City of Gloucester Reaches Settlement with the Town of Essex

December 17, 2019

City of Gloucester Reaches Settlement with the Town of Essex

–Gloucester and Essex Agree to Financial Settlement for Capital Costs

–Amends Inter-Municipal Agreement for 25 Years; Wholesale Rate Set

GLOUCESTER, MA (December 17, 2019) – Mayor Sefatia Romeo Theken today announced that the City of Gloucester recently reached a settlement with the Town of Essex regarding litigation involving the Combined Sewer Overflow (CSO) project.

In 2000, Gloucester entered into an inter-municipal agreement (IMA) with the Town of Essex setting the terms and conditions for which Gloucester agreed to sell and Essex agreed to buy wastewater treatment and disposal capacity from Gloucester.

In 2017, there arose a dispute regarding certain language in the 2000 IMA.  As a result, Gloucester brought suit against Essex for certain damages that included, among other things, breach of contract.

After engaging in successful mediation, a settlement was reached in September that was ratified by the Gloucester City Council on December 10 and by the Town of Essex’s Board of Selectmen at their December 16 meeting.  The settlement requires Essex to pay Gloucester $1,664,134.75 in equal, annual installments of $66,565.39 each over a period of twenty-five (25) years to be made on or before the 31st day of July in each fiscal year, beginning in Fiscal Year 2021.

James Destino, Gloucester’s Chief Administrative Officer said, “We are pleased to have reached an amicable settlement with our neighbors.  The money the parties agreed to represents Essex’s share of the CSO project.  With that behind us we look forward to our long-term partnership and ongoing regional cooperation for this work.”

Annual payments will go into the Enterprise Fund and be used to pay down debt.

Additionally, both parties agreed to the renegotiation of the IMA outlining the terms on how Gloucester’s Department of Public Works will continue to provide sewer service to Essex in consideration for payment of applicable sewer use rates and fees.

In recognition of the infrastructure work, maintenance and operation Essex will manage in its own town an IMA-Wholesale Rate was set.  That rate is fourteen percent (14%) less than the sewer rate charged to Gloucester’s residential users.  Gloucester’s residential rate may be amended from time to time and the IMA-Wholesale Rate will automatically adjust for a period of twenty-five (25) years from July 1, 2020 to June 30, 2044.

Essex expects that the annual savings from the new IMA-Wholesale Rate will offset the amount it has agreed to pay Gloucester for each annual CSO-related payment.

Andrew Spinney, Chairman of the Essex Board of Selectmen, said “The Essex Board of Selectmen is happy that, through mediation, we have reached an agreement with the City that will satisfy both communities’ needs for the next 25 years.  I applaud all of the officials in both communities for their hard work in coming to this important agreement.”

Gloucester also has an IMA for this project with the Town of Rockport.  The two communities have begun discussions for amending that IMA based on the Essex settlement.