MINUTES OF THE BOARD OF COUNTY

COMMISSIONERS MEETING

August 19, 2008

The Board of County Commissioners for Cecil County met in regular session at the County Administrative Building, 200 Chesapeake Blvd., Elkton, MD. The following members of the Board were present:

• William C. Manlove, President
• Mark H. Guns, Vice President
• Rebecca J. Demmler, Commissioner
• Brian Lockhart, Commissioner
• Wayne L. Tome, Sr., Commissioner

Constituting a full Board.

The Board adjourned into a closed session at its work session on August 12, 2008 at 10:00 A.M., motion was made by Commissioner Lockhart, seconded by Vice President Guns and unanimously carried pursuant to the State Government, Annotated Code of Maryland 10-508 (a) (1) personnel matters; (7) legal advice and (14) negotiations.

The Board adjourned into a closed session at its work session on August 19, 2008 at 10:00 A.M., motion was made by Vice President Guns, seconded by Commissioner Lockhart, and unanimously carried pursuant to the State Government, Annotated Code of Maryland 10-508 (a) (1)personnel matters; and (7) legal advice and (14) negotiations.

The meeting of the Board of County Commissioners for Cecil County, August 19, 2008 was called to order by Commissioner Manlove at 2:00 p.m. and opened with the Pledge of Allegiance.

The minutes from the July 29, 2008 rezoning hearing were unanimously approved.

The minutes from the July 30, 2008 meeting were unanimously approved.

-COMMISSIONERS' COMMENTS-

The Board declined comment.

- TREASURER'S REPORT -

Pamela Howard, Treasurer for Cecil County presented the Treasurer's Report as of July 31, 2008. A copy of this report is attached hereto and incorporated into these minutes.

- W.L. GORE & ASSOCIATES, INC., 50^{TH ANNIVERSARY CELEBRATION -}

President Manlove and the Board presented W.L. Gore & Associates with a proclamation and plaque in honor of their 50th Anniversary.

- CERTIFICATE OF RECOGNITION - TONYA ADAMS -

President Manlove and the Board presented Tonya Adams with a Certificate of Recognition for her outstanding commitment to the Cecil County Recycling Program.

- CERTIFICATE OF RECOGNITION - CECIL COUNTY SOLID WASTE DIVISION-

President Manlove and the Board presented the Cecil County Solid Waste Division a Certification or Recognition for their outstanding commitment to the Cecil County Recycling Program.

- PUBLIC COMMENT -

Carl Roberts, 1641 Ingleside Avenue, Perryville, MD - commented in support of the Artesian Wastewater & Water Franchise Agreements, and urged the Board to vote in favor of agreements.

Joyce Bowlsbey, 73 Laurel Run Road, Elkton, MD - encouraged the Board to follow the recommendation of the Water & Wastewater Task Forces recommendation and approve the franchise agreement with Artesian.

Ralph Young, 9 Georgia Avenue, Earleville, MD - commented in support of the franchise agreements and suggested that the municipalities should also be discussing agreements with companies for their water and wastewater needs to alleviate the burden from the taxpayers.

Jim Brady, 987 Shady Beach Road, North East, MD - commented in support of the franchise agreements, he stated that the approval of such agreements would benefit the entire county and is line with the Comprehensive Plan.

Renee Quietmeyer, 60 Ridge Run Road, North East, MD - on behalf of the Cecil County Chamber of Commerce urged the Board to support the franchise agreements.

Laura Mayse, 265 Jacob's Way, Cecilton, MD - on behalf of the Cecil County Chamber of Commerce commented in support of the franchise agreements.

Chris Ann Szep, Cecil College, North East, MD - on behalf of Cecil College, commented in support of the franchise agreements.

George Kaplan, 35 Oak Street, Colora, MD - on behalf of the Cecil Land Use Alliance, commented in opposition to the franchise agreements and expressed concerns over the expansion of the service area. He also commented relative to a possible conflict between Commissioner Lockhart and his affiliation with Cecil Bank. Mr. Caplan further presented a petition to defer the decision by the Board.

Clifford Newman, 1488 Appleton Road, Elkton - commented in opposition to the expansion of the service area north of I-95, and encouraged the Board to defer the decision.

Vernon Duckett, 1061 Union Church Road, Elkton - commented in opposition to the franchise agreements and stated that if approved, Cecil County would soon become comparable to New Castle County.

Carol Wohner, 218 Catswamp Road, Elkton, - commented in opposition to the franchise agreements and stated that Commissioner Lockhart should recuse himself from this matter due to his affiliation with Cecil Bank, as a result of Cecil Bank and their vested interest in Aston Pointe. She further encouraged the Board to hold a public hearing on this matter.

