Three Warren County Supervisors who had not yet retained legal counsel during an initial September 27 court appearance of County and EDA officials charged with misdemeanor misfeasance and nonfeasance regarding an absence of due diligent oversight of former EDA Executive Director Jennifer McDonald were back in court Monday morning, October 21.
Those supervisors, Tony Carter, Linda Glavis and Archie Fox appeared either with counsel or with letters to the court from their attorney. The 9 a.m. Warren County Circuit Court docket of Judge William Sharp was adjourned at 10 a.m. to allow Judge Bruce Albertson to record the trio of supervisors’ legal representation and set motions hearings dates. Albertson appeared by video hookup from his Harrisonburg Courtroom. Sharpe has recused himself from hearing all EDA related matters.
Glavis and Fox were slated for the Monday, October 28, 9 a.m. docket when a preponderance of the 14 County and EDA board members motions to quash the three misdemeanor charges against them will be heard, along with Discovery Motions should the effort to have the charges dropped fail.
Due to a scheduling conflict of Carter’s attorney Caleb Kershner, the Happy Creek Supervisors Motions Hearing date was scheduled for November 21, at 4 p.m. It was noted that another attorney scheduling conflict had Supervisor Tom Sayre’s Motions Hearing date set for November 19, though that date did not work for Carter’s Leesburg-based attorney either.
Fox is represented by John Swerling, out of Alexandria, and Glavis by Bruce Blanchard of Reston.
Next Monday will be a busy and crucial day for EDA related hearings. In addition to motions to quash the criminal misdemeanor charges against the bulk of the 14 current or past public officials charged with failing to provide adequate oversight of Jennifer McDonald’s actions as EDA chief executive, the first hearing date on the Removal Petition of all five County supervisors filed on Friday is also slated for that day’s morning docket. That petition is seeking to immediately suspend the supervisors “from performing their duties in office until the Show Cause hearing is held”.
Removal Petition attorney Timothy Johnson said that while technically the Show Cause (as to why the supervisors should not be removed) Hearing could be held on that initial court date, experience says that additional Respondent motions may push the hearing date out.
Should that happen and were the judge predisposed to grant the motion to immediately suspend the supervisors from their duties pending the Show Cause hearing it remains to be seen how the County government would function as to any necessary board votes on appropriations or budgetary matters, etc. Johnson said the court could appoint people to fill the roles of supervisors, though the more likely path would be that the motion for immediate suspension would not be granted to allow the uninterrupted function of County government to continue.
EDA Executive Committee ponders strategies, assets and impediments
The Front Royal-Warren County Economic Development Authority Executive Committee met virtually Friday, August 14, to discuss its Strategic Plan. That an economic development strategy must balance vision and process, as well as assets that make a community uniquely attractive to prospective clients versus impediments that would drive them away, dominated the 90-minute discussion.
EDA Board of Directors Vice-Chairman Jeff Browne moderated the virtual meeting attended by Executive Committee members Jorie Martin, Greg Harold, Tom Pattison, and Melissa Gordon, the latter by phone hook up as she drove her child to Virginia Tech to register for their first year of college. So, the topic of establishing a “Project Return Home” as some states and areas have to improve the quality of job opportunities available for the community’s college-educated next generation was of particular interest for her, Gordon told her colleagues near the meeting’s end.
The initial discussion focused on the process by which an updated Strategic Plan would be developed in conjunction with a refined “Vision Statement” for the EDA’s work. Then the committee, along with EDA Executive Director Doug Parsons and Administrative Assistant Gretchen Henderson, delved into the factors that would form that vision. Browne pointed to the County’s geographical location and commercial transportation access to Interstate highways and railroads as a key “Vision” variable.
Harold presented a draft of an organizational chart he had developed and commented that he is a great advocate of the “KISS” method of planning – “Keep It Simple, Stupid”. Maximum use of available technologies to disseminate information among board members and targeted industries was also cited by Harold as a necessary tool in forwarding the Strategic Plan.
After Gordon noted she did such strategic planning development in her real job, Harold deferred to his colleague’s professional experience for elaboration on the process of strategic planning. Gordon cited the necessity for, not only the development of a comprehensive strategic plan based on a community vision but of regular review to “establish where you are” and how the Strategic Plan is functioning to achieve the desired goals.
