Worcester County Commissioners c/o Roscoe R. Leslie, Esq., County Attorney 

Re: Planned Unlawful and Inequitable Water and Sewer Cost/Debt Allocation My Client: Ocean Pines Association, Inc.

Dear Commissioners (and Mr. Leslie):

I serve as outside general counsel for the Ocean Pines Association, Inc. (“OPA”), and submit this letter to your attention on behalf of the OPA Board of Directors. Certain aspects of this critical matter are, by now, well known and understandably have received a great deal of public and media attention. Other aspects of the matter are, unfortunately, not fully known, due apparently to the County’s failure or refusal to either fully investigate or to fully disclose information and details that are obviously of great public interest and importance.

Here is what OPA presently (and generally) knows, thanks in large part to Commissioners Madison “Jimmy” Bunting, Jr. and Anthony W. (“Chip”) Bertino, Jr., appropriately sounding the alarm on behalf of their respective constituents (and other County residents/property owners)(1) :

• In Setptember 2024, the Commissioners were first made aware of a significant Water and Sewer service area enterprise fund problem, specifically, the previously undisclosed mismanagement of those enterprise funds over time, and the resulting deficit/insolvency of many of the separate enterprise funds established and maintained for each of the eleven water and sewer service areas in the County (Ocean Pines being one of those eleven service areas).

• Commissioner Bertino has publicly described the issue as accumulated deficits in service areas and (undisclosed and unauthorized) transfers that had been made between service area enterprise funds, from reserves existing in particular service area funds to cover deficits arising in other service area funds; all of which violated County financial protocols.

• The mismanagement had occurred to such an extent that an overal deficit of over $9 million had accumulated, allocable to different service areas in different amounts (based on the particular and varying fiscal condition and needs of each service area).

• Again, the mismanagement apparently included County staff, without authorization, “borrowing from” certain solvent enterprise funds (existing and reserved, by law, for certain service areas) in order to cover shortfalls in other enterprise funds (existing and reserved for other service areas).

• Apparently, despite there being awareness of this financial malfeasance since September 2024 (or earlier), for unknown reasons, no formal and/or outside audit or investigation of the mater has occurred, and no detailed investigative or audit report of any kind has been issued, at least none that has been made publicly available. Indeed, the majority of the Commissioners appear committed to effectively burying critical details associated with this matter, and limiting the scope of public discussion.

• In January 2025, to address the $9 million (aggregate) enterprise fund deficit, again arising from gross mismanagment of those funds over time and from unmet financial needs of certain service areas not covering their own costs and expenses, the Commissioners voted unanimously to transfer $9,061,187.00 from the County’s General Fund: 1) as a grant of $2,760,177 to the Riddle Farm service area; and 2) as loans to other service areas as follows: $242,000 to Edgewater Acres; $790,000 to the Landings; $1,730,000 to Mystic Harbor; $200,000 to Newark; and $3,339,010 to Riddle Farm.

(1) The acts or omissions of the Commissioners with which OPA takes issue in this letter (and otherwise on this matter) are those of a voting majority of the Commissioners that does not include Commissioner Jimmy Bunting and Commissioner Chip Bertino, both of whom have been forceful and vigilant in opposing the proposed (unlawful) path on this matter, providing what information they can to OPA and the public, and generally advocating appropriately for the interests of ratepayers who would be unfairly burdened if the majority of Commissioners continues down its proposed path. 

• In County Commissioner meetings held on March 18, 2025 and April 1, 2025, certain Commissioners (again, those other than Commissioners Bertino and Bunting) have expressed support for a proposal (not yet formally adopted), formulated and advanced in connection with the County’s FY25-26 budget process, to recoup a portion of the $9 million deficit/loan by equally imposing a surcharge on all ratepayers in all service areas, regardless of 1) how much each service area may have contributed (or not contributed) to that deficit/debt; 2) how solvent particular service areas may be (or were prior to the financial mismanagement); and/or 3) what the future needs may be of particular servic areas.(2)

• Notably, based on available information, the maximum portion of the $9 million debt which may be properly allocable to the Ocean Pines service area, based on its own fiscal and operational needs and expenses, is $116,699.00 (approximately 1% of the total), but the plan of the majority of Commissioners (excluding Messrs. Bunting and Bertino) is to allocate to OP service area ratepayers ten times that amount, through a surcharge to be paid over time.