Bill De Freitas, 42 Clearview Court, Elkton - commented in support of the franchise agreements and applauded the Board for taking action on this initiative.

Ed Cairns, 104 Jackson Hall School Road, Elkton - commented in opposition to the expanded area of beyond I-95 into the Northern Agricultural District and stated that if approved, would impose growth in the protected areas.

Ron Hartman, 164 Little Egypt Road, Elkton, MD - commented in opposition to the franchise agreements and spoke in reference to capacities and build-outs of the proposed project.

Jane Schaefer, 4 Dare Drive, Elkton - encouraged the Board to delay their decision and commented about concerns for the expansion of service.

Tom McWilliams, 245 Plum Point Road, Elkton - commented in support of the plan as recommended by the Water & Wastewater Task Force, but expressed concerns about the expanded area.

Russell Holland, 20 E. Parkway, Elkton - commented in opposition to the agreement as written, due to the change in the original scope of the RFP. He encouraged the Board to reconsider this issue.

Steve Vandevort, Town of Charlestown - encouraged the Board to delay their decision until such a time that the Municipalities are able to discuss this matter with the Board.

Dianna Broomell, 1000 Nesbitt Road, Colora - commented in opposition to the privatization of the county's waster and wastewater systems, she stated that these type of issues should be handled with various growth control tools, such as APFO's and special taxing districts. She further stated that the "open meeting act" has been violated and that Commissioner Lockhart's affiliation with Cecil Bank and Aston Pointe is a conflict.

John Williams, 2 Woodbine Circle, Elkton - commented in opposition for any expansion beyond the CSX Rail line, and stated that making a decision today would be premature.

Deborah Marvell, 27 Cox Road, Colora, MD - read a letter from Anne Lane opposing the agreement and the presence of Commissioner Lockhart in taking part of a vote as a result of his affiliation with Cecil Bank and Aston Pointe.

Elaine Ondre, 709 S. Main Street, North East - presented the Board with information relating to federal grant money that is available for stream assessments.

Jeanne Minner, Town of Elkton - on behalf of the Mayor, requested that the Board delay their decision.

Jim Mullin - commented in support of the area, below I-95.

Robert McKnight, Town of North East - requested that the Board delay any decision and take this matter under serious consideration.

Dan Derr, 724 Conowingo Road, Conowingo - commented in support of the franchise agreements and stated that this has been talked about for 30 years and the Board needs to follow the recommendation of Water & Wastewater Task Force.

Charles Herzog, 56 McCush Lane, Conowingo, MD - commented about his concerns for the expanded service area of the agreement and the effect on MALPF easements and future rural legacy grants this expansion may endanger. He encouraged the Board to defer their vote for a 30 - 60 day period, so that the citizens can determine whether or not this is the best thing for the county.

Nancy Schwerzler, Cecil County SPCA - commented in reference to the proposed resolution to increase dog license fees in Cecil County. She stated that these fees have not been updated for more than a decade.

Owen Thorne, 20 Hillwood Road, Elkton - recommended that the Board postpone their vote on the franchise agreements and spoke in opposition to the proposed agreements. He stated that as a result of the expanded franchise area, Artesian will be pumping water from Pennsylvania and Delaware to meet this demand. He further stated that Commissioner Lockhart should immediately withdraw from this vote, due to involvement with Cecil Bank and Aston Pointe. He further alleged that the open process was violated and kept secret from the towns and state.

Patricia Lemmerman, 85 W Shady Beach Road, North East - requested that the Board delay their vote.

Dwight Thomey, 18 Lake Forest Road, Elkton - commented in support of the franchise agreements and stated that this initiative will alleviate future disputes between the county and municipalities. He urged the Board to move forward with the proposal.

- INTRODUCTORY ITEM - RESOLUTION - CECIL COUNTY VOLUNTEER FIRE COMPANY, EQUIPMENT ACQUISITION PROGRAM 

Craig Whiteford, Budget Manager, presented the Board with a Resolution for the continuation of the annual Fire Company, Equipment Acquisition Program that will provide the local volunteer fire companies up to $1,075,000 of financial assistance in fiscal year FY 09 to be used for the purchase of replacement vehicles and equipment pursuant to the policies as set forth in the resolution.

The Resolution will be presented to the Board for consideration at their September 2, 2008 meeting.

