County says No to Cape Charles Blackmail: puts PSA on hold

Update: After the joint meeting, Cape Charles PSA rep Bob Panek forwarded his take on events to Town Manager Manuel and Mayor George Proto:

At the June 22^nd joint meeting with Northampton Board of Supervisors and the Public Service Authority (PSA), the Board sent a clear message that they have more important priorities than the PSA pipeline project, and that they were not going to give in to what Katie Nunez, and several members of the audience called blackmail by the Town of Cape Charles. The board voted to put the entire PSA project on hold for the foreseeable future.  “I have a very big problem with the Cape Charles contract. The cost, the profit (for Cape Charles), and the way they want to hold zoning over our heads. I’ve got a big problem with that, “said Larry LeMond. “We have EMS issues, we have school issues,” added Supervisor Hogg. “We have important issues that need to be addressed first. The PSA is going to have to take a back seat.”

PSA chairman John Reiter was on hand to provide an in-depth overview of just where the PSA project stands. According to Reiter, the preliminary engineering by Hurtt & Profitt, which makes up 40% of the overall project, has been completed. Responding to a question by Chairman Hubbard, Reiter responded that the county has spent $78,000 on the project to date.

A major issue still outstanding is the negotiations with Cape Charles. There is a draft agreement, but there are also two outstanding issues. The first is the cost per gallon. According to Reiter, the current cost for Cape Charles is 1.2 cents per gallon, 70% of which is fixed cost. If the county were to pay on this schedule, assuming a flow of 15,000 gallons per day, Cape Charles would net $50,000 in profit over the year. Much to the County’s chagrin, Cape Charles wants to charge 1.5 cents per gallon instead. “But, this difference could be worked out fairly easily,” said Reiter.

The second issue is over the connection fee. Presently, Cape Charles is insisting that the County pay for connections according to the current schedule (roughly $12,000 for Town Residents). This fee would have to be paid up front, at an estimated cost to the County of $750,000. On day one, the County would have to cut that check to the town. It would also increase the cost of the project from $2.6 million, to $3.3 million.

“We have also heard that Cape Charles is not interested in any further negotiations until the BoS deals with their zoning request at Rt. 184 and Rt. 13,” added Reiter. Mr. Reiter is referring to the Town’s desire to create an overlay district at this location.

“Blackmail,” said Katie Nunez. “We haven’t received anything in writing to that effect. That is just what was reported from the last Town Council meeting.”

“It does make life interesting,” said Hubbard.

“The contract says a surcharge of 10 percent, but now they are asking for 26 percent, the 1.5 cents per gallon. What is the surcharge for?” asked LeMond.

“For them being good guys and letting us export our product for them to process,” said Reiter.

Chairman Hubbard questioned where the current estimates of usage were coming from. Nunez noted that engineers have surveyed various properties that might be involved, and extrapolated out from there.

“We are crystal balling this, absolutely,” added Reiter. “If you can tell me what’s going to be built out there, I can give you a good number.”

Supervisor Hogg still had questions about usage, and profits to Cape Charles based on the 1.2 cents per gallon costs. “They already have their budget and they are paying these costs today, without any input from the PSA. When they get our input, that is extra money. They already balanced the budget without us, so the money they get from us is bonus money,” responded Nunez.

“But, we have been stagnant for so long. Where did we come up with these numbers?” asked Hogg.

“We are doing this based on growth out there,” said Reiter. “Either you are going to predict that you are going to have growth out there, or we can just close up shop and go home.”

“I guess the assumption is then, that some will move in from the north, or elsewhere, to take advantage of the sewer system,” said Hogg.

“Not necessarily. Tourism, or more commercial properties catering to tourism,” said Reiter.

“The concept of this project was for more commercial development,” added Hubbard.

“That is the directive the PSA received from the board, and that is what this is,” said Reiter.

“And that is what Cape Charles wants to talk about,” said LeMond.

Another sticky point brought up by Reiter, is the special tax district, and whether or not property owners should be allowed to opt out. According to Reiter, it is the consensus of the PSA that they should be allowed to opt out, but this option does come with some caveats. If the property owner decided later that they wanted to opt in, they would have to pay a special tax (10 year) and a penalty for connecting. This would end up being “a very hefty bill.” The other drawback is that the cost would then have to be spread out amongst those that opted in, making it more expensive.

A related issue is how much of the cost should be borne by the property owner vs. how much should be paid by the general tax. The PSA currently believes the split should be 50/50, essentially doubling the property owner’s tax. The original thought was a 75/25 split, but due to the increased cost of project, the PSA feels a 50/50 is more reasonable.

“Isn’t it true, that if they opt in, their property values will go up?” asked LeMond.

“That is up to the Commissioner of Revenue,” said Nunez. “This will not be borne out until we see sales activities go up. Most valuations are set by sales activity.”

PSA member, Taylor Dukes of Exmore added, “In Exmore, it was thought, if they build it they will come. We did not see it, most of the traffic is still north, mainly in Accomack. I hate to see the County go into debt, and the building not come. In Exmore, it did not come.”

Moving forward, Reiter said the Board needed to pay the upfront startup costs, as well as back the Bonds that will be issued by the PSA. Bob Panek added that, to clarify the Cape Charles position, the fees are to be used to pay for plant expansion, once the additional usage pushes it to capacity.

After the PSA adjourned to the adjoining conference room, the Board continued the debate. “Am I to understand that the PSA is on hold until the Board deals with these issues?” asked Nunez.

“Until we hear from Cape Charles, this is all we can do,” said Hubbard.

“I just want to understand what on hold means,” said Nunez. “Does it mean no set work, or that the PSA does not need to meet any longer—no nothing?”

“There are some things we have to do. Until then, there is nothing they can do,” said LeMond.

“That is what I’m asking. Should the Board still be working on this? Should I put it on the agenda—or not,” asked Nunez.

“We are waiting on Cape Charles,” said Hubbard. “I don’t see spending any more money until we know what’s going on. We should not move forward until we have more support from the citizenry.”

“So, you’re killing the project. Just so we’re all clear,” said Nunez.

“Putting a hold on the project,” said LeMond.

“So, I’m not supposed to do any work on this? I’m trying to understand,” said Nunez.

“There are steps,” said LeMond. “Until we can proceed.”

“So, you are not going to pursue those steps. Or are you?” asked Nunez. “I’m trying to understand you.”

Board voted 3-1 to put the PSA project on hold, with Trala opposed.

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