“When I look at the Strategic Plan I start very BIG in terms of what is our maximum potential and then break it down from there … to where are we today. And then coming up with measurable objectives over however the length of time we’re setting the Strategic Plan for; and then evaluation each year of what’s working well and what’s not,” Gordon said of the long-term game plan.
She also addressed the variables of regional economic development and Warren County and Front Royal’s place in that development. “The other thing I would say is, even though there are a lot of other counties around that are moving forward with economic development, deciding what makes us unique from them …”
Economic development assets
“Location, location, location,” Browne quoted a long-time observation about the “top three” factors in business development. “Logistics is something we have a great strength in – we are almost dead center in the mid-Atlantic; we’re eight hours from the Canadian border; we’re eight hours-and-change to Boston; eight hours going west gets you to Indianapolis; and eight hours south gets you all the way down to Georgia,” Browne recited of commercial driving times from Warren County.
“We have the Inland Port and train transportation that gets us to one of the two largest ports (Norfolk) on the entire east coast for importing and exporting goods,” Browne continued of the logistical advantages the county has as a commercial transportation hub near the intersection of two major Interstate highways, I-66 (east-west) and I-81 (north-south).
“From a logistical standpoint, one of the critical things every company looks at, we’re really ideally situated. We’re close to Washington, D.C., I could keep going on and on, on the logistical advantages that we have here that are under-utilized in what we do,” Browne told the executive committee.
The transportation hub discussion led to another geographical consideration, the Town of Front Royal as the northern gateway to the Shenandoah Valley and the county’s natural assets of the Shenandoah River, it’s north and south forks, and the Blue Ridge Mountains overlooking the river.
“That’s one of the reasons we live here,” Gordon chimed in from her trip south to Blacksburg and Virginia Tech, likely on I-81.
“Regionalism is another area that I think is under-utilized in what it is that we do. We are, in my mind, less competitive with all of our neighbors although on specific projects we might well be vying for the same dollars on grants and the like. But the reality is that we are the Gateway to the Northern Shenandoah Valley. And if we’re doing our job well, we all benefit from it,” Browne said of an intertwined regional economy that fosters a cooperative outlook.
“To me, regionalism and working cooperatively is a much more attractive thing for site developers and companies looking to be here. I would rather get a piece of the pie by going that way, than none of the pie by going it alone,” Browne reasoned of regionalism’s positive impact on economic development for all.
Impediments to Economic Development
Browne then segued to what he called “impediments” to economic development. And ironically his referenced regional cooperative outlook has been impeded, not by an outside community, but by one closer to home.
“We’re well aware of the issues with the Town,” Browne began of a co-founding and still legally at least participating member, the Town of Front Royal, adding, “We have lawsuits and other things we’re going to have to overcome and have strategies for what it is that we do.”
We later checked with Browne on his “other things” reference. He elaborated that it was to three projects the Town owes the EDA debt service payments on: the new Town Police Headquarters, Leach Run Parkway and the West Main Street Connector Road at the Royal Phoenix site, the latter two he estimated adding about $3 million to $4 million to the $9-million debt service on the FRPD headquarters.
As previously reported, on June 1st the EDA presented the Town with an invoice for slightly over $441,300 paid thus far by the EDA on the FRPD headquarters project, with a remaining balance of $8.44 million with 3% interest accruing. The Town’s response through back-channel negotiations between council members Chris Holloway and Lori Athey Cockrell and supervisors Cheryl Cullers and Delores Oates was to offer to pay a recoverable $10,529, or half of the interest-only July payment of $21,102, without admitting any legal or moral obligation to pay anything on the police station debt service.
The Town also requested and received permission from the state government to become the first Virginia municipality to be given authority to create an independent, second EDA while still technically a member of the EDA it co-founded with Warren County in 1969.
After initially championing a “reform” the EDA movement, the Town Council opted out of that cooperative effort with the re-tooled EDA and Warren County in order to sue the EDA for “at least $20 million” mirroring the EDA initial civil action against former EDA Executive Director Jennifer McDonald and seven co-defendants totaling $21.3 million. The EDA’s civil action has climbed to nearly $26 million against McDonald and 23 co-defendants, while other than the above-referenced and apparently stalled “back-channel” effort, the Town has rejected EDA offers of “good faith” negotiations to establish exactly what Town assets were involved in the alleged EDA embezzlements.
