Old School Developer Gets Another Lucky Break
By GEORGE SOUTHERN
Cape Charles Wave
December 15, 2014
J. David McCormack of Petersburg, who is converting the old Cape Charles High School in Central Park into a 17-unit apartment building, has enjoyed one lucky break after another over the past four years. Most recently, he saved as much as $200,000 in repairs to a crumbling back wall.
It was that same wall that town officials claimed made the old school impossibly expensive to repair for use as a community center. When Northampton County offered to chip in, then-Mayor Dora Sullivan turned the County Board of Supervisors down flat.
“The cost to provide a historic restoration is prohibitive at $2-4 million,” she wrote to then-Supervisor Willie Randall, noting that “one exterior wall collapsed as a result of the earthquake last year and the estimate to repair that wall alone was approximately $200,000.”
The actual estimate was $228,000 and came from FEMA, who was willing to pay to repair the earthquake damage so long as the town retained ownership of the building. FEMA refused, however, to compensate the town unless the money was used to repair the wall.
The FEMA report also contained the question, “Was this site previously damaged?” The answer given was “No.” But the damage had been documented years earlier in the 2006 Shriver Holland report: “The exterior wall along the west side of the east wing has pulled away from the floor framing. . . . Geotechnical investigation should be provided to determine cause of wall movement. Wall may need to be re-anchored and additional foundation support provided,” the report stated.
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Town officials were not interested in seeing the wall repaired. Instead, they were looking for money to pass to developer McCormack. So they turned down FEMA’s offer and went instead to the Virginia Municipal League, which insures town assets. The VML estimated an actual loss of $66,000. Subtracting a $25,000 deductible left $41,000, and the town cashed the check.
Meanwhile, then-Assistant Town Manager Bob Panek had struck a no-bid deal with McCormack and his sometime partner, Edwin Gaskin, to convey the school plus the $41,000 insurance proceeds in return for the nominal sum of $10. The deal was agreed to by Town Council in a series of closed-door discussions initially concealed from public scrutiny.
Fast forward to late 2014, when McCormack began construction on the school building. Two masons spent the better part of two days repairing the wall. Typical of construction at the time (1912), the wall consists of three courses of brick. Only the outer course had fallen down (see top photo), and the masons simply bricked it back.
If each mason was paid $25/hour, and worked 16 hours, the total cost of labor was $800. Throw in another $200 for mortar and some new bricks (most were simply reused) and the estimated cost for actual repair was $1,000 – a remarkable saving over the $200,000 figure named by the former mayor, and a $40,000 profit for McCormack over what the town gave him.
But the wall is only the latest “lucky break” for McCormack. He also enjoys a remarkable (if illegal) business relationship with the town by which he receives free water. Town Council has granted several water concessions to McCormack, but they never passed any ordinance giving him free water. That decision was made by acting Town Manager Panek, by fiat.
Town code requires payment of a sizable utility connection fee when a building permit is issued. But the town agreed not to charge McCormack a connection fee until issuance of a Certificate of Occupancy, which comes only after construction is complete.
Meanwhile, the school has always had a water connection. Anyone else purchasing property with a water meter is required to pay a monthly charge, whether any water is used or not. In fact, the town code goes further, requiring monthly water payment even where a structure has been razed. For example, the town billed the developer of the Cape Charles Yacht Center for water and sewer for several years after the only building on the property had been demolished.
In McCormack’s case, Panek ordered town staff to ignore the existing water hookup to the school, which otherwise would have been billed a minimum of $108/month even if no water were used. McCormack has now owned the building for two years, which amounts to over $2,500 in utility charges that any other owner would have been billed. Meanwhile, builders at the school are enjoying the use of free town water (see photo).
Another “lucky break” came in the form of two sizable tax reductions. When McCormack bought the old school, it was valued on the tax rolls at $921,000. A 2014 reassessment lowered that value to $510,900. But McCormack was not satisfied, and appealed the reassessment to county officials. In a series of clever, if not outlandish, arguments, McCormack maintained that the seven lots on which the school is built in a residential district should be valued below that of adjoining lots, because the presence of the school building is a liability. He further argued that the basketball court adjoining the school should have a value of zero, because “the basketball hoops have been dismantled by the Town of Cape Charles, and the courts are no longer in use.” The county bought his argument and reduced the total property assessment value to $285,000.
