The Guam Waterworks Authority will likely have to hike water rates, face issues with creditors, and could be slapped with penalties and even a receivership from the federal government if it loses a $220 million land dispute over the island’s largest wastewater treatment plant.
That’s according to GWA General Manager Miguel Bordallo who last week filed a declaration in Superior Court of Guam Judge Elyze Iriarte’s courtroom outlining the harm that could come to GWA and ratepayers if construction firm Core Tech International prevails in the lawsuit.
GWA wants to take to the Supreme Court an ongoing $220 million dispute with Core Tech over ownership of the Dededo land where the Northern District Wastewater Treatment Plant sits on.
Counsel for Core Tech, meanwhile, wants the matter to continue to trial in the Superior Court.
GWA this month petitioned the appeals court to address the case, and is seeking to reverse decisions the trial court made in Core Tech’s favor.
Paying out the $220 million settlement Core Tech is seeking in a single year would require GWA to roughly double its entire revenue stream by raising customer rates, Bordallo stated in his declaration.
Every GWA customer would have to pay an extra $4,800 a year to come up with the money, documents state.
It is unlikely, however, that the Public Utilities Commission would approve such a steep rate, Bordallo stated.
GWA attorney Rodney Jacob, in a status hearing last week, told Iriarte that the utility wants to pause the suit in the Superior Court while the Supreme Court decides whether to take up the matter.
Attorney Vanessa Williams, counsel for Core Tech, said she would object to any stay, and argued that the lawsuit should continue its course in the Superior Court and proceed to trial.
Jacobs argued that GWA may face irreparable harm should the court rule that Core Tech owns the northern treatment plant.
Williams countered that ejecting the waterworks authority was not the solution being sought by Core Tech, but just compensation for the property it had rightfully purchased, and which GWA now occupies.
The damages Core Tech sought from GWA for alleged inverse condemnation of the land were all monetary, and financial burden did not constitute irreparable harm, Williams told the court.
GWA wants to overturn a judgment that Iriarte made last August, which found that certificates of title for the treatment plant property reverted from GWA to the government of Guam in 2009 because of GWA’s failure to properly survey the land.
Iriarte found that Core Tech, which later obtained the certificates of title for the property that were handed by the Department of Land Management to an ancestral landowner’s estate in 2006, could rely on the certificates and was protected under Guam law.
Core Tech paid $178 million for the Dededo property the plant sits on back in 2015, and argues the utility has failed for years to properly reserve an interest in the land. The company wants $220 million in damages and back rent.
In 2020, the government destroyed a fence that Core Tech had erected in order to expand the wastewater treatment plant, an act that has been called encroachment and illegal condemnation by the company’s attorneys.
Attorneys for Land Management, which is also a plaintiff in the suit against Core Tech, have argued that there were illegalities and irregularities when the treatment plant land was transferred out of the government.
The government wants to revoke or change certificates of title that Core Tech owns for the Dededo property.
Iriarte said she would rule on the request for a stay some time in June.
Receivership, penalties, court orders
Bordallo’s declaration states that GWA bonds, future improvements and upgrades GWA is required to implement by court order, and compliance with U.S. environmental regulations, as well as water rates, could be affected if the court finds Core Tech owns the treatment plant.
The Department of Defense’s Office of Local Defense Community Cooperation had shared concerns that changing ownership of the plant could pose threats to the military’s mission in the region, documents state.
It would also prevent GWA from constructing a pump station at the treatment plant to deliver treated effluent needed to cool the new Ukudu power plant, which is a critical part of the island’s power grid, documents state.
A settlement, or consent decree, reached with the U.S. Environmental Protection Agency this year over GWA’s alleged regulatory violations could also be impacted.
GWA this year agreed to pay $400 million in sewer upgrades as part of the settlement over alleged sewer overflows and other pollutant issues.
According to the settlement, transferring ownership of GWA’s sewage treatment works does not relieve GWA from any responsibility to meet the settlement terms.
GWA counsel, Jacobs, highlighted that issue before Iriarte last week.
Williams countered that removing GWA from the property is not something Core Tech seeks to do.
But Bordallo’s declaration states that just having to pay out the significant $220 million settlement to Core Tech would have significant consequences for GWA’s ability to operate Guam’s water and wastewater systems.
GWA’s ability to meet the requirements of a 2024 settlement with the U.S. EPA could be imperiled if the waterworks authority has to start diverting “most or all” of its resources to pay Core Tech.
Plans to fix leaking pipes, deal with contaminants in local water, and other capital projects over the next five years could all be delayed, Bordallo stated. Some of those are needed to get in line with federal regulations.
If the federal courts and U.S EPA “lose faith” in GWA’s ability to meet the consent decree stipulations, being placed under a federal receivership is also a potential risk, Bordallo noted.
That would result in even more penalties being levied against GWA from federal regulators, documents state.
GWA could end up in court for decades, at the expense of ratepayers, Bordallo stated.
Bordallo stated he now had to bring the potential harms of the lawsuit to GWA bond counsel, the U.S. EPA, and DoD, among others.
Some senators, meanwhile, have approved spending up to $65,000 on legal services to advise them on the GWA-Core Tech land dispute.
The land where the treatment plant sits may have been transferred out of GovGuam without any approval from the Legislature, which is required by law, and this is the Legislature’s main concern.
The Legislature should assert its position that the property cannot be transferred in Guam without legislative approval, Speaker Therese Terlaje said.
