says the pre-annexation agreement has been a long-standing policy that’s always been supported by the BPW. The BPW memorialized the policy through a resolution in 2007. Then in 2013, the board adopted another resolution finding the policy was in the best interest of ratepayers.

More recently, the board changed its position on the policy and signaled its intention to abandon it.

The BPW’s service area has included areas outside the city limits since at least 1963.

In its motion, the BPW claims the pre-annexation agreement is unlawful because, if enforced, would require the BPW to discriminate against ratepayers. In certain situations, the BPW argues, residents seeking utilities could not obtain services from another provider, forcing them to agree to annexation they do not want.  The BPW reinforces its independence by saying it has the authority to borrow funds in its own name.  The BPW also points to the city’s comprehensive plan, which says the BPW is “in addition to and separate from the city.” It also says the BPW is authorized by the General Assembly under a separate charter to establish, control and regulate electric, water and sewer.  When it comes to providing services to properties within the city’s annexation area, the BPW says, the comp plan clearly states they have authority to make decisions.

“Only the Board of Public Works can implement recommendations related to electricity, stormwater management, drinking water and wastewater in Lewes,” the lawsuit emphasizes.

The city and BPW have 30 days from Oct. 6 to respond to each other’s motion. That will be followed by a 15-day window for another response. Judge E. Scott Bradley will ultimately make a ruling on the motions, which is likely to occur later this year or in early 2020.

Timeline

March 2007 - BPW officials adopt resolution memorializing the pre-annexation agreement

December 2013 - BPW adopts another resolution supporting the pre-annexation agreement

October 2016 - City Solicitor Glenn Mandalas, then also working as counsel to the BPW, issued a memorandum about the pre-annexation agreement saying he was unsure such an agreement would hold up in court if challenged 

April 2017 - BPW votes 4-1 to hire Michael Hoffman of law firm Tarabicos Grosso as counsel, replacing Glenn Mandalas. Board members and staff indicate possible conflicts of interest in Mandalas representing both the city and BPW

July 2017 - BPW receives an opinion from Hoffman saying BPW has ultimate authority over policies and a pre-annexation agreement is likely not enforceable

Early 2018 - Property owner within service area seeks exemption from pre-annexation agreement

May 2018 - BPW and city council hold a joint executive session to discuss pre-annexation agreement policy

June 2018 - BPW directors grant waiver request

March 2019 - Property purchaser within service area seeks exemption from pre-annexation agreement

May 2019 - BPW expresses support for waiver, but city officials object.

June 24, 2019 - City adopts resolution directing BPW to require annexation or signed pre-annexation agreement prior to providing utilities to a property

June 26, 2019 - BPW unanimously rejects the city’s position

July 17, 2019 - BPW files lawsuit in Superior Court seeking clarification on city’s authority over BPW and enforceability of pre-annexation agreement

Aug. 29, 2019 - BPW amends lawsuit, including more supporting information for the court

Sept. 6, 2019 - Judge E. Scott Bradley gives the OK for the BPW to submit a motion for declaratory judgement and for the city to submit a motion to dismiss

Oct. 6, 2019 - BPW and city attorneys each submit motions

Oct. 8, 2019 - BPW and city officials attend a Public Service Commission meeting in Dover. BPW seeks permission to provide service to the 50-acre Mitchell Farm near Cape Henlopen High School. City intervenes in the matter because the BPW has not secured a signed pre-annexation agreement. PSC officials delay action 30 days to see if BPW-city squabble is resolved