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EDA Board authorizes sale of Afton Inn as Town withdraws title claim

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“Can we sing Hallelujah now,” Economic Development Authority Board member Jorie Martin exuded following 5-0 roll call approval (Gordon absent) of a motion by Greg Harold, seconded by Martin, authorizing the sale of the Afton Inn property to developer 2 East Main LLC at a price of $325,000. The sale is to be accomplished upon signing of the Deed of Sale and necessary Title company documents “at the earliest possible time”.

Virtual jubilation, here it is EDA’s Greg Harold, was in order as the Town allowed the EDA sale for renovation of the Afton Inn property to proceed, without an ownership challenge on sales proceeds which are earmarked to pay part of the EDA Afton project bank loan off. Royal Examiner Photos by Roger Bianchini

The landmark achievement, in the works now well into last year if not longer as the EDA and Town negotiated some rocky legal terrain on a variety of fronts, was accomplished Friday afternoon following an approximate 45-minute Special Meeting Closed Session of the EDA Board of Directors convened shortly after 2 p.m.

Royal Examiner contacted EDA Board Chairman Jeff Browne, who along with Board Secretary Greg Harold will sign the Afton Deed of Sale for the EDA, shortly after the 3:05 p.m. adjournment of the February 12 Special Meeting. “Is this a done deal, is the Town okay with this,” we asked Browne four days after an occasionally tense Monday night meeting exchange with Front Royal Mayor Chris Holloway on the dynamics of a potential Afton sale.


Yes, the EDA board chairman replied, explaining that subsequent communications with the Town this week enabled Friday’s action to proceed on the most recent extended 2 East Main LLC sales contract deadline date of February 12.

“To me this is symbolic that we’re working together to get some things done and getting the Afton Inn resolved is a good sign. And hopefully we’ll move on and get other things resolved as well,” Browne said of renewed EDA-Town communications.

A BIG Fix is coming – ‘Just’ when you were getting used to seeing this at the head of Front Royal’s Downtown Business District, soon it will be a little different (see below).

He noted that the EDA had received a letter from the Town indicating it would not dispute the EDA’s title claim to the Afton property ownership. And while there was some language in that message found somewhat “cloudy” by the Sterling-based title company or EDA counsel, a subsequent letter signed by Mayor Holloway dated February 12 promised that language would be clarified to remove any perceived ambiguity.

Browne pointed out the sales price is the originally discussed one that has fluctuated somewhat up and down over the months the sale was on hold due to variables involving both the EDA’s financial scandal civil litigation and Town questions over its ownership interest in the property.

As Browne noted during his February 8 report to the Front Royal Town Council, 2 East Main LLC plans to begin its massive renovation project within a year and hopes to complete the $2-million project within two years. See more detail on those renovation plans in Royal Examiner’s December 29 story “From Town Eyesore to Downtown Anchor: Reimagining the Afton Inn”

Above, 2 E. Main LLC graphic of its plan to restore and expand the Afton Inn, originally the Montview Hotel circa 1868, to become a high-end anchor building for downtown Front Royal. Below, Board of Architectural Review (BAR) members Angela Toler, Duane Vaughan and Nancy LeHew peruse 2 E. Main plans. The Town BAR recommended approval of those plans.

Also following Friday’s closed session, the EDA approved a short-term lease proposal on part of the Baugh Drive warehouse space with WOW Airlines. An initial three-month lease will be offered on 4400 square feet (s.f.) of warehouse space and 860 s.f. of office space, which includes a $1,000 security deposit and $900 utility payment, with month-to-month renewal options after the initial three-month period.

WOW Airlines would be the fourth short-term lease tenant in the sprawling Baugh Drive warehouse that the EDA eventually hopes to sell, possibly in relation to its connection to Parallel LLC’s bid to become the region’s medical marijuana distributor.

 

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Following Joint Closed Session with County, EDA authorizes $9-million civil settlement negotiation with former executive director

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The Board of Directors met with the Warren County Board of Supervisors in a joint meeting at their Work Session on Tuesday, May 11. Following an approximately 90-minute Closed Meeting, on a motion by Greg Harold, seconded by Jim Wolfe, the EDA Board unanimously approved the following resolution:

RESOLVED, that the Sands Anderson, P.C. law firm is authorized to enter into such agreements and make such court pleadings on behalf of the Industrial Development Authority of the Town of Front Royal and the County of Warren, Virginia (“EDA”) as may be necessary to effectuate in favor of the EDA a resolution of the EDA’s claims against Jennifer McDonald, MoveOn8, LLC, and DaBoyz, LLC, which resolution shall include provisions (i) that any judgment against Jennifer McDonald, MoveOn8, LLC, and DaBoyz LLC shall be the joint and several liability of all three entities, (ii) that any judgment against Jennifer McDonald, MoveOn8, LLC, and DaBoyz, LLC shall not be dischargeable in bankruptcy, and (iii) that any such judgment be for no less than $9,000,000.

