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Sparrows Point owes Baltimore $5.4 million in unpaid water bills

The city never stopped the flow of water to the steel mill, even when the mill stopped paying the bill. A BREW EXCLUSIVE.

Above: RG Steel’s owner, billionaire Ira Rennert, with New York Police Commissioner Ray Kelly at a charity gala last November.

The Sparrows Point steel mill racked up $5.4 million in unpaid Baltimore City water bills over the last three years, The Brew has found.

This is 2½ times more than the $2 million reported when the steel company filed for bankruptcy protection on May 31. Because the charges are considered unsecured debt, it is highly unlikely that these fees will ever be paid.

Sparrows Point is one of the biggest users of water and treated sewage (known as “industrial process water”) in Maryland, consuming up to 50 million gallons a day. Also gargantuan is the amount owed by RG Steel Sparrows Point to the city.

To put it in context, the company’s water bill, if paid, would be more than enough to keep the fire companies, set to be closed by Mayor Stephanie Rawlings-Blake, open for the 2013 budget year – and end the practice of revolving fire station closures.

The payments owed by RG Steel and its billionaire owner, Ira Rennert, would keep the eight recreation centers threatened with closure operating in the city.

No Payments in 30 Months

Sparrows Point’s underpayment of water charges goes back many years. However, it rapidly accelerated after Russian-based Severstal purchased the facility in 2009.

City records show that water is supplied to the mill under two large meter accounts. The last payment made by Severstal for one of the accounts was 30 months ago in December 2009.

When RG Steel took over the facility last year, it never paid the prior debt owed to the city. In fact, the company altogether stopped paying on the account for the next 14 months, city records show.

The account is currently $3,680,502.04 in arrears.

RG Steel paid minimal amounts on its second water account. The last payment of $67,500 was made in April. The account is currently $1,738,603.57 in arrears.

Mill Not Put on Tax Sale

The city routinely puts residents at risk of losing their homes over unpaid water bills as small as $350.

Amounts owed by Sparrows on its two major water accounts with Baltimore City. (Bureau of Water and Wastewater download)

$5,419,105.61 owed by Sparrows Point on its two water accounts with Baltimore City. (Bureau of Water and Wastewater download)

Last month, more than 300 properties went to tax sale because of unpaid water bills, according to the Baltimore Finance Department.

Sparrows Point was never placed on tax sale by the city (although The Brew revealed that Baltimore County planned to put the mill on sale for failing to pay $4,526,001 in property taxes when it filed for bankruptcy on May 31).

Nor did Sparrows Point suffer from a cutback in water due to its persistent delinquency.

Records at the Bureau of Water and Wastewater show a February 6 “turn-off” date for the mill.

But the date passed with no action taken by the city.

City Records Hard to Get

Asked by The Brew for information on the steel company’s water debts, City Hall was no help.

Inquiries to the Finance Department were met with the response that finding out how much RG Steel owed the municipal government would take time.

But the amount came into better focus in a filing  by lawyers to the U.S. Bankruptcy Court of Delaware late last week.

The filing cited $5.1 million owed to the city on two water accounts. By tracing these accounts, The Brew found that the amount owed was actually $5.4 million.

May Owe Additional Funds

The court filing noted that RG Steel may owe additional funds to the city “related to water reuse agreements, water discharge agreements and otherwise.”

The filing added: “Baltimore City is continuing to review its receivables and reserves all rights with respect to its claim(s) against the Debtors.”

The petition was filed by Venable LLP. The Baltimore-based law firm which was hired by City Solicitor George Nilson to represent the city in the bankruptcy proceeding.

RG Owes Baltimore County $1.9 Million More

Venable also represents Baltimore County. In a separate filing, Venable told the Delaware court that Baltimore County is owed $1.86 million in sewage charges in addition to the $4.5 million in unpaid property taxes.

The filing reports that Baltimore County charges approximately $155,000 a month for sewage disposal at the steel mill.

Using this figure, the filing implied that RG Steel has not paid its sewage bill for 12 months.

Altogether, court filings show that RG Steel owes the city and county $11.5 million, or nearly twice the initial amount publicized when the company first filed for bankruptcy protection.

Both Baltimore city and county asked the court to order RG Steel to pay more than two weeks charges as a deposit for the continued supply of water and sewage service to the mill.

The petitions argued that taypayers are “at risk for non-payment” of future water and sewage bills because of RG Steel’s precarious finances and lack of a known buyer of the mill.

Bankruptcy Court Judge Kevin J. Carey has not yet ruled on the request.

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