So, why hasn’t the Town filed suit over the Wastewater Plant?

With the holiday season upon us, the Town of Cape Charles is once again ready to send out those joyful, yearly tax bills. Along with this seasonal joy, another humiliating kick in the crotch will be when we receive our utility bills. What used to a be a marginal annoyance has become a real burden on many in our community, especially those on a fixed income. The exorbitant increase we have witnessed over the last few years is the direct result of the failed policy of the Town, of both the legislative and administrative bodies. In this case, the rate hike is to pay debt service on the Town’s misguided sewer plant.

But why are low income citizens being stuck with the bill? This of course, goes back to the the Brown and Root annexation agreement. The 1991 Commission on Local Government report originally boasted the planned development as good thing, a unique way to bolster the town and to provide more services to the residents,“Brown & Root has predicated its development plans on the incorporation of all its property into the Town of Cape Charles and on the expansion and utilization of the Town’s utility system. To this end, Brown & Root has entered into an agreement with the Town by which it has committed itself to supporting the proposed annexation and to investing its resources into an expansion and enhancement of municipal facilities,” the Commission wrote. [Annexation Action Report, February 1991, page 11]

It is important to note that at the time, Brown & Root agreed to all the Commission’s proposals, especially that it would be “investing its resources into an expansion and enhancement of municipal facilities.”

Within the agreement, it is also clearly spelled out that the developers would paying for the expansion of the wastewater plant, “Brown & Root and the Town agree that any reservation of treatment capacity in or from the Town’s water or waste water 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 waste water systems, made by Brown & Root.”

Of course,Brown and Root never did any of that, and instead sold the Accawmacke Plantation to Richard “Dickie” Foster in 1996, thus leaving the town with Bay Creek. When Foster acquired the Accawmacke Plantation, he also acquired the obligations. This is clearly stated in the annexation agreement, “The obligations of Brown & Root, contained herein . . . shall run with the land and be binding upon the subsequent owners of Accawmacke Plantation, which owners shall assume all of the obligations and relieve the prior owner thereof.” That is, the developer, not the individual landowners, are responsible for paying for the waste water plant, “It is the intent of the parties not to impose the obligations of Brown & Root contained herein upon the consumers who purchase lots, condominiums, and/or memberships within Accawmacke Plantation.”

So, why didn’t the Town go after Foster to make him pay what he was obligated to pay? Actually, they did.

In 2008, then Town Manager Joe Vaccaro wanted to deal with what he saw as a dark cloud hanging over the future of Cape Charles. Council, however told him to stay away, and to instead leave all water issues to Bob Panek. Vaccaro did instruct staff (Panek?) to pen a letter to Steve Bennet, who was the construction manager at Bay Creek, offering that Bay Creek either pay in one big chunk of $21.1 million, or an upfront payment of $8.9 million and the Town would make up the margin by increasing water and sewer connection fees for new residences to $10,047.

Sources tell the Mirror that the letter was a source of internal strife, as it appeared to run counter to the annexation agreement – the second option actually relieved the developer of a large part of the payment and shifted the financial burden to homeowners who would have to pay higher connection fees.

Of course, Foster and Bay Creek did not pay anything. Vaccaro told council that if Bay Creek did not pay their share, the Town would need to find other revenue sources, which it did (hence, your higher utility fees). Foster, however, did respond to the Town with the below letter:

Then Mayor, Dora Sullivan published the Town’s response to Foster in the Gazette:

January 5, 2009

Mr. Richard S. Foster
Owner
Bay Creek Resort & Club
1 Club House Way
Cape Charles, VA 23310

Dear Mr. Foster,

This is in reply to your letter of December 11, 2008, in which you provide your opinion of when Bay Creek is obligated to pay for their share of wastewater treatment capacity expansion and ask what is expected of you to indicate movement on this matter.

The Town has previously addressed the issue of when Bay Creek is obligated to pay several times, both in meetings and in correspondence, including our September 12, 2008 letter. We do not agree with your opinion that payment should occur only when the existing plant reaches permitted capacity; i.e. 250,000 gallons per day (GPD). The Annexation Agreement states, “Brown & Root agrees to pay the cost of the physical expansion of the Town’s sewer and water treatment systems, i.e. collection, distribution and treatment, to accommodate the additional treatment demands of the Brown & Root Property beyond the limits of the Town’s current permitted capacities.”