• Such allocation to Ocean Pines would occur without any regard for the historical solvency of the Ocean Pines service area (considered separately as it should be), the historical facilities improvements and upgrades in that service area covered responsibly and fully by Ocean Pines ratepayers, and the small portion of the $9 million debt that is actually allocable to the OP service area.

• This “plan,” if pursued by a voting majority of the Commissioners, is not only grossly unfair to Ocean Pines ratepayers, but just as troubling, would directly violate clear provisions of State and local law, would be contrary to the County Water and Sewer Plan, and would in our judgment subject the County to costly legal claims not only by OPA and/or its ratepayer members, but also by the ratepayers in other unlawfully and unfairly impacted service areas (e.g., Briddletown, Edgewater Acres, Lighthouse Sound, River Run, and West Ocean City). More specifically:

o County Code section PW 5-202 states in pertinent part that “[w]ater and wastewater facilities and services shall be provided and managed on the basis of separate service areas . . . which shall be established as provided by law . . . The revenues and expenditures for each such area shall be accounted for in a separate enterprise fund in accordance with the financial managment rules of the county, and charges and fees shall be levied against the benefited properties in each such area sufficient to pay the operating expenses and debt service associated with each separate area; provided, however, that the County Commissioners may, in their discretion, make grants or loans from the general fund of the county to any such enterprise fund as they may determine to be necessary and appropriate.”

(2) In the next fiscal year, under the subject budget proposal, $2,188,000 of the $9 million would be recouped through a surcharge payable in the same amount by all ratepayers throughout the County; in subsequent fiscal years, the balance of the $9 million would be recouped through similar surcharges. 

o County Code section PW 5-203 provides that “the revenues, expenses, assets, liabilities, and debt of each service area shall be accounted for in separate enterprise funds for each said service area.”

o County Code section PW 5-304 provides that “[s]anitary service areas shall constitute separate taxing districts for the purpose of collection of assessments, charges, and user fees for sanitary services provided therein. The County Commissioners may levy such assessments, charges and fees within individual sanitary service areas as [they] deem necessary and appropriate to provide water and sewer services within the sanitary service area.”

o County Code section PW 5-306 provides that, when water and/or sewer services are extended or provided from one service area to another, “[i]n all such cases the recipient [service area] shall fairly compensate the [service area provideing the services] for maintenance and operation cost and for a proportionate share of the value . . . of the sanitary facilities required to provide the service.”

o County Code section PW 5-310 requires a separate budget each year for each service area, and for assessments within a service area to be set to cover expenses of that service area and “to retire any indebtedness of the service area.”

o Separate water and sewer service areas are contemplated and required under section 11-401, et seq. of the Local Government Article of the Maryland Code.

o Section 9-648(f) of the Environment Article of the Maryland Code provides that “each [water and sewer] service area . . . is a separate taxing district.”

o Resolution No. 04-03, adopted January 20, 2004 by the Worcester County Commissioners, amended the County Water and Sewer Plan (“the W&S Plan”) to make clear and expland on its “Existing Ratepayer Financial Protection Policy,” and to further protect “existing ratepayers [in service areas] from costs unrelated to provision of service to them.”

The bottom line here is that the “plan” proposed by a majority of the Commissioners (other than Commissioners Bunting and Bertino) to deal with the $9 million deficit that arises from the County’s mismanagement over time of service area enterprise funds (and to cover part of that deficit through a surcharge to ratepayers in the next fiscal year), is facially unlawful, would violate County Code and State law, and would violate the County’s W&S Plan, as amended. Furthermore, any thought that the County could render their “plan” lawful through self-serving legislative changes to the County Code and/or purported consolidation of the eleven separate service areas into one (County-wide) service area, is unavailing, both practically and legally. And in any event, any such outcomes – even if legally and practically feasible (they are not in our view) – would require a lengthy and public process that would include obtaining MDE approval; and in the unlikely event such outcomes would or could be achieved, they would not retroactively invalidate (or render moot) claims that OPA and its members presently have in this regard.

If a majority of the Commissioners proceed with their unlawful and unfair plan, and take further deliberate steps in that direction, OPA and other ratepayers would likely initiate civil litigation, and advance claims against the County and certain Commissioners, including breach of fiduciary duty, equal protection violation under the Fourteenth Amendment of the U.S. Constitution, for declaratory and injunctive relief, for monetary damages and attorney’s fees, for violation of applicable State and County Code provisions, for administrative mandamus, and/or for unlawful taking.

On the OPA Board’s behalf, I respectfully ask that you course-correct on this matter, and do so immediately. Very truly yours, Bruce F. Bright