But McCormack’s luck didn’t stop there. Last May, the county approved his application for “Tax Assessment Rehabilitation,” which locks in the $285,000 assessment for 10 years, no matter how valuable the property may become. That means McCormack will pay only about $1,900 county tax and $786 town tax annually on his 17-unit apartment building for the next 10 years – less than most other town property owners pay for a single family residence.
McCormack appears confident that his luck will hold with the Virginia Department of Historic Resources, which decides whether he qualifies for historic tax credits totaling 45 percent of his expenses. He has always conceded that his only reason for taking on the school project was to get the tax credits (which also apply to the “administrative fees” that he charges himself).
But an official at the Department of Historic Resources initially denied McCormack’s application, listing a litany of requirements that would have to be satisfied. For example, McCormack was supposed to build a full scale mockup of the proposed roof-mounted heating/air conditioning system and skylights. McCormack has ignored all the DHR’s requirements, but he did hire a former DHR official, Page Pollard, to handle the application process. (The Wave has learned that DHR has never denied any of McCormack’s previous applications for historic tax credits.)
McCormack also lucked out on asbestos in the school. Scare stories had been circulated to the effect that asbestos abatement would cost thousand of dollars — another reason for the town to unload the school. But in the event, little to no asbestos abatement was performed, and inspectors have not reported a problem.
McCormack also enjoyed amazing luck with the town’s own Historic District Review Board, which under the leadership of Russ Dunton found that “converting the old school to apartments is not an appropriate use of the building.” But then, in a wholly unrelated matter, the entire Historic Review Board resigned after Town Council overruled it on granting an occupancy permit to the new Hotel Cape Charles. (The hotel developer, David Gammino, admitted that he made significant changes to the design without obtaining permission from the Review Board.) Town Council appointed a new Review Board, which has approved all of McCormack’s requests.
McCormack also learned that, like Gammino, it is better simply to act without requesting approval from the Review Board. For example, Historic District guidelines do not allow a parking lot in front of a building in a residential district. McCormack is building a parking lot across the entire front of the school, but he never requested permission, and consequently obtained a building permit. McCormack maintains that the school actually fronts on Plum Street (where there is no door), and the front of the building with the main entrance is actually the side. As the Wave has reported, the former town planner, the former mayor, and several members of Town Council have simply refused to answer Town Councilman Frank Wendell’s question, “Which direction does the school building face?”
McCormack was also quite fortunate to have a wife who “just by sheer coincidence realized that she had a relationship with Heather” [Arcos, former town manager], to use McCormack’s own words, which the Wave has on video (CLICK). No one knew that the town was even interested in selling the school to a developer, although there was a plan to lease it to the Cape Charles Christian School. Without ever advertising the property, Town Council agreed to in effect pay McCormack to take it, meanwhile refusing to consider an offer from local residents to buy it for $10,000 for use as a public community center.
But McCormack’s luck has not always been so remarkable. Back in 2009 he proposed that he be given the old armory building in Blackstone, Virginia, for conversion to apartments, with the assistance of historic tax credits. Local landlords objected that McCormack was getting an unfair competitive advantage, and the request was denied.
But earlier this year McCormack offered $5 to buy the armory and turn it into an organic tomato processing facility. This time he thought he had the votes needed in the town council to win — and he would have, were it not for Blackstone town resident Cindy Taylor-Longest. Council member Eric Nash had already stated that he intended to vote to give away the armory, but just as the town clerk was recording the votes, Taylor-Longest called out from the audience, reminding Nash that his landscaping service had a contract with McCormack. Nash responded that he was already receiving a lot of personal criticism on Facebook, and therefore would abstain from voting. The result was a tie vote, which Mayor Billy Coleburn broke by voting No. And so, in that case at least, McCormack’s luck failed to hold by a thread.
UPDATE: On December 15, Blackstone Town Council voted 6-1 to convert the old armory into a community center, working in conjunction with a community support group.