Friday, March 21, 2008

Nestle's propsal could change everything

SATURDAY UPDATE: Ken MacGray at the forum posted a note from Nestle that is being circulated among the press:
Hi Clinton and Sterling reporters --

there's an article on the above paper's web site tonight which contains significant factual errors -- including an outlandish figure of 28 million. We have an executive summary of the RFP response prepared which we'll provide you on Monday. While we work at getting a correction over the weekend, we just wanted to make sure the mistake did not get repeated elsewhere.

Thank you and have a good weekend.

Nancy J. Sterling, APR
Senior Vice President, Strategic Communications ML Strategies, LLC
The discussion there is speculating that the proposal is for $2.55 per 100 cubic feet of water, which would bring the contract down to $280,000 per year from the reported $28 million. If that speculation is true, it changes the discussion 18o degrees. Would it be worth Clinton's trouble for an additional $280,000?

In any event, I guess we'll have to find out Monday to find out if Nestle's Easter basket is filled with cash or not.

Nestle presented Clinton with their offer for the Wekepeke water on Friday, and it is impressive. Frankly, the magnitude of the proposal will probably significantly change the discussion about the project's viability. Here are the first details, from the Times and Courier:
Nestlé, which has spent the last year expressing interest in tapping the aquifer beneath the 564-acre Wekepeke Reservation in northern Sterling, is seeking to pay Clinton $2.55 per cubic foot of water extracted. Nestlé officials had earlier proposed installing wells with maximum safe yields of 230,000 gallons per day, or approximately 11.22 million cubic feet per year — a potential payout to Clinton of $28.62 million.

Nestlé is also offering Clinton an initial, one-time payment of $100,000 for Wekepeke dam repairs, plus another $100,000 annually for ongoing maintenance, broken into five $20,000 annual installments. In addition, the company will pay Sterling $200,000 to $300,000 annually.
Let's try to put those numbers into perspective. According to, the entire fiscal year 2008 budget for the town of Clinton was a shade north of $37 million. Of that, about $14.7 million were raised in property taxes. Essentially, if Clinton chose to do so, they could stop collecting property taxes altogether and still bring in an annual surplus of $13.9 million.

Obviously, that is a huge impact. What would Clinton do with the money? Use it for capital improvements? Salaries for more police and fire? I suppose if they wanted to, they could do an Alaska-style plan where they give each resident a $1,000 dividend in addition to paying no taxes.

Look at it another way. The proposal is for a 25-year contract, with three 10-year options. Assuming the options are picked up, that is $1.573 billion over 55 years. Even if the contract was not renewed, it would still pay Clinton over $700 million. That's A-Rod money.

As it affects the Wekepeke, the amount of money promised could remove some of the legal obstacles to the proposal. Specifically, it could affect the issues of the unsigned conservation restriction, the purchase of the Rauscher property, and the agreement with the Massachusetts Water Resource Authority to provide water to the town for free.

At the meeting in Sterling on Tuesday, State Rep. Harold Nauhgton answered a few questions about his opinion of the proposal. He said it was both his opinion and the opinion of the House of Representatives' counsel that the 2004 Conservation Restriction on the Wekepeke property would not allow Nestle or any other corporation to draw water for commercial purposes. That opinion has put Clinton in a bind, since the Conservation Restriction has to be signed and enacted in order for the town to receive the $353,600 state grant to help it purchase the Rauscher property.

All of that may be moot now. Certainly, it won't be in Clinton's best interest to approve the restriction if it costs them over $700 million over the next 25 years. But even if the money and water didn't begin to flow for years, the town might be able to use the contract as collateral for a loan or to a bond issue to purchase the Rauscher Farm. Essentially, they could tell the state that they don't need their grant and purchase the Rauscher Farm anyway.

The other obstacle that Rep. Naughton mentioned Tuesday was Clinton's relationship with the MWRA. I asked him if he would support a petition to amend the Conservation Restriction to allow pumping if the Clinton Selectmen asked for such an amendment. He did not commit one way or the other, but said that he had some real reservations that if Clinton were allowed to sell water from what was originally a municipal water supply that the MWRA might no longer provide Clinton with water from the Wachusett Reservoir for free. Well, it seems to me that the town would have plenty of money left over to pay for water from the reservoir should the MWRA decide to end the free ride.

Of course, there are other obstacles that still remain. The question of whether or not the 1876 and 1882 Acts even allow commercial use has yet to be decided. Ultimately, that one will probably go to court. Even if that is decided in Clinton's favor, Sterling's zoning doesn't allow for commercial pumping. Assuming the zoning is not changed, Nestle will probably have to go to court again to determine if the Mass DEP's jurisdiction over commercial pumping supersedes local zoning.

I've stated previously that I don't think Sterling should be playing ball at all with Nestle until the 1876 and 1882 issues are decided. My opinion hasn't changed. However I wonder what effect the details of the RFP will have on the people of Sterling. Will they consider the offer of $300,000 annually an insult, considering that Clinton will be getting 100 times that amount, and harden their opposition? Will they warm to the plan, figuring that $300,000 is a starting point and that if the town negotiates with Nestle, it can push the payments into seven figures? I don't know.

But I know that the proposal will likely change everything. I just haven't figured out how.

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