It is clear that the Annexation Agreement defines what Bay Creek is obligated to pay for, i.e. accommodation of additional treatment demands beyond the limits of current permitted capacities, not when. In this regard, we agree that Bay Creek bears no responsibility for replacing the existing capacity. That is why we have discounted the Bay Creek share by half (34% vs. 68%), in recognition that the first 250,000 of the 500,000 GPD capacity of the new wastewater treatment plant (WWTP) represents replacement of existing capacity. As you know, 68% represents the share of projected treatment demand beyond current permitted capacity that is attributable to Bay Creek property subject to the Annexation Agreement. If we were only building new capacity, the Bay Creek share would be 68% instead of 34%. We have explained this in our letters of July 11, 2008 and September 12, 2008.

The Town is responsible for planning for the replacement of existing facilities and providing additional capacity to accommodate projected growth. In the case of the WWTP, timing is complicated by state regulations that require the Town to meet the specified nutrient waste load allocation by January 1, 2011 in order to maintain the permitted discharge of 500,000 GPD. If we don’t meet the deadline, our waste load allocation will be reduced to the capacity of our existing plant; i.e. 250,000 GPD. Any treatment capacity beyond that will require reuse of the effluent, rather than discharge into the bay. Effluent reuse is significantly more costly than discharge because of the need to build reject storage, pipelines and off-season storage. Our growth projections indicate that the 250,000 GPD capacity will be reached in 2013, only three years after the waste load allocation compliance date. Because of these cost and timing implications, we are currently designing and planning to build a 500,000 GPD WWTP. These planning considerations dictate when the Town needs to incur costs and, consequently, when Bay Creek is obligated to pay their share under the Annexation Agreement.

You state in your letter, “I want to understand what you expect of me? What “movement” are you looking for?” In short, I expect you to pay the bills for the Bay Creek share (34%) of design and construction of the new WWTP as they are rendered by the Town. After application of anticipated grant revenues, we expect the Bay Creek share will be about $3.5 million to $4.5 million. As indicated in our September 12, 2008 letter, absent these revenues the Town will need to consider downsizing the WWTP to minimize the financial risk to existing wastewater customers. This will result in significantly higher costs in just a few years, as noted above, to build capacity beyond 250,000 GPD. The greater portion of these higher costs, 68%, will fall to Bay Creek.

I hope the above provides sufficient information to spur movement on this issue on the part of Bay Creek.

Sincerely,

Dora Sullivan
Mayor

Note: How did the Town think it could possibly settle this matter without the concurrence of the County and the Court, since all were parties to the Annexation Agreement which called for Bay Creek (Brown & Root) to pay for the upgrades and expansion of the Utilities to provide capacity to and for Bay Creek’s 34 planned subdivisions (9 started, one abandoned – Marina Village East)?

With the possibility of having to cough up millions of dollars, Bay Creek decided to do nothing, and engage with Town in a game of chicken. The question was who was going to blink first. While the Town was willing to spend well over $250k to fight the citizens group over the old school, not a penny was spent trying to make the developer live up to the annexation agreement. Instead, the course chosen by the town was to attempt to fund the new wastewater plant by increasing connection charges (shifting financial responsibility onto homeowners). That increase was from $10,000 to $20,000. But even this did not stay around for long, as council eventually voted to reduce charges down to $12,350. The reasoning used for the drop was that the new estimates were based on a “significant payment for such capacity expansion pursuant to the Annexation Agreement.”

True to form, there never was a payment, just increased debt piled onto the citizens of the town. A few months after sending the letter to Bay Creek, Joe Vaccaro was fired as Town Manager…

Bay Creek construction manager Steve Bennett is still on Town Council…

Bay Creek’s Joan Natali sits on Town Council and the Planning Commission….

Bay Creek’s Andrew Follmer is president of the Cape Charles Business Association….

….. and Bob Panek is still  behind a desk at the Town offices…

So it goes….