Statement on McGinnes litigation

Thu, 09/02/2021 - 3:30pm

The following statement sent to the New Shoreham Town Council was copied to The Block Island Times.
On August 6,2021 a final judgment was entered in Superior Court in a case initiated by Sara McGinnes as a dissenting minority shareholder of the Block Island Power Company regarding the sale of its assets to the Block Island Utility District. The aim was to challenge the value of her one-third interest at $900,000, an amount agreed to by the prior shareholders when the Town of New Shoreham purchased the Power Company in 2015. Sara refused to sell at that time and, in fact, initiated two lawsuits to try to halt the sale, but it occurred as planned in 2016.

The town subsequently wrote legislation approved by the State of RI to create a non-profit Municipal Utility District, the first in Rhode Island. Once created, the Utility District’s newly elected Board made an offer to purchase the assets of the Power Company and the offer was accepted. The balance of the purchase price, once liabilities were paid off, was intended to be distributed to the shareholders, 2/3 to the town and 1/3 to Sara McGinnes as the minority shareholder. Sara received $900,000, representing the fair value of her shares as determined in 2016 and reaffirmed by an appraisal done for the Power Company in contemplation of the sale. Under the title of the Sara Golvinveaux McGinnes 2011 Trust, Sara exercised her statutory right as
a dissenting shareholder to challenge that valuation. She never wavered from insisting that her share should be valued at $2,892,000, an amount that precluded any reasonable possibility of settlement prior to trial. The sale to the Utility District went forward and the lawsuit to resolve Sara’s claim proceeded. The money from the sale that remained after payment of liabilities and the $900,000 paid to Sara, was held in escrow under the title of the Island Light and Power Company until the lawsuit was resolved.
The trial was held in March of this year and was essentially a battle of appraisers for the parties who valued the company as of the date of the vote to sell to the Utility District— December 2018. While the plaintiffs were able to prevail on several issues claimed by Sara’s appraiser, Judge Licht ultimately found that the value of BIPCo had increased during the two years the town was in charge and awarded Sara’s trust an additional $815,000 beyond the
$900,000 already paid to her.
The final judgment entered this month included that amount plus interest and expenses for a total of $1,172,688.01. This money will be paid from the balance of the sale held by the Light and Power Company and a previously agreed contribution of $300,000 from the Utility District. Because of the court judgment, what remains from this distribution will be paid to the town as a shareholder and should amount to approximately $500,000.

Thus ends a lengthy saga, made more so by these lawsuits. Although the end result meant that the town did not get a full refund of the original $1.8 million it fronted for the purchase of 2/3 of the shares of BIPCo, the result is that BIPCo was turned into the non-profit Block Island Utility District, with all the benefits a non-profit brings, including the support of national Utility Districts, wonderful responsive management under the direction of Jeff Wright which is positively impacting rates and overall reliability, at a final cost to the town of only $1.3 million.