Milton files legal action over Artesian-Tidewater deal

The Town of Milton has filed legal action in Delaware Superior Court challenging the Delaware Public Service Commission’s approval of a deal whereby Artesian Wastewater Management would acquire Tidewater Environmental Services.

Mayor Ted Kanakos said in a statement, “A decision of this magnitude is too important to be rubber-stamped by the Public Service Commission without any regard for the sage advice of its own staff and the public advocate. The Town Council and I, along with our very capable town manager, are committed to safeguarding the interests of the residents of Milton and expect our voices to be heard on this matter of great importance.”

Town Manager Kristy Rogers said the action is not a lawsuit but an appeal of the commission’s decision to approve the deal. 

“The end goal is to assure the town has a seat at the table for the acquisition and assuring the transaction is in the public’s interest,” Rogers said.

Artesian CEO Dian Taylor said she believes Artesian has presented a better solution to Milton’s wastewater issues for both the customer and the environment, and that issues between the town and the company can be worked out. 

“I’m optimistic about seeing this project through,” she said.

The Artesian-Tidewater deal was announced in August, under the terms of which Artesian would acquire Tidewater Environmental Services, the wastewater management arm of Tidewater Utilities. The deal was for $6.4 million in cash, and other considerations. 

Tidewater Environmental Services served customers in Kent and Sussex counties, but one of the company’s biggest clients was the Town of Milton. Tidewater purchased the town’s wastewater operations in 2007. 

When the Tidewater-Artesian deal was announced, it was expected to close by Friday, Dec. 31, although with the town’s appeal, that closing date will not likely be until sometime in January. In the time between, Milton officials publicly expressed frustration that they were not able to get additional answers from the parties as to what that deal means for the town. The biggest issue is the building of a new wastewater treatment plant on Sam Lucas Road. 

Building a new plant has been in the works for years, as both the town and Tidewater wanted to move the plant away from its existing location on the Broadkill River waterfront on Front Street. Plans were put into motion when the town was given 10 acres on Sam Lucas Road by Loblolly LLC, the property management division of Draper Holdings, for town use. The town kept 5 acres for its own use, and that site is expected to house a new public works yard. The other 5 acres was given to Tidewater for a new plant. 

Tidewater was given final site-plan approval for the new plant by the Milton Planning and Zoning Commission in April. 

The town’s press release on its legal action says, “The sale of Tidewater Environmental Services to Artesian would not be in the public interest because it is unclear if certain contractual obligations of Tidewater will be honored under Artesian’s ownership, including an obligation to build a new wastewater treatment plant and water service line in the town, and it is unclear how changes in rates and billing techniques will affect the residents of Milton.”

According to the town’s legal filing, the town asked the Public Service Commission to grant the application, but under the condition that Artesian satisfy the town’s contract with Tidewater, which includes building the new plant and removing the Front Street plant, with the land going back to the town. The commission voted in favor of the sale without the town’s conditions on Oct. 27. 

The town, represented in this case by Glenn Mandalas, who has served as the town’s appellate attorney in other cases, argues that the commission erred in its ruling because there is insufficient evidence the sale is consistent with public interest. The town argues that the commission acted in an arbitrary and capricious manner in not developing a factual record consistent with the public interest and was biased in its decision making. 

Artesian’s plan

Taylor said Artesian has proposed that instead of building a new plant on Sam Lucas Road, Artesian would route Milton’s wastewater to a new regional plant Artesian would build at its Sussex Regional Recharge Facility, a 127-acre network of farmlands along Route 30. Taylor said this would enable Milton to no longer discharge treated wastewater into the Broadkill River, which would have still happened with the Sam Lucas Road plant. Instead, the treated wastewater would be spray irrigated on Artesian’s network of farm fields. 

Taylor said this solution is not just more environmentally friendly, but also more cost-efficient. She said the planned treatment plant would cost $23 million and would only serve Milton. However, the plant at the Artesian recharge facility would cost $13 million, and serve Milton and the surrounding area. 

Taylor said she has held meetings with Kanakos and members of Milton Town Council, and she believed they were making progress on issues that needed to be clarified. 

“Our solution is beneficial for the customer and avoids making unnecessary investments. I think the mayor is well-intentioned. A delay doesn’t benefit the customer. If it doesn’t go through, it will be a problem environmentally and financially,” she said. 

Artesian CFO Dave Spacht said after demolishing the old plant, the company would still give the land back to the town. He said Artesian is ready to go on building the new plant, with materials already on site, and is just waiting for permits from the Department of Natural Resources and Environmental Control. 

Spacht and Taylor said one of the sticking points could be a proposed 12-inch water line that Tidewater was scheduled to build to provide water to the new plant. Tidewater had applied to drill a private well on the site, but Milton Town Council denied Tidewater’s request and asked them to build a water line to connect to the town’s water system. Spacht and Taylor said a water line on Sam Lucas Road is not part of the transaction between Artesian and Tidewater. 

Spacht said Artesian has agreed to an eight-year transition period on rates with the town, to allow for both the move between companies, and for the building of the new plant, which could be online by late 2023 or early 2024. 

The next step for the appeal is a response from Artesian, which is expected within 30 days. 

“Our desire is to get it worked out. It should be worked out,” Taylor said.