From: Cole, David A
Sent: Monday, February 23, 2004 10:19 PM
To: Stearns, Alan; Adams, Kurt
Subject: FW: Sears Island
Alan, per our conversation today. I believe this was passed on to Becky, but apparently not forwarded to you and Kurt.
Sorry for the delay.
From: Smith, Jim
Sent: Tuesday, February 10, 2004 2:33 PM
To: Cole, David A
Subject: FW: Sears Island
PRIVILEGED-ATTORNEY/CLIENT AND WORK PRODUCT-IN ANTICIPATION OF LITIGATION
Dear Commissioner Cole:
On February 9, 2004, Commissioner Wyke posed 2 inquiries to Toni Kemmerle, Esq. and me regarding the possible sale/lease of Sears Island. The first concerned the ownership of Sears Island. The second concerned who may sell the property, with subparts questioning whether there exist any prohibitions to such sale, and, if sold, into which fund should the proceeds be deposited. For your information, I have included in our response the recent financial history of the State's involvement with Sears Island.
According to a February 6, 2004 memo from Terry Caswell, Assistant Director, MaineDOT Finance and Administration, the Sears Island Cargo Project (Part of the Department's 3 Port Strategy) dates back to 1977. During the time from 1977 until the mid-1990's, MaineDOT invested in excess of $22.0 Million in infrastructure and project efforts on behalf of the Sears Island Port Project. The expenditures were a combination of General Fund Bonds, Federal Highway Administration (FHWA) funds, and Highway Funds. In 1997, the Department purchased the remainder of the island for an additional $4.0 Million using a $2.0 Million General Fund appropriation and $2.0 Million of FHWA enhancement funding. In 2001, the Department and Federal Highway Administration agreed to remove the enhancement funding from the purchase of the island. By default, the Highway Fund absorbed the $2.0 Million that was repaid to FHWA.
In response to the first question, pursuant to the Notice of Taking dated October 9, 1984, and recorded in the Waldo County Registry of Deeds on June 17, 1985, the named owner of the 50 acre terminal site on Sears Island is "The State of Maine by its Department of Transportation." "The State of Maine by its Department of Transportation" also acquired the island's paved state road by a Notice of Taking dated February 5, 1986, and recorded in the Waldo County Registry of Deeds on February 6, 1986. The remainder of the island was deeded to the "THE STATE OF MAINE, acting by and through its Department of Transportation" by a Corrective Quitclaim Deed dated November 4, 2002, which corrected certain language contained in prior deeds including the 1997 version. The "acting through or by and through" language regarding the takings or conveyance, reflects the legal status of the MaineDOT as the agent acting for or on behalf of the prinicipal State of Maine. Therefore, the answer to question number one is: the State of Maine is the owner of Sears Island.
In response to the second question, the Governor, on recommendation of the Department, may sell and convey on behalf of the State the interests of the State in property taken or acquired by purchase for transportation purposes and deemed no longer necessary for those purposes. 23 M.R.S.A. Sec. 61.2. In accord with that language, the Sears Island property was acquired or taken for marine and/or other transportation purposes. Since, at the present time, the MaineDOT has preliminarily determined that a portion of the island may no longer be deemed necessary for transportation purposes but rather necessary for energy and economic development purposes, the Governor may sell or convey same. If the property is determined to be for transportation purposes, the above statute authorizes the Department to lease it. 23 M.R.S.A. Sec. 61.3.
On a related subject, the "Governor may grant to the Maine Port Authority such rights in submerged land owned by the State and located within harbor limits as may be necessary for the Maine Port Authority to fulfill its powers, duties and obligations." 23 M.R.S.A. Sec. 4424. This grant would most likely be used in the context of developing a portion of Sears Island as a port facility closely related to the development of a Liquid Natural Gas facility as an energy/economic development project.
Although it appears clear that the Governor may sell or convey the subject property as explained above, there was a question as to any statutory prohibitions or restrictions regarding any proposed sale or conveyance. Our preliminary research reveals that 30A M.R.S.A. Sec. 4754-A requires that all state agencies offer the Maine State Housing Authority (MSHA) the opportunity to purchase or otherwise acquire any land and improvements on the land or any structures determined to be surplus before the property may be offered for sale or transfer to any other state agency, community or buyer or transferee. In practice, the MSHA has not decided to purchase any such property from MaineDOT in recent years.
As a matter of possible interest, it should be also noted that the Maine Bureau of General Services (BGS) has statutory responsibility for most state property. However, the "definitions" section of 5 M.R.S.A. Sec. 1741, appears to exempt Maine DOT from BGS requirements -in this and certain other situations. The relevant portions of that statute read: "Nothing in this section may apply to the construction, improvement or repair of any and all ways, roads or bridges with appurtenances and other public improvements which, by law, are under the supervision of the Department of Transportation." The term "public improvements" is defined "to mean and include the construction, major alteration or repair of buildings or public works..." A liquid natural gas project would most likely qualify as a public improvement through the construction of terminal buildings and tanks. The project would also most likely fit within the definition of "public works."
The final question was into which fund should be deposited the proceeds from any sale of Sears Island or a portion thereof. 23 M.R.S.A. Sec. 61.4 reads that the State's share of all gross proceeds realized from a sale, lease or vacating of property pursuant to 23 M.R.S.A.Sec. 61.2 "shall be deposited into the Highway Fund and shall only be expended upon allocation by the Legislature. The Federal Government's share shall be deposited in the account from which it originated." However, after the acquisition of the entire island, it was determined that the most appropriate financial entity to own the island and the remainder of the other assets of the project, was the State's Ports and Marine Enterprise Fund. Justification for this decision was most likely pursuant to Title 23, Part 6, Chapter 412, Subchapter 2, subsection 4425, "Acquisition of Land".
The Ports and Marine Enterprise Fund subsequently sold the steel that was stockpiled for the original Sears Island pier. The proceeds from the sale of that steel were dedicated to the Ports and Marine Enterprise Fund and the legislature granted budget authority for MaineDOT to spend those funds on designated projects. Currently, Sears Island is carried as an asset of the Ports and Marine Enterprise Fund at a value of $4.25 Million. According to Terry Caswell, if the proceeds of a sale were deposited into the Ports and Marine Enterprise Fund, then the Administration and the Legislature could legislatively allocate these funds or transfer them to either the General Fund or the Highway Fund. We leave this determination to the administration.
We trust that we have sufficiently answered the questions posed to us. If we may be of any further assistence, please contact me.