- ACTION ITEMS -

- FRANCHISE AGREEMENTS FOR WASTEWATER AND WATER SERVICES BETWEEN CECIL COUNTY, MARYLAND AND ARTESIAN WASTEWATER MARYLAND, INC., AND ARTESIAN WATER MARYLAND INC., (ELKTON WEST) -

Larry Haislip presented the Board with the final report and recommendation of the Elkton West Water & Wastewater Services Evaluation Committee and proposed franchise agreements for wastewater and water services between Cecil County and Artesian Wastewater, Inc., and Artesian Water Maryland, Inc.

In July, 2007, Cecil County Government issued Request for Proposal No. 08-02 (the "RFP"), inviting appropriate and qualified entities to submit proposals to develop water and wastewater service within the area known and designated as the Elkton West Service Area.

The County Commissioners appointed an Evaluation Committee to consider and evaluate potential RFP responses. The Evaluation Committee consisted of the County Administrator, the Directors of the Departments of Public Works, Economic Development and Planning & Zoning, the Budget Manager, the Purchasing Agent and Commissioner Brian Lockhart.

The County received proposals from Artesian Water Maryland, Inc. ("Artesian"), and Tidewater Utilities, Inc. ("Tidewater") in answer to the RFP. The respondents were interviewed and their proposals were evaluated by the Evaluation Committee.

In late 2007 the Evaluation Committee made a preliminary report of its findings and recommendations to the County Commissioners.

The Evaluation Committee reported that it had received timely responses from Tidewater and Artesian, each dated September 7, 2007. The Evaluation Committee reviewed each of the written responses and found them to be compliant with the requirements of the RFP. The Evaluation Committee met with each of the respondents on October 19, 2007, to receive formal presentations from each of them. As contemplated in the RFP, each respondent provided an Executive Summary/Overview with respect to its presentation. The Executive Summaries were dated and received October 23, 2007, and were found to be compliant with the terms of the RFP.

The Evaluation Committee and counsel met in extended sessions with each of the respondents in November 2007. At the conclusion of these meetings the Evaluation Committee deliberated, and evaluated the respondents and their responses. As set forth in the RFP, the Evaluation Committee's criteria included an evaluation of (i) each respondent's understanding of the project; (ii) the qualifications of each proposed development team; (iii) proposed project design and specifications, and (iv) the benefits, scope and structure of the financial aspects of the proposed transaction.

At the conclusion of this process the Evaluation Committee, and recommended that the Board of County Commissions select Artesian as the respondent with whom the County should engage in detailed negotiations for the award of a franchise agreement for water and wastewater systems for the Elkton West Service Area, as contemplated in the RFP. In making this preliminary report and recommendation the Evaluation Committee emphasized the following:

1. The Evaluation Committee found that the responses of both Artesian and Tidewater were compliant with the requirements of the RFP.

2. The Evaluation Committee found that, based on the responses and the Evaluation Committee's inquiries, either respondent was capable of satisfying the requirements for the installation of water and wastewater systems as contemplated by the RFP, and that the probability was high that the County would be able to negotiate a satisfactory agreement with either one of the respondents.

3. The Evaluation Committee made a preliminary determination that the proposal and qualifications of Artesian were comparatively more advantageous to Cecil County Government, based on the technical and financial factors set forth in the respondent's RFPs. In particular, the Evaluation Committee noted the following factors:

a. Artesian has access to significant water resources for immediate delivery to the proposed service area, through multiple and redundant sources, including sources of other water authorities, through over twenty interconnection agreements.

b. Artesian appears to have access to significant capital resources to enable it to fund the proposed systems.

c. Artesian appears to have significant depth and breadth of experience in designing, building and operating water and wastewater systems of the types contemplated in the RFP; and this experience appears to be available within Artesian itself, as distinct from being provided by joint venture or by subcontract, with other specialists or service providers.

d. Artesian is a publicly regulated public service company, subject to the jurisdiction of the Maryland Public Service Commission.

The Evaluation Committee recommended that Cecil County Government make a preliminary determination with respect to the franchise award, subject to successful conclusion of negotiations.

In December 2007, following a public hearing on the matter, the Cecil County Commissioners voted to accept the recommendation of the Evaluation Committee and to authorize it to commence to engage in negotiations with Artesian exclusively, subject to the reservation of the right to Cecil County Government to suspend or abandon such negotiations whenever, in the judgment of the Evaluation Committee, such negotiations were not likely to lead to the conclusion of an agreement upon terms which were deemed advantageous to Cecil County Government.