Other impediments were cited, including one created by an asset – blocked roads from lengthy freight trains headed to the Inland Port in the county’s north side. Though there is hopefully some relief coming with grant funds being accessed for a Rockland Road “flyover” to ease one of those blocked sites, he observed.
Martin also noted a hopeful contact to expand broadband service throughout the county to solve another impediment, the lack of broadband Internet connection countywide. That is a particular issue, not only for economic development but education during the COVID-19 pandemic emergency measures requiring a certain amount of home Internet virtual instruction to students while social distancing limits their in-school time.
Money and board vacancies
As with its own initiatives and Strategic Planning efforts, it was noted that budget factors were always a limiting variable on the County side as well. But it was commented that the EDA should become an advocate for the type of expenditures that will help stimulate economic development on the positive side, whether in educational funding or elsewhere.
Toward the committee meeting’s end, the matter of the two board vacancies created by the resignation of Gray Blanton and Ed Daley’s move to the County as interim county administrator was raised.
Browne said he had yet to receive word from the county supervisors who make EDA board appointments on Blanton’s seat but that he believed a decision was close. He also raised the possibility that an interim replacement for Daley might be put on the table with the understanding it would be a short-term replacement. The EDA and County’s intent has appeared to be that former EDA Board Chairman Daley will return to his position when the County hires a permanent replacement for Doug Stanley.
EDA civil case judge considers more defense motions to remove defendants
Several more Economic Development Authority civil defendants were in court Thursday morning, July 30, to hear their attorneys echo past EDA defendant counsel arguments on dismissal of their clients from one or the other of the EDA’s two civil litigations now totaling at least $26 million.
Present from the nine-defendant list of people and companies named in the April 14, 2020, filing of a civil action seeking “not less than $4.45-million” in actual damages and $350,000 in punitive damages were William T. Vaught Jr. and Rappawan Inc. principal Stuart R. Vaught and Walter and Jeannette Campbell of Century 21 Realty. Dismissal motions were also argued for Tracy L. Bowers of TLC Settlements LLC, though she did not appear to be present for those arguments. Not having motions before the court were Service Title of Front Royal LLC and agent Victoria L. Williams.
Chief 26th Judicial Circuit Court Judge Bruce D. Albertson of Harrisonburg presided over the 8:30 a.m. hearing that ended a 11 a.m. with the judge taking the various defense motions under consideration.
Those motions began with Robert Light and Joseph Silek Jr. representing William T. Vaught Jr. and Rappawan Inc. Other than Silek and Light, the latter who presented the Vaught-Rappawan motions case, and EDA attorneys Vivian Giles and Sean Hutson of Sands Anderson who countered the defense motions, all other attorneys were present by remote telephone connections to the courtroom. Those remotely connected attorneys generally cited agreement with Light’s initial presentation for Vaught/Rappawan, adding specifics of the allegations against their clients, to call for their removal from the civil suit list of defendants.
At issue for all defense attorneys was an alleged lack of specific actions in the EDA complaints against their clients that proved they were aware of being part of an alleged conspiracy to defraud and misdirect EDA assets in conjunction with central civil suit defendant, former EDA Executive Director Jennifer McDonald. Also contended for all defendants were arguments that the nature of those allegations indicated that Statute of Limitations timelines on bringing charges had expired by the time the EDA civil litigation against their clients was filed.
Plaintiff attorneys Giles and Hutson countered that there was, indeed, detail of the participation of the defendants in alleged schemes utilizing real estate transactions to move EDA funds through McDonald companies in order to “launder” stolen EDA money and give it the appearance of legitimacy through those real estate transactions from which all involved parties allegedly saw profit from.
According to the EDA Complaint, the Vaught-Rappawan case utilized TLC Settlements to move $2-million of EDA money into McDonald’s DaBoyz real estate company to purchase several parcels from Rappawan with that money, which was then sold back from DaBoyz to Rappawan at a $600,000 loss a month later.
