Historical Look at Cape Charles Water Wars

While it may seem somewhat disturbing to watch Cape Charles Town Manager John Hozey diligently tie his own rope by fostering the sale of the town’s water and wastewater utilities, he is actually just following precedent established by at least four previous town managers. The strange case of the town’s water narrative, its water wars with Bay Creek, and the even stranger thing, the dark and looming Annexation Agreement, is a hill that town managers have an affinity for dying on…and the town council always seems ready and anxious to give them enough rope to do so. Let’s look back.

On June 24, 1991, the Town of Cape Charles awarded bids to improve the town water system. The total cost of the project was $3,166,000, and was undertaken to provide metered water, as well as wastewater connections to what is now Bay Creek. $126,000 in local funds was used for the connections.

While the Town expanded the capacity, neither Brown and Root nor BayMark paid a dime for the work. At the time, Bay Creek and Marina Village had approximately 200 metered accounts and consumed approximately 20,000 gpd of metered water. Cape Charles believed that this water is from capacity created by Town’s expansion of the water treatment plant, and in their opinion, this water was “lent” to BayMark. Further, in 2005, then town manager Tim Krawczel in a letter to Richard Foster, owner of BayMark, told Mr. Foster that when BayMark expands the water treatment plant, all the capacity that was originally created should be returned to the Town. They held the belief that the Annexation Agreement firmly put Mr. Foster and BayMark on the hook for the cost of expanding the plants since the expansion is due to the development of Bay Creek and Marina Villages. From the letter:

Issue # 1: The Town and BayMark must agree on the responsibility for upgrading the water and sewer treatment plants to serve the Bay Creek and Marina Village developments, both in terms of water and treatment of wastewater treatment. The Annexation Agreements assign Brown & Root and its successors the responsibility for expanding the capacity of the water and sewer plants to serve the needs of its developments. When BayMark Construction, as the successor of Brown & Root, fulfills its responsibilities, the Town will reserve the capacity created by BayMark investments….As we know, the Town’s water treatment and wastewater treatment plants must be expanded to accommodate the development of Bay Creek and Marina Village. In the months ahead, we must agree fundamentally on our roles and responsibilities so that our attorneys and engineers can guide us through complex design, permitting and construction activities.

Over the years three, and if you count Bob Panek (who served as interim Town Manager), four Town Managers have tried to get Bay Creek to pay up for what the Town sees as its obligations to expand the wastewater plant. They point to this portion of the Annexation Agreement:

.. .(d) Brown & Root and the Town agree that any reservation of treatment
capacity in or from the Town’s water or wastewater systems, as provided in the
Prior Agreement, for the use of Accawmacke Plantation, shall be derived from the
capacity created by investments in the Town’s water and/or wastewater systems,
made by Brown and Root…

Expressing frustration, Town Manager Timothy Krawczel wrote: if Bay Creek and Marina Village were not adding new utility accounts and new service demands to the system, the Town would not
need to expand the capacity of either the water treatment plant or the wastewater treatment plant. All expansions in plant capacities made by Bay Mark Construction (except that which replenishes the capacity “lent” by the Town to Baymark to date) will be reserved for use of Bay Creek and Marina Village. The Town will use the capacity of the water and wastewater treatment plants that existed prior to the development of Bay Creek and Marina Village for existing and new utility accounts within the historic town.

In 2008, after receiving an invoice from the town for design work intended for the new wastewater plant, Bay Creek went on the offensive, offering a different interpretation of the Annexation Agreement. In what now appears to be a brilliant move, Foster notes that the Agreement states that Bay Creek is only on the hook if the plant needs to be expanded to meet the demand of the new planned unit development. That, in his opinion, had not occurred, and to the contrary, Cape Charles was replacing the plant because of the DEQ regulatory requirements (the old one was failing), not because of capacity issues.

This thumbing of the nose angered the town. Then town manager Joe Vacarro sent a letter in which he stated: Given this state of affairs, we appear to be headed towards litigation and perhaps downsizing the proposed Wastewater Treatment Plant due to funding challenges…

In late 2008, during Executive Session, Mr. Foster told the Cape Charles Town Council: I’ve been here seven years and only built 300 units. A (smaller) 250k might last another 13 years.

In an email to the town council, Bob Panek responded that the new plant would reach capacity in 2013.

Note: We are midway through 2022 and the plant seems to be playing the banjo and just rolling along. So much for the town’s paid expertise.

In the same email, Mr. Panek tells the council that the Annexation Agreement provides no firm trigger of when Bay Creek should pay once the planet “reaches design capacity”. He goes on to argue that Bay Creek should be paying upfront for when the plant will surely, in the future, reach design capacity.

At this stage, Bay Creek has only placed the town in check, but checkmate is just a few moves away–only Cape Charles doesn’t realize it.

Early in 2009, the town increases utility hookup charges from $10,047 to $20,000 effective July 1, 2009. It was a bold move Cotton, but not sure it paid off.

The town claimed that the charges were increased to fund the cost of providing future water and wastewater system capacity, but it seemed to be more of an attempted squeeze play against Bay Creek.

In an email responding to Paul Galloway’s question about future connection costs, then town manager Heather Arcos told him that future costs could not be determined, and that, “I don’t know what the cost of the connection will be by the time you develop those lots. The letter sent to all owners of unimproved lots and or buildings without connections is to make everyone aware of the increase of the residential connection charge and the time frame along with the capacity of the plant. As of right now, I don’t see the town approving any more subdivisions without an approved plan to expand plant capacity“.

