McGinnes’s ready to negotiate on BIPCo stock

Fri, 01/12/2018 - 9:15am

As Block Island Utility Board of Commissioners Bill Penn made the motion to go into closed session on Jan. 9 to discuss the acquisition of BIPCo, former BIPCo President Cliff McGinnes, whose wife Sara is the minority shareholder of the power company, said he had a couple of questions. As minority shareholders, he said he was confused as to who had the authority to talk to him and his wife about the acquisition of their share of BIPCo.

Cliff McGinnes said there were three entities involved: the BIPCo Board of Directors, the Town Council (since the town owns two-thirds of the shares of BIPCo), and the Utility District Board.

“At this juncture, it’s the Town Council,” said Penn.

But First Warden Ken Lacoste, who is now on the BIPCo Board of Directors, disagreed, saying that the BIPCo Board was “the front line.”

Commissioner Everett Shorey told Cliff McGinnes that “there are several options.” In one scenario, BIPCo could purchase and then retire the McGinnes’s stock. Another option is for the Utility District to acquire the town’s stock, and the McGinnes’s stock directly from them. A third option is for the Utility District to buy the assets of the company, and not the stock.

“In the end, the people with the money would be us,” said Shorey.

“So where would you get the money?” asked Sara McGinnes. 

Penn said they were in discussions with two banks — CoBank and the National Rural Utilities Cooperative Finance Corporation — both of which have made presentations to the Utility District in recent months, and both of which expressed the desire to work with the new entity.

“Both organizations provide technical support and educational services” said Penn. “That’s a plus for us.”

Commissioner Mary Jane Balser said she was also impressed by the services the two banks could provide. 

“Are you ready to sit down and negotiate?” asked Sara McGinnes.

“Yes,” said Shorey.

“To get closer, it’s my intention to have a sit-down between the BIPCo Board and the Town Council,” said Lacoste, “so we’re on the same page.”

Penn asked if the Utility District could be part of the discussion, which would be held in closed session. “We understand the interest of the ratepayers, but there’s also the interest of the taxpayers,” said Lacoste.

From the audience, Bill McCombe asked Lacoste if any actions taken by the BIPCo Board in negotiating with the McGinnes’s would have to be approved by the Town Council, and he was assured that it would be.

“The Town Council will have the final say,” Lacoste said.

Sara McGinnes asked if it would be okay for them to talk to the BIPCo Board themselves, and was told they could.

“It would be helpful if you would put a proposal on the table,” said Penn.

“I’m glad to see this — there’s some movement here,” said McCombe.

“To be clear, it’s okay for Sara to talk to BIPCo?” asked BIPCo President and Board Director Jeffery Wright.

“Both parties are free to talk,” said Shorey. But he cautioned that there could be an impasse. “You can make a deal with BIPCo, but that’s not going to change what we’re willing to buy (BIPCo) for.”

“We’re going to keep trudging and get our financing in order,” said Balser, expressing hope to “get everything done in one transaction.”

“It’s our preference that you talk to us,” said Shorey.

The New Shoreham Town Council has agreed to lend the Utility District $25,000 for start up costs. Penn, who is the Board’s Treasurer, thanked them for the loan “which we greatly appreciate.” Progress at the Utility District has been stymied by the lack of funds so far, with the exception of obtaining legal counsel from Partridge, Snow and Hahn. 

“In conjunction with this we need to open a bank account,” said Penn, hoping that the authorization for him to do so could be made at the meeting. However, Balser noted that the opening of a bank account was not specifically on the agenda, and after some discussion on whether acceptance of the note and opening an account could be rolled together under the same agenda item, it was decided that they shouldn’t. The matter was tabled until Jan. 18.

Directors and Officer’s insurance is on the shopping list, and an inquiry was made to R.I. Interlocal Trust, which provides insurance products, including health insurance, to cities, towns, and school systems in the state. Interlocal Trust was asked if it could underwrite the Utility District, and the answer was essentially “no.”

Shorey said he had obtained a quote from the Block Island Power Company’s insurance provider of $5,000 for the D&O insurance, but that figure seemed high to both Penn and Balser. Both said they would reach out to their own insurance agents to obtain additional quotes for coverage.

The Commissioners approved payment — once a bank account is opened — of the first invoice from Partridge, Snow and Hahn in the amount of $6,000. When asked what services had been performed so far, Shorey said that there were three. The first two concerned options for acquiring BIPCo, which is ultimately the goal of the Utility District. 

Penn said the third service involved obtaining tax-exempt status from the IRS and the state. Penn said the determination of PS&H was that tax exempt status on the federal level was “implicit in the legislation.” The enabling legislation defines the Utility District as a governmental entity, which is “by definition,” according to Penn, tax exempt.

This finding is important as an application to the IRS requesting tax exempt, or not-for-profit status, could take several months to be reviewed and accepted.

The next meeting of the Utility District Commissioners will be January 18 at 12:30 p.m. at Town Hall.