“Through these transactions over just a month’s time, Defendant Rappawan and Jennifer McDonald effectively laundered stolen money from the EDA. McDonald put $650,000 of the EDA’s cash in her pocket; Rappawan got back all the land originally sold and put $250,000 in stolen EDA cash in its pocket. The EDA, of course, got neither land nor its money back,” paragraph 75 on page 15 of the 30-page complaint states.
Of moving money through a bank into a real estate deal for someone other than the source of the money (in this case the EDA), Giles told the court, “Transactions like this just don’t happen when you pocket $600,000 in one month. Money in the bank makes it clean? – It’s a drug dealer’s dream – but it doesn’t work like that. Were they unjustly enriched? – Absolutely. If we’re wrong let a jury decide,” Giles told the court.
She told Judge Albertson that the defendants were essentially trying to make evidentiary arguments best suited for trial, during pre-trial motions. – “This is Discovery,” she said of defense arguments seeking additional clarity on the plaintiff’s case against their clients.
The statute of limitations arguments largely revolved around a debate on the nature of the charges and when the EDA actually became award of the alleged theft, embezzlement, and misdirection of their assets.
Of the defendant counsel assertion then EDA Board of Directors Chairman Greg Drescher had signed off on one of the enabling transactions, legitimizing it as EDA business, Giles told the court, “Mr. Drescher was duped, like the EDA was. What was happening was not discovered till much, much later.” – Which is essentially what defense attorneys are arguing for their clients.
How much later we will find out the result of Thursday morning’s legal arguments is unknown. Judge Albertson did not give a hint as to a timeframe for his ruling. To this reporter’s knowledge, thus far no EDA civil case defendant removal motion has been successful.
EDA monthly meeting report; solar panels gone; Afton Inn sale moving forward
The Board of Directors held their regular monthly board meeting today. Two motions were passed:
-Finance Committee Chair Jorie Martin made a motion, seconded by Tom Patteson, to award a $2,500 bonus to Administrative Assistant Gretchen Henderson for exemplary performance. The Board also will also pursue a reclassification of her job position based on new duties and responsibilities. The board voted unanimously in favor.
-Ms. Martin also made a motion, seconded again by Dr. Patteson, to approve United Sprinkler to provide the annual inspection for 426 Baugh Dr. for a fee not to exceed $600. This inspection is required for the insurance policy. The board voted unanimously in favor.
Finance Chair Jorie Martin reported that the EDA will be modifying its budget. The EDA had issued bonds for Christendom College and Royal Arms housing complex renovations. Once per year, they owe the EDA administrative fees. Those fees were not previously invoiced. Current EDA staff has resumed that task so the budget will be updated to reflect these two new sources of revenue.
Sunlight Properties, LLC has paid in full and removed the solar panels from the roof of the EDA office building at 400 Kendrick Lane. Executive Director Doug Parsons proposed that the Board of Directors work on a plan for repairing the roof. He noted that he’s been in contact with individuals looking to lease commercial office space and that the revenue it would generate would support making the commitment to the repair project.
Finally, Doug Parsons reported that the FY 2018 and 2019 audits by Brown Edwards continues to move forward. Auditors completed their preliminary fieldwork in early July. He projects completion by August/September.
Asset Management Committee
Royal Lane “Workforce Housing” property-Committee Chair Harold and EDA Chair Ed Daley met with Front Royal Mayor Tewalt and Vice-Mayor Sealock on the EDA’s plans for the property. He reported a positive and constructive meeting and appreciated their input. Multi-family housing will be a welcomed addition to the Front Royal area.
Afton Inn-Mr. Harold was pleased to report that the sale of Afton Inn continues to move forward and projects closing this Fall. The EDA will be glad to see this property in the hands of private developers. The goal of the buyers/developers, 2 East Main, LLC will be to bring this downtown Front Royal landmark back to life. The EDA is looking forward to finalizing this sale.
Finally, the EDA will undertake signage projects for the Kelly Drive Industrial Park and the LFCC Tractor Trailer Training facility in the Avtex parking lot.
EDA staff and the Board of Directors welcomed Doug Stanley as he gave his final report as County Administrator. He has been an invaluable asset to the EDA and the Front Royal Warren County community. He will surely be missed. The Board recognized that EDA Chair Ed Daley will be stepping down to become Interim County Administrator. Vice-Chair Jeff Browne will assume the duties of Chair.