Ouch.

In January of 2009, then Mayor Dora Sullivan fires off another letter to Foster. In this futile gesture, Sullivan threatens that if Bay Creek doesn’t pay up, the town will have no choice but to downsize its plans and build a much smaller plant, which town expert Bob Panek confirms will reach capacity in just a couple of years, at which point an expensive ‘upgrade’ will have to take place.

Bay Creek calls their bluff and essentially tells Cape Charles to go pack sand. Checkmate.

However, the folly continues as Bay Creek CEO Oral Lambert pens a response to comments made by a citizen during Town Council’s Regular Meeting public comments section:

From: Oral Lambert
Sent: Wednesday, January 21, 2009 2:06 PM
To:
Subject: Comments in 1/20/09 Publication
Importance: High

Please share this message with your readers. 

To Readers of “All Around Our Town”

     The edition of “All Around Our Town” that was distributed earlier yesterday, 1/20/09, publishes a copy of the remarks delivered by Ms. Karen Jolly Davis during a recent Town Council meeting.  In those remarks the statement is made:

“Since July of 2006, the town has spent $7,169 in attorney’s fees, attempting to get Bay Creek to pay its share of the costs for a new, state mandated water and sewer system.  By July 2008, Bay Creek owed the town $42,000 for their portion of the system’s design costs.  That debt is still unpaid.”

     We have purposefully not engaged in the public discussions regarding the recent actions before Town Council, however, the writer of the statements about Bay Creek is misinformed and may not have read the Annexation Agreement.  We can not allow these allegations to go unnoticed.  Bay Creek has a reputation for paying its debts and in fact has paid hundreds of thousands of dollars to the Town of Cape Charles during the course of our business with them as well as having spent hundreds of thousands of dollars toward construction of the water system.  The $42,000 “debt” the writer refers to has not been paid because it is not owed by Bay Creek.  The Town Council is fully aware of our position on this as we have met with the Council in executive session to discuss the Annexation Agreement and to explain our position…we haven’t paid it because we don’t owe it.  We have not until now made a public statement on this out of respect to our continuing discussions and negotiations with the Town.  The Waste Water treatment facility project that is the subject of the state mandate is a replacement project…the existing treatment plant is wearing out.  It is outdated and it must be replaced…replaced even if Bay Creek was not here.  This is a cost that all of us who live here in Cape Charles must share in.  The cost of replacing the plant will be paid for by all users and of course Bay Creek will pay as a user of the system like everyone else. 

              Bay Creek does have an obligation to pay to expand the plant when it becomes necessary.  The Annexation Agreement requires Bay Creek to participate in the cost of expanding the plant once the permitted capacity of the plant is reached.  The Town’s consultant has made that point clear by his statements during public meetings. At a recent public briefing he stated and then repeated for emphasis his understanding that Bay Creek’s participation in expanding the plant is tied to “permitted capacity”.  In other words, when the plant reaches its current permitted capacity Bay Creek must then pay to increase its size sufficient to cover the additional needed capacity that is generated by the Bay Creek development…new capacity over and above the existing permitted capacity. That has not happened and is not likely to happen for a number of years into the future.  Bay Creek plans to fully meet its obligations under the terms of the Annexation Agreement when that time comes.

     As an aside, we are also in disagreement with the current thinking that a 500,000 gallon a day treatment plant should be built before it is needed.  This is a major, major cost to the taxpayers and utility users in this small town and we believe all options should be considered before incurring that debt…a debt that every utility user will be strapped with for many years to come.  We are willing to pay our part but we have repeatedly taken the position that the utility expenditures must be based on a sound and affordable business plan to address what is needed and not so much what might be nice to have.    

     The writer goes on to suggest that Mr. Bennett may favor density because it benefits Bay Creek.  I do not know how Mr. Bennett will vote when the time comes, but I believe I know him well enough to say that when the time comes for him to vote his decision will be based on what he believes is in the best interest of the community…just as I am sure was the basis of Ms. Davis’ decisions when she voted to approve land use decisions that increased densities as a member of the Planning Commission.   

     If I may say, on a personal note, for the good of our community and the potential it holds for our future I encourage all who have gotten emotionally caught up in what has turned into a “bitter” debate to slow down and rethink what we are all about.  We strengthen one another by sharing differing opinions.  There is always room for disagreement, healthy debate and even dissent, but I see evidence of too much ugliness and too little faith in one another.  It is not serving our community well and I believe it is disrupting long and deep relationships.

C. Oral Lambert, Jr.

Chief Executive Officer

Bay Creek Resort & Club  

Fast forward to now, the plant does not appear to be reaching capacity, and even if the plant needs to be expanded, can it be proven that it needs to happen because of Bay Creek’s development? Foster and Bay Creek argued, successfully, that there are other forces that are driving the plant towards capacity. It could be argued that new stores, hotels, and eateries, as well as the massive influx of tourists, are just as culpable. Historically, Bay Creek has been as slippery as an Alabama catfish, and this will probably never change. Who could blame them? The Town of Cape Charles has shown itself to be unequipped to do much more than divest itself of premium assets while diligently working to make a once small and quirky little village as unlivable as possible.