CUMBERLAND – The town of Cumberland will pay over $660,000 to an entity it bought utilities from over a decade ago, settling a lawsuit between the two parties.
The dispute, which was in court for a couple years, was over which side was the rightful recipient of certain payments used for extending sewer lines.
Cumberland entered into an agreement with GEM Utilities, Inc. in 2010 to buy sewer and water assets, property, territorial authority and other rights used by GEM to provide sewer and water service in and around Hancock County.
A dispute arose between GEM Utilities, Inc. and Cumberland regarding agreement terms pertaining to recoupment payment obligations, and GEM filed a complaint against the town in Hancock County Superior Court 1 in 2020.
Ben Lipps, Cumberland town manager, noted that while the town bought GEM Utilities from GEM Utilities, Inc., the dispute was specifically over the asset purchase agreement for the sanitary sewer utility. As a part of that agreement, GEM Utilities, Inc. had other contract obligations that the town assumed, he continued, adding there was a payment schedule for those obligations.
Those obligations were essentially made up of contracts to extend sewer lines, Lipps said, through which the utility pays a portion of over-sizing the line and developers pay extra to oversize it for future development. As new development occurred and hooked onto the line that had been oversized, payments made by new development went to a schedule of contracts of developers to recoup the extra funds they paid above what would serve their development.
The town’s purchase agreement with GEM Utilities, Inc. stated GEM Utilities, Inc. would keep the right to that recoupment payment. Lipps said there was a dispute with past town officials over exactly who would keep that right – GEM Utilities as a utility run by the town, or GEM Utilities, Inc. – the entity the town bought the utilities from.
“Because obviously we [the town of Cumberland] are GEM Utilities as a utility, and the previous owner is GEM Utilities, Inc., and that needed to be resolved before the payments would be made,” Lipps said.
He added that when GEM Utilities, Inc. came to Cumberland and said it owed money stemming from those recoupment payment obligations, the town wanted to ensure that was the case.
“We’re just happy to have it resolved and we’re thankful that things were cordial and the money’s going where it belongs,” Lipps said.
The settlement agreement Cumberland Town Council approved earlier this month calls for the town to pay GEM Utilities, Inc. $662,761.41. Lipps said the town has enough money through its GEM Utilities to settle the payment in its operating balances.
“It won’t have any impact on operations or planned projects,” he said.