Two supervisors questioned about ‘back channel’ dealings with Town on EDA issues
On Tuesday, July 21, Happy Creek Supervisor Tony Carter’s call to add board discussion and a vote of “formal approval” of an informally negotiated “Reservation of Rights Agreement” with the Front Royal Town Council led to the evening’s most surprising and most contentious discussion.
During that discussion, Carter asked if informal County “Reservation of Rights” negotiators Delores Oates and Cheryl Cullers should be made an official board committee. When County Administrator Doug Stanley noted that once formed as a formal municipal committee, further meetings would require public notice of, and minutes to be taken at future meetings.
“I know, that was my intent,” Carter replied, indicating he thought a formal committee a better path than the undocumented, unsupervised way those unofficial meetings between Cullers and Oates and Lori Cockrell and Chis Holloway on the Town side were being conducted. Carter called the meetings similar to the Town-County Liaison Committee meetings, which are formal and documented. Perhaps oddly or not, the Reservation of Rights Agreement discussion was NOT part of last week’s Liaison Committee meeting agenda.
“I think everybody wants to be transparent. And it seems like that would be the best way to be transparent – notify the media, notify the public about having these discussions,” Carter said of formalizing such an important matter involving the County, Town, and EDA.
However, Cullers and Oates countered that their un-monitored meetings with the Town representatives were being made in good faith to move a stagnated process forward.
“I would like to disagree with that,” Culler said of Carter’s formalized committee idea, adding, “simply because I feel like we’re making some headway – not that I’m trying not to be transparent. But at some point, you have to sit down with people in a room, shut the door and get down to business without too many people in the room. I think the Reservation of Rights that we came to here is a step in that direction. I don’t know if we would have got there if we had more people in the room.”
“I understand what you’re saying, that you prefer to conduct public business without the public,” Carter retorted of Cullers’ rationale for continuing her and Oates meetings as they have thus far been conducted without public and media scrutiny.
As previously reported, the original “Reservation of Rights Agreement” was a late June, Town-drafted quasi-legal document agreeing to a one-time, recoverable $10,528.95 payment covering half the $21,102 interest-only July payment on the new Front Royal Police Headquarters debt service. The agreement was first revealed during a June 30 Town Special Meeting called to approve the initial draft. However, due to excessive conditional language included in that document, first EDA officials who were being asked to sign off on the agreement they had no previous knowledge of, and then apparently County officials as well, rejected moving forward with it.
Last week a revised and severely paired back, one paragraph “Reservation of Rights Agreement” was brought forward by North River District Supervisor Oates and Board Vice-Chair Cullers for reconsideration by the supervisors. While the intent remained the same, a one-month, recoverable half-interest Town payment on the July FRPD debt service that the Town was admitting no obligation to make, virtually all the excessive verbiage that would have had the EDA and County signing a document stating the Town has “no legal or moral obligation” to pay for its EDA-financed police station and preventing any future EDA or County use of the payment and its documentation in court or “any forum” was gone.
It was replaced with the Town’s acknowledgment that the payment was being made “with no admission of obligation and reserving all rights to continue to contest this and other matters in pending litigation between the Town and EDA. The EDA accepts this payment acknowledging this reservation of rights.” See Royal Examiner’s coverage of evolution of the draft proposals in previous stories “Legal questions surround Town offer of one-time, recoverable FRPD payment” and “Pared back FRPD payment ‘Reservation of Rights Agreement’ revealed by County”.
As for the asserted “good faith” aspect of the secretive Reservation of Rights Agreement discussion, Carter said, as EDA Board Chairman Daley would soon agree to during his comments on the matter, “Wouldn’t it be good faith if the Town paid their obligations? Wouldn’t it be good faith if the Town, County, and EDA worked together, instead of against each other in legal procedures?”
Both Cullers and Oates responded that was their ultimate goal, adding that the non-publicly acknowledged meetings allowed the conversation to be undertaken “without the undermining going on”. Contacted later, Cullers said that was not a reference to any media coverage of Town-County issues.
Carter continued his “show of good faith” questions, asking, “Is it a show of good faith that the Town is starting its own EDA, thus duplicating costs to the town taxpayers, instead of working together? After all, most of the EDA projects are located in the town.”
