Utility District refinances town loan
The New Shoreham Town Council voted unanimously (3-0) at a special meeting on Jan. 28 to approve a short-term loan of $5,400 to the Block Island Utility District to fund the extension of liability insurance for its five Board of Commissioners. The insurance was expected to expire on Jan. 29, so the Utility District refinanced its original balloon promissory note of $25,000. With the additional loan, and accumulated interest from the past year, the Utility District’s promissory note now totals $31,170.92.
The insurance needed to be extended to protect the Utility District’s board members while it completes its ongoing discussions about acquiring the assets of the Block Island Power Company. The five board members are: Chair Barbara MacMullan, William Penn, Everett Shorey, Jack Savoie and Mary Jane Balser. The Utility District has had insurance since the board members were elected. MacMullan and Penn said at the Jan. 28 meeting that it hoped to close on the asset sale on Feb. 14, but a final date had not been set.
The terms of the promissory note drafted by the town states that the quasi-municipal corporation must pay back the loan with any “unpaid principal and all accrued interest” by “six months from the date of execution” of the note; or when the Utility District “secures and closes on financing of any type in excess of $250,000.” The balloon note, initially executed on Jan. 24, 2018, “may be prepaid in full, or in part at any time.”
Town Manager Ed Roberge told the council, “The Town Solicitor has reviewed this draft, and has concurred with this format.”
MacMullan informed the Town Council that the loan would be paid back to the town when the Utility District closes on its purchase of BIPCo’s assets. “Our insurance expires tomorrow,” noted MacMullan, seated beside Penn at the meeting.
“We had anticipated when we got that insurance that we would have completed the transaction of acquiring BIPCo’s assets by tomorrow,” said MacMullan. “For a variety of reasons that did not happen. In the meantime, we need to renew that insurance, and we don’t have the funds to do so.”
Resident Chris Warfel asked MacMullan to explain the “problems” associated with the transaction, and why the asset purchase did not close on schedule, and how confident she was that it would close by Feb. 14. Warfel, and 11 other plaintiffs, were involved with an unsuccessful lawsuit opposing the town’s $1.8 million voter-authorized purchase of BIPCo on Sept. 26, 2016.
“I wouldn’t call them problems,” said MacMullan. “It just took us longer than expected to come to an agreement on the asset purchase agreement.” MacMullan said she hoped the sale would go forth on Feb. 14. “It’s a matter of (BIPCo) completing their paperwork,” she said.
“This will give us ownership of all of BIPCo’s assets,” added MacMullan. “The corporation (BIPCo) will continue to exist, but the assets will be transferred to the Utility District.”
“Isn’t the end game for BIPCo to disappear?” asked Councilor Martha Ball, noting the conversion from the old private utility company to a town-owned and governed Utility District.
“Yes,” said MacMullan, noting that BIPCo would be dissolved after the debt is paid and the shareholders are paid.
Resident Cathy Payne, also a plaintiff on the BIPCo purchase lawsuit, asked why BIUD doesn’t have the funds to pay for their own liability insurance. During a fiery salvo, Payne complained that her “rates haven’t gone down,” and asked why BIPCo President Jeffery Wright was not in attendance at the meeting. “If you don’t have the money in your pocket you shouldn’t be buying something,” she said.
Boudreau said that Payne “voiced concerns for a lot of folks on the island,” and then asked MacMullan to explain why BIUD doesn’t currently have the funds to pay for the insurance.
MacMullan explained that the Utility District has no assets and is not yet in operation, and therefore has not received any revenue. She noted that board members are unpaid volunteers, and the Utility District is in the process of acquiring BIPCo’s assets, and once the transaction is complete, and the Utility District begins generating revenue, collecting rates, etc., it will then pay back the town for the loan.
Penn informed Payne that Wright was on vacation and did not have knowledge of the meeting, but he would be brought up to speed upon his return.
Resident Verna Littlefield, a plaintiff on the lawsuit along with Payne and Warfel, asked why BIUD needs to pay for insurance for board members when it’s not in operation yet. “Why are they having to pay for insurance if they don’t have any authority to make any decisions about what goes on?”
“They do have authority,” said Finance Director Amy Land, noting that the Utility District was established by the Rhode Island state legislature, and the board members have been making decisions. “Their actions leave them open to challenge,” she said.
“This protects individuals from getting sued,” said Councilor Willi. “Who wants to run for elected office without having any protection of getting sued individually?” Willi said the board members have been meeting and making decisions on behalf of the Utility District. “I wouldn’t want to do that without insurance.”
Roberge summarized the formation of BIUD, noting that the Utility District borrowed $25,000 “as a loan to get them started.” He said those funds paid for the “first annual insurance policy, legal representation and the cost of creating the asset sale agreement.”
Roberge said that extending the liability “insurance policy was important.” He noted, “It was a unique request,” but once the Utility District “has assets, the BIUD intends to pay back” the loan. “It’s been a two-and-a-half year process. This is just one of those small steps.”
As for Wright’s status, he told The Times that the plan is for him to remain BIPCo’s President until the company is dissolved, “just to provide continuity through to the end.” Wright said he thinks that he will become President of the Utility District after BIPCo is dissolved.