The EDA has successfully proved in civil court that Ms. McDonald and the two corporations associated with her owe money to the EDA, and by extension, to the citizens of our community. This resolution, resulting in a significant judgment in favor of the EDA, once properly approved and entered by the courts, will represent an important milestone in the EDA’s effort to recover losses it has incurred in this matter. The judgment, if approved by the courts, will not be dischargeable in bankruptcy and these defendants will be liable for it until it is paid.

The Board understands that the citizens of Front Royal and Warren County expect accountability and restitution by any and all parties who were involved in misconduct or other unlawful takings from the EDA. This resolution, with support from the Warren County Board of Supervisors, is a step forward in that direction.


The EDA Board of Directors will persist in seeking redress for losses incurred by the EDA. Just as importantly, the EDA will continue moving forward, working diligently to bring jobs and investment to Front Royal and Warren County.

The EDA Board of Directors will have their next regular monthly board meeting via Zoom on Friday, May 21, 2021, at 8 a.m.

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EDA announces 1-year lease with SYSCO on Baugh Drive warehouse

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In a special meeting, the Warren County/Front Royal Economic Development Authority on April 30, 2021, has leased the 426 Baugh property to Sysco until May 2022. The monthly lease is $28,800 per month.

Earlier the EDA had made arrangements to sell the former Atlantic Skyline Building at 426 Baugh Drive for the full asking price of $5,750,000 to Parallel Virginia, LLC, a pharmaceutical processor of medical cannabis. The sale was contingent upon the conditional approval of the company’s application for a pharmaceutical processor permit in Health Service Area 1 by the Virginia Board of Pharmacy – that decision that was expected in March 2021 apparently had been postponed.

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EDA ups ante in civil litigation versus McDonald – without defense objection

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Could the Warren County Economic Development Authority (EDA) and its former executive director, Jennifer McDonald, be headed toward a settlement of the EDA’s multi-million dollar civil litigation against her and her two real estate LLCs, MoveOn8 and DaBoyz? That would appear to be a possibility in the wake of a “Stipulations” agreement hearing Friday morning, April 9, in Warren County Circuit Courtroom A.

Then EDA Executive Director Jennifer McDonald speaking at a 2017 town council work session – might she and her attorney soon be talking to EDA attorneys about a mutually agreeable settlement of the civil litigation against her? Royal Examiner File Photos by Roger Bianchini

After the adjournment of the 9 a.m. docket hearing to deal with remote phone connection issues for other defendants’ attorneys not present for the two-pronged April 9 hearing, Judge Bruce D. Albertson reentered the courtroom at 9:25 a.m. with the remote connection issues resolved. EDA lead civil attorney Cullen Seltzer of the Richmond law firm of Sands Anderson then read the five-point “Stipulations” submission to the court as McDonald and her attorney Peter Greenspun listened at the defense table.

The first of those stipulations set an amount of $62,315,315.51 as the EDA’s claimed damages in the civil case against McDonald and her two real estate companies alleged to have been used to move EDA assets to her or co-defendants’ personal benefit. It is worth noting that the original EDA civil litigation filing was in the $21-million range, later being amended with added defendants to near $28 million.


The second and third stipulations note that the McDonald-LLC defendants “take no position on the basis for” that plaintiff-claimed amount; nor do they admit to “any wrongdoing” regarding the EDA’s claim of damages.

It is the wording of the final two stipulations approved by the court that may hint at negotiation between the plaintiff and defendant:

“The Defaulted Defendants (McDonald, MoveOn8, and DaBoyz) have endorsed an order providing money damages judgment in the amount of $62,315,315.51 in favor of the plaintiff (the ‘Money Judgment Order’),” Stipulation 4 reads, followed by this:

“No sooner than 60 days from April 9, 2021, Plaintiff’s counsel may tender to the Court the Money Judgment Order if the Defaulted Defendants and the Plaintiff do not sooner enter into an agreement satisfactory to the parties. The Defaulted Defendants do not oppose the Court’s entry of the Money Judgment Order once tendered pursuant to this paragraph.”