Carter also questioned the advisability of the supervisors as the county’s governing body, signing off on a document that Oates admitted had not been what she and Cullers had hoped to achieve on behalf of the County and EDA, which was the full July payment acknowledging the bank-financed 3% interest rate on the FRPD debt service.
Part of the Town of Front Royal’s $20-million-plus civil litigation against the EDA is the claim it was promised a 1.5%, 30-year debt service interest rate on the FRPD project by former EDA Executive Director Jennifer McDonald.
Called to the podium to comment for the EDA Tuesday night, still EDA Board Chairman Daley told the supervisors the EDA has documentation dating to 2017 and 2018 indicating the Town knew the FRPD project interest rate would be no lower than 3%.
Daley also was fairly pointed in indicating to the supervisors that he believed the Town was not dealing in good faith with the EDA regarding any financial issues. He observed that Town legal attacks or refusals to meet financial obligations with the EDA were also attacks on the County since the County has taken on sole financial responsibility in support of the EDA.
Following the 35-minute far-ranging, sometimes pointed conversation, on a motion by Carter, seconded by Fox, the board voted 4-1 to table action on the Reservation of Rights Agreement. Oates cast the lone negative vote. After a long pause when her name was called for the roll call vote, Cullers voted with the majority to table.
See all the drama of your local government in action, including discussion with County Attorney Jason Ham on the advisability of formal versus informal meetings of this magnitude, Chairman Mabe’s observations in the middle of the debate, and Daley’s full observation from the EDA perspective in this Royal Examiner video segment:
Pared back FRPD payment ‘Reservation of Rights Agreement’ revealed by County
In an unexpected and somewhat stunning development in an added agenda item to conclude Tuesday’s Warren County Board of Supervisors Work Session, it was revealed that a revised “Reservation of Rights Agreement” has been negotiated between members of the county board and the Front Royal Town Council. Following the discussion about the new agreement on making the July FRPD construction debt service payment, a board consensus was reached to place a vote on approval of the revised agreement on the board’s July 21st meeting agenda.
The new agreement is a radically pared-back version of the one the town council unanimously approved at a June 30 Special Meeting to cover half the July FRPD headquarters debt service payment, as will be explored in detail below.
Board Vice-Chairman Cheryl Cullers made the motion to add the item to Tuesday’s work session. Delores Oates then noted she and Cullers “met, I think you guys know, with Ms. Cockrell and Chris (Holloway)” on the matter, observing that the supervisors had not appropriated funding to continue covering the EDA FRPD debt service payments into the new fiscal year.
It seems the County and Town are on the verge of taking a high-stakes gamble on whose credit rating will suffer the worst if the EDA’s FRPD debt service payments are not covered this fiscal year.
The pared-back Reservation of Rights Agreement appears to be a compromise to avoid that gamble being played into the commercial banking community as of July 16.
It was revealed during the subsequent discussion that today, Wednesday, July 15, is the last day before the $21,102 interest-only payment to United Bank goes overdue. If the agreement to keep the loan current is realized before either elected body votes to sign off on the method by which it will be done, at least for July, the Town will still only pay half of the monthly amount due, or $10,529.
That half interest-only payment is based on council’s contention that verbal assurances by former EDA Executive Director Jennifer McDonald of a New Market Tax Credit-based 30-year, 1.5% interest rate on the FRPD construction project that it did not even qualify for, is somehow legally binding. The EDA is paying United Bank 3% interest on the debt service.
And while it is the EDA’s loan, supported by the County’s operational funding, both municipalities have traditionally and continue to be responsible for covering the debt service on their capital improvement projects funded through the EDA. It seems clear outside of Town Hall that precedent indicates the intent was for the town government to assume the Town Police Station construction debt service upon completion of the project, dating to October 2018.
But that was before the previous EDA administration financial scandal began unraveling in 2018. That unraveling led to the EDA’s initial March 2019 $21.3 million civil litigation against former EDA Executive Director Jennifer McDonald and 14 co-defendants alleged to have conspired with her to misdirect or embezzle EDA assets to their own benefit. It was followed by the Town’s filing of escalating litigation against the EDA, now seeking recovery of “at least $20 million” of allegedly misdirected or promised Town assets.