The Evaluation Committee commenced negotiations with Artesian in January 2008, and completed its assigned task in late July 2008, and recommends the accompanying agreements, entitled "FRANCHISE FOR WATER SERVICES AND WATER SERVICE AGREEMENT" between the County and Artesian Water Maryland, Inc., and "FRANCHISE FOR WASTEWATER SERVICES AND WASTEWATER SERVICE AGREEMENT" between the County and Artesian Wastewater Maryland, Inc., for acceptance by the County Commissioners. The basis for the Evaluation Committee's recommendations follows, including highlights of the referenced agreements.

Determination to Award Franchise as Opposed to Operation and Maintenance of County-Owned Systems and County Purchase of Water

The proposed agreements contemplate the issuance of two franchises, one for the installation and operation of a water system, the other for the installation and operation of a wastewater system, initially within the area delineated in the RFP as the "Elkton West Service Area." Provision is also made, in each agreement, for expansion of the water and wastewater service areas, in connection with the conclusion of so-called "Definitive Agreements" with the relevant franchisees, for the sale and transfer of certain county and privately owned water and wastewater facilities, all of which presently lie outside of the Elkton West Service Area. Some preliminary word is on order about how these agreements came to take the forms in which they are now presented.

The County's initial search for assistance in the development of a water and wastewater system for the Elkton West Service Area was crafted in the form of a request for proposal, governed with reference to the procurement and purchasing provisions of Chapter 183 of the County Code, because the County's request was framed in the alternative, as either (A) a request for contract services to develop and/or operate County-owned water and wastewater systems in the area or (B) a request to apply for and to receive a franchise for the development and operation of private systems. To the extent that the process was governed by Chapter 183 of the County Code - governing County procurements - the RFP specifically provided that the County reserved the right to accept or reject, in whole or in part, any responses, as well as "to negotiate further with one or more of the bidders as to any features of their bids and to accept modifications the work and bid price when such action will be in [the County's] interest and is desirable."

After careful consideration, the Evaluation Committee determined that the ownership and operation of additional County facilities, for water and wastewater service, within the Elkton West Service Area, was not in the public interest. Accordingly, the County did not ultimately determine to accept either proposal (from Artesian and Tidewater, the two RFP respondents) for the provision of goods and services, for the construction and operation of County-owned water and wastewater systems. Instead, the County determined to issue franchises for the development and operation of such systems by Artesian, as a defined "public service company" under the Public Utility Companies article of the Annotated Code of Maryland, subject to regulation by the Maryland Public Service Commission. The agreements also contemplate the potential sale of portions of County-owned systems and for their further ownership and operation by these publicly regulated public utility companies, under an expansion of those franchises.

Under applicable provisions of the Maryland Code as applied to Cecil County, neither the award of franchises for the private operation of water and wastewater systems nor the sale of County property are governed by the procurement provisions of Chapter 183 of the County Code. Rather, the Commissioners have extensive power to grant franchises for water and wastewater systems, as well as to enter into options, memoranda of understandings, letters of intent and the like respecting the disposition of County property. These decisions, as to franchise issuance and as to sale of County property, are within the scope of the plenary powers of the County Commissioners, to which the procurement and bid provisions of the County Code do not apply in the first place.

Provisions for Potential Sale of County-Owned Systems and for Expansion of Franchise Areas

A word is also in order respecting the provisions of each franchise agreement which calls for the potential sale and transfer of certain County-owned facilities (most notably the Meadowview Wastewater Treatment Plant) as well as the franchisee's acquisition and operation of presently-privately held facilities (the Ceco WWTP), together with the expansion of the franchise areas to accommodate the franchisee's expanded operations.