Did Friday’s EDA civil litigation hearing indicate signs of progress toward an out-of-court resolution of, at least a portion of that litigation?

Defense attorney Greenspun and his client left the courtroom after the five minutes it took for the “Stipulations” submission to be read to the court by EDA counsel and for Judge Albertson to accept them, as indicated above, without objection from the defendant or her counsel, as the second part of the morning’s hearing began. That hearing was on a “Protective Order” request by defendant April Petty’s attorney Bill Shmidheiser to prevent volumes of his client’s bank records not relevant to the EDA case against Petty being posted on a secured database accessible by all the associated defendants, 15 in the first amended complaint and nine more added later.

Shmidheiser cited 3 pages related to a $41,000 check deposit regarding one real estate transaction as relevant to the case out of an estimated one thousand pages of Petty’s bank records from at least six accounts reviewed by the plaintiff attorneys and posted to the database.

EDA co-counsel Sean Hutson argued that the defendant should not be the one to determine the relevance of her own documents, that other defendants’ counsel should. After he polled four defense attorneys connected to the hearing remotely and getting four “no objections” to Petty’s counsel’s request, Judge Albertson granted Petty’s requested exclusion of apparently unrelated bank records from the case database.

Following adjournment after that 20-minute hearing, we asked EDA lead counsel Seltzer about the implications of the Money Judgment Order “Stipulations” agreement approved by the court earlier. However, he declined to discuss details of the status of an active case on the record.

Pictured virtually hosting recent EDA Board meeting, Chairman Jeff Browne is hopeful discussion can lead to out-of-court agreements on at least parts of EDA efforts to recoup alleged miss-directed assets.

So, we soon tried EDA Board of Directors Chairman Jeff Browne with whom we’d briefly discussed the morning’s hearing following adjournment of an 8 a.m. Emergency Meeting of the EDA Board earlier that morning. No action followed a 50-minute closed session. During the brief open session, Browne explained the “emergency” designation simply meant the meeting had been called within 24 hours of its convening.

While also reluctant to discuss the still-active EDA civil litigation, Browne did observe that the entering of a signed agreement by the involved parties citing a 60-day window to reach a mutually satisfactory conclusion was a positive sign that discussion would take place. Of the potential of such discussion, Browne observed, “If we can avoid trial and save tons of money by coming to an agreement it would be a positive development. I hope it works out.”

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County updating equipment, rewriting IT software in wake of system ‘intrusion’

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During his update on County business at the virtual meeting of the Warren County-Front Royal Economic Development Authority Board of Directors Friday morning, March 26, Interim County Administrator Ed Daley addressed the status of the County’s software situation in the wake of the early March discovery of what has been termed an “intrusion” of that system. Daley has fallen short of calling the incident a “hack” due to an absence of discovered consequences such as stolen files or manipulation of existing files or systems.

However, the consequences which began with a nearly three-week halt in use of all county officials and staff emails due to the County server being taken down as a security precautionary measure, continues to be felt. As previously reported, the local IT system intrusion was part of a larger “intrusion” of software at various unspecified locations across the country. It’s source and purpose continues to be a matter of investigation from the federal level down.

A day prior to Daley’s report at the EDA’s monthly meeting, Warren County Emergency Services Coordinator Rick Farrall’s March 25 County “Situation Report” also began with an update on the post software “intrusion” consequences:

COMMUNITY INFORMATION


  1. Warren County Email Update
    1. Warren County, the Warren County Sheriff’s Office, and the Warren County Department of Fire and Rescue Services are still experiencing significant computer/email issues.  The County is working diligently to restore full computer and email service to all personnel.
    2. Please note that any emails sent to County personnel at warrencountva.net, warrencountysheriff.org, or warrencountyfire.com may not be received until all email services are fully restored.

File photo of County Emergency Services vehicle in front of WCGC in March 2020. A year later the on-site emergency services have revolved around software protection and clean up. Royal Examiner Photos by Roger Bianchini

A clue to that restored service came Friday during the interim county administrator’s report to the EDA. Daley told the EDA board that 150 new laptop computers were slated to arrive Tuesday (March 30). Contacted late Friday afternoon, Daley told Royal Examiner by phone that it was anticipated