But on Tuesday, Oates asserted that the new agreement, which removes the conditional legal language that would have had the County and EDA signing a document that stated the Town had “no moral or legal obligation” to pay for its police station, indicates ongoing “good faith” negotiations between the two municipalities to resolve the FRPD debt service impasse; and perhaps other issues related to the Town’s $20-million-plus civil litigation against the half-century-old joint County-Town EDA. That litigation relates to the previous EDA administration’s financial scandal, details of which were revealed by a 2018 forensic audit commissioned by the EDA and County.
That audit was commissioned in the wake of Town Finance Director B. J. Wilson and Town auditors discovery of financial irregularities in some of the Town’s debt service arrangements with the EDA, though the police station project was not one of those.
It is against this legal backdrop our community financial drama is unfolding.
Pared-back legal verbiage
As opposed to the convoluted legalese we described in our story “Legal questions surround Town offer of one-time, recoverable FRPD payment”, the new, one-paragraph draft “Reservation of Rights Agreement” is brief and to the point, at least comparatively.
It reads: “The Town of Front Royal (‘Town’) tenders $10,528.95 to the Industrial Development Authority of the Town of Front Royal and County of Warren, Virginia a/k/a Economic Development Authority of the County of Warren (‘EDA’) for the July 2020 payment on the loan by United Bank for the Town Police Department with no admission of obligation and reserving all rights to continue to contest this and other matters in pending litigation between the Town and EDA. The EDA accepts this payment acknowledging this reservation of rights.”
Gone are the “Conditions” that led EDA attorney Sharon Pandak to tell Royal Examiner upon our reading them to her over the phone, that she would be reluctant to advise the EDA to sign off on the initial agreement. Those deleted passages include:
“The Town denies that it owes any moral or legal obligation to repay the Loan”;
“The County and the EDA acknowledge that this payment shall not be construed as, considered to be, or argued to be, in any forum, an admission for any purpose, including but not limited to of liability of the Town for the Loan or the Costs”; and,
“All parties agree that payment hereunder shall be inadmissible for any purpose except by the Town to recover this payment as damages in the Litigation,” among other legally qualifying passages.
So, good-faith negotiations perhaps – just in small steps, VERY small steps with a very large credit rating gamble looming in the balance that could impact this community’s financial future on both sides of the Town-County boundary.
Thus far the EDA, with County support has been making what have been interest-only payments on the $9-million FRPD project. That will change on November 1, when the United Bank loan moves to principal and interest payments. EDA Executive Director Doug Parsons estimated that would take the monthly payments to about $50,000 from the $21,000 interest-only range.
According to Parsons the balance on the United Bank FRPD headquarters loan as of June 1, when the EDA submitted an invoice to the Town for slightly over $441,300 paid thus far by the EDA, is $8.44 million.
How not only this month’s payment but also coming ones will be handled by both municipalities appears to be hinted at by the new one-paragraph Reservation of Rights Agreement spitting the FRPD debt service down the middle with minimal additional legal verbiage. Letting the EDA’s FRPD debt service go delinquent may not be a gamble in either involved municipality’s best interest.
At issue now appears to be will July’s $21,102 payment be made by somebody, somehow before the end of the July 15th banking day; and will majorities of both the Town and County’s elected bodies to agree to this arrangement on an ongoing basis to prevent that rather large credit-rating gamble being played on the municipal-banking poker table??
Stay tuned for the next thrilling episode of “As the FRPD Debt Service – and EDA, Town and County Credit Ratings – Turn”. But while you wait for that next episode, see Tuesday night’s episode unfold over the last 10 minutes or so of Tuesday’s meeting in this Royal Examiner video:
Town authorizes new EDA; Chamber as CARES administrator; and FRPD equipment upgrades
On Monday, July 13, the Front Royal Town Council took several actions, for better or worse, that will shape several key future functions in coming months and years. At the top of the list was second and final reading approval – 4-1, Thompson dissenting as she did at the June 22 first reading – of creation of a new Economic Development Authority solely overseen and funded by the town government and its taxpayers.
