Developer Pays Blackstone Tap Fee Day before Deadline

By GEORGE SOUTHERN
Cape Charles Wave

September 27, 2012

Today is the day that residents of Blackstone Lofts were dreading.

Blackstone VA Town Council voted a month ago to turn off the Lofts’ water supply if the developer did not pay the connection fee by September 27.

The Blackstone Lofts developer is J. David McCormack, who is also a partner in Echelon Resources, Inc.

Echelon has a contract with the Town of Cape Charles to convert the old school at Central Park into an apartment building to be called Cape Charles Lofts.

According to Blackstone Town Council minutes, Town Manager Philip Vannoorbeeck admitted that the town was at fault for issuing a building permit for Blackstone Lofts without first receiving payment for the water and sewer connection fees.

The town has been trying to get McCormack to pay ever since. Last March, the town council gave him 30 days to pay, but did not enforce its demand.

Manager Vannoorbeeck told the town council he had both talked to McCormack and informed him in writing, “which is not endearing him to the town,” according to the minutes.

On August 27, the town council gave McCormack another 30-day deadline, and this time made sure he knew they meant it. Failure to pay meant the water would be turned off, period.

McCormack told the Wave September 3 that he definitely intended to pay the connection fee but was negotiating the terms.

Yesterday Blackstone Mayor Billy Coleburn told the Wave that McCormack had just delivered a check to the town manager for $38,000. He earlier had paid $2,000, and this covered the balance.

The Wave has been covering the Blackstone connection fee issue because of the parallels with Cape Charles.

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McCormack converted an abandoned tobacco warehouse in Blackstone into “luxury lofts.” He proposes to do the same with the old school and Central Park property in Cape Charles.

In Blackstone, McCormack received a building permit without paying a connection fee. Cape Charles Town Council has passed a special ordinance allowing him to do the same thing here.

Cape Charles town code requires payment of water and sewer connection fees at time of issuance of a building permit — unless Town Council authorizes a special payment arrangement. Town Manager Heather Arcos confirmed to the Wave that according to the same ordinance, even with a special arrangement the connection fees must be paid no later than the time of actual hookup of the water and sewer lines.

But on June 14, Town Council passed a special ordinance overriding the normal rules. McCormack and his partner, Edwin Gaskin, will not have to pay water and sewer connection fees until issuance of a certificate of occupancy for Cape Charles Lofts.

It is not clear whether the developers must pay before receiving a temporary occupancy certificate or a permanent one. Hotel Cape Charles, for instance, has been open for three months without receiving a permanent certificate of occupancy.

On March 10, Town staff distributed a list of 10 “Frequently Asked Questions.” Question #9 was: “Why would the Town give the property to the developer at essentially no cost?”

The answer provided was: “The project is financially viable through the application of Federal and State historic tax credits and if the property is conveyed essentially free.”

But Town documents obtained through the Virginia Freedom of Information Act reveal that in secret negotiations with Town staff, Echelon partners Gaskin and McCormack were delivering a different message: Getting the building for free was not enough — they needed a $200,000 cash payout from the Town as well.

Manager Arcos and Assistant Town Manager Bob Panek suggested cutting water and sewer connection fees by 50 percent. That would equal $105,000. And they also offered to pay Echelon $41,000 insurance money received from earthquake damage to the school.

But Echelon needed $52,000 more. Arcos suggested the Town could pay that out over a three-year period.

In the April 3 email below, Gaskin applauded Arcos’ “creative suggestion” that “is going to keep this thing from falling apart.”

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According to Gaskin’s email, it would be up to Bob Panek to “make the $52K happen.”

And Panek did make it happen. He persuaded Town Council to pass a second ordinance specifically for Echelon, reducing their connection fee a further 50 percent — resulting in a further $52,500 cash saving.

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Now, McCormack and Gaskin have only to pay the Town $52,500 for connection fees on a deferred basis — similar to what ultimately happened in Blackstone.