The RFP specifically provided that "The County also reserves the right to negotiate further with one or more of the bidders as to any features of their bids and to accept modifications of the work and bid price when such action will be in their best interests and is desirable. The responses of Artesian as well as Tidewater each spoke to the potentiality of expansion of their proposals to accommodate ownership, or at least operation and maintenance, of existing County facilities located outside the existing defined service area. For example, in its response Artesian stated: "Artesian also proposes the option of an expansion to the County's Meadowview wastewater plant for increased treatment and disposal requirements;" and "Artesian proposes to purchase the Cherry Hill wastewater treatment facility." These provisions reflect Artesian's argument, made at the beginning of the RFP process, that the best approach to meeting the County's objective for the provision of wastewater service might be to incorporate existing County facilities. The Evaluation Committee was not initially receptive to these arguments, desiring to confine its actions to the recommendation of an award of franchises within the initially-defined Elkton West Service Area. But during the seven months of negotiations, it became increasingly apparent to all parties that the best beneficial use of the limited nutrient credits available in Cecil County arose as a significant matter, particularly in regard to the County's desire for expansion of its Seneca Point wastewater plant. It also became apparent that the Meadowview wastewater facility might have significantly greater discharge available than initially believed. All of these matters were brought to the fore when, in early 2008, Ceco Utilities, Inc., approached the County with an offer to have the County acquire and operate CECO's Manchester Park wastewater treatment system, then under citation and mandate from the Maryland Department of the Environment for its non-compliant status and operations. The County, under the initiative of the Director of Public Works and his staff, developed a plan for this acquisition and for the ultimate re-routing of discharges from the Manchester Park system and the Cherry Hill system up to, and through, the County's Meadowview system - and thus completely out of the Chesapeake Bay discharge area. Initial discussions between the Director of DPW and State MDE officials suggested that such a plan might be favorably received by state officials. However, when the Evaluation Committee considered the potential costs to the County to implement such plans using County resources it determined that Artesian might be able to accomplish these goals more quickly and more efficiently and more economically than the County. The County determined that Artesian had sufficient financial resources to fund improvements to existing County facilities, while the County faced other substantial financial needs and commitments, and that Artesian could provide economies of scale resulting in the more cost-effective provision of water and wastewater service than if the County acquired or retained ownership of these existing systems. Considering these facts, and as contemplated by the language within the RFP and Artesian's proposal, the final negotiated agreements progressed to include the potentiality of an expansion of the franchise area upon the negotiation of definitive agreements for the transfer of existing county-owned water and wastewater facilities (other than Seneca Point) to Artesian.

The Evaluation Committee is at pains to emphasize that the proposed franchise agreements DO NOT expand the franchise area beyond that contemplated in the RFP; and they DO NOT accomplish the sale or other transfer of ANY existing County or privately-owned water and wastewater systems lying outside of the originally defined Elkton West Service Area. The agreements do recognize the present intent of the County and the proposed franchisee to work toward those goals. But significant issues remain to be discussed and agreed upon: timing, order of exercise, valuation of assets, method of payment or reimbursement to the County, use and disposition of wastewater/nutrient treatment credits - to name but a few. The proposed franchise agreements contemplate that these matters will be the subject of detailed private discussion and public review and comment, at the local, County and State level, over the course of weeks or months following the execution of the proposed franchise agreements.

Elements of Water and Wastewater Franchises and Agreements

Article 25, §3D of the Annotated Code of Maryland provides that the Cecil County Commissioners are authorized to issue franchises for the ownership and operation of water and wastewater systems within the County in order to assure delivery of adequate, economical, and efficient services to its citizens, to avoid duplication of facilities, to provide for the health and safety of its citizens, to control disease, to prevent blight and other environmental degradation, to utilize efficiently the public right-of-way, to protect limited natural resources for the benefit of the citizens of the County, and to promote the general health and welfare by providing for adequate water systems. The proposed franchise agreements are to be issued by the County in exercise of that authority. Pursuant to the Cecil County Code no water or wastewater system may be constructed in the County without County approval. And, pursuant to the Public Utility Companies article of the Maryland Annotated Code: (i) a person may not construct a water or wastewater system for public use without the prior authorization of the Maryland Public Service Commission; and (ii) in order to obtain that approval such a person must first hold a franchise from the County, evidencing the County's consent before laying pipes or constructing water works within the proposed service area, and the Commissioners may adopt reasonable regulations for the laying of pipes, construction of works and operations of a public utility company, and such a person may not exercise a franchise except upon a demonstration to the Public Service Commission that the County Commissioners have provided the required consent for the exercise of the franchise, and then only to the extent authorized by the Public Service Commission.

The purposes of the proposed agreements are to: (i) confirm the grant of the water and wastewater franchises to the identified Artesian entities, as the defined "Franchisee" in each instance, as a franchise created in exercise of the authority vested in the Commissioners pursuant to Article 25, §3D of the Annotated Code of Maryland; (ii) establish the Franchise Area, and the Franchise Term, including provision for expansion of the Franchise Area in connection with the potential sale and disposition of certain County-owned facilities to the franchisees; (iii) define the terms, covenants, conditions and restrictions upon which each franchise is granted by the Commissioners and upon which it is to be accepted and held by the relevant franchisee, and exercised by the franchisee subject to the regulatory control of the Maryland Public Service Commission under Maryland law; and (iv) define the terms, covenants, conditions and restrictions upon which each franchisee contractually agrees with the County to provide water or wastewater services within the franchise area.

Here are some of the highlights or essential terms from the agreements:

· the County grants Franchisee the right and franchise to design, build, own, operate, maintain, repair and replace the water and wastewater systems solely with respect to the defined Franchise Area, for the Franchise Term (20 years, subject to renewals for three successive periods, each of 20 years).