The Town will become the first municipality in Virginia to concurrently be a part of two EDA’s. In an unprecedented example of attempting to “have your cake and sue it too”, the Town has maintained its half-century-plus, co-founding membership in the half-century-old joint County-Town EDA while civil litigating for virtually all the money the EDA is trying to recover in its initial $21.3 million civil action against its former executive director and 14 co-defendants accused of conspiring to misdirect or embezzle EDA assets.
But at least the Town does not have to fund operational costs of the old EDA, as in EDA legal fees to fight the Town litigation, while figuring out where its operational costs for it new unilateral EDA will come from, if not a successful civil litigation against its old EDA. For as previously reported, the County took over the Town’s share of joint EDA operational funding several years ago as part of ongoing negotiations about the double taxation of town citizens. So, while the town government doesn’t have to fund the EDA’s legal defense against it, its citizens do as county taxpayers.
Alright, enough of that dizzying legal scenario.
Also approved Monday were a Fiscal Year-2021 budget amendment authorizing receipt of $1,276,558 of the County’s $3.5 million in CARES (Coronavirus Assistance, Relief Equities and Securities) Act federal funding for COVID-19 relief for private-sector economic losses incurred due to the Coronavirus pandemic emergency management response restrictions; as well as an agreement with the Front Royal-Warren County Chamber of Commerce to manage distribution of the Town’s CARES Act funds.
The amount of money authorized to be put under the Chamber’s control was $1,176,558, $100,000 less than the total amount being transferred to Town control. According to the staff summary, that $100,000 is being put into the General Fund Contingency account to cover “COVID-19 expenses”.
Questioned about those expenses by Councilwoman Lori Athey Cockrell, Interim Town Manager Matt Tederick said those costs were an “unknown” at this time, so no amount was being cited at this point in the process.
However, Tederick said he was “confident” those costs would be “minimal”.
Also approved in a series of 5-0 votes, Holloway absent, as were the CARES Act related items, were three appropriations totaling $256,981.72 for equipment upgrade purchases for the Front Royal Police Department. FRPD Chief Kahle Magalis made a detailed presentation on the need for the equipment upgrades at council’s previous work session.
Those equipment purchase authorizations were:
- $82,159.72 for a VESTA 911 phone system;
- $162,000 for replacement of 10 WatchGuard 4Re In-car WIFI camera systems, and 24 VISTA body cameras, and;
- $12,822 for Avtec-Motorola radio console equipment to replace existing equipment termed at its “end of life” stage of service.
As Chief Magalis told council at his work session presentation, these equipment upgrades are the cost of doing law enforcement work at an optimum of communications efficiency; and self-monitoring standards that protect both the public and the department’s personnel legally.
The agenda summary noted that the Town will pay for the car and body cameras at $32,440 annually over a five-year period. Funding for all three purchases were cited as available through existing FY-2021 FRPD budget line items.
A scheduled Closed Session to discuss unspecified “Personnel” matters was deleted from the agenda at Councilman Meza’s suggestion, due to the absence of one member, Chris Holloway.
Lori Cockrell’s request to then add a Closed Session to discuss the Town’s litigation against the County-Town Economic Development Authority was rejected for not receiving the required unanimous vote to alter the advertised agenda. Councilwoman Letasha Thompson explained she would oppose the addition on the same grounds council had agreed to remove the scheduled Closed Session, Holloway’s absence preventing consideration by the full council.
The final agenda item was unanimous approval of a Resolution of support for a Town “Employee Appreciation Day” to be this Wednesday, July 15. The resolution cited the ongoing contributions of the Town’s remaining 168 part and full-time employees, particularly during upheavals in normal service resulting from the COVID-19 Coronavirus pandemic emergency management response. Staff will be honored with a Town-hosted luncheon tomorrow to mark Employee Appreciation Day.
See the staff summaries, discussion and votes on these matters, as well as Stars of the Month Employee recognitions to the Solid Waste Department’s EJ Swindell and Jorge Guerrero for work “above and beyond”; and the departmental “pinning” by his wife, of FRPD’s newest Officer Scott Baker; and public presentations on town road infrastructure/pothole issues (Mike McCool), trash accumulation and overflow at the County Dog Park in town (Betty Showers), and another 2nd Amendment Sanctuary initiative seeking to shield citizens from State-enacted gun laws presented to council (Paul Aldridge) in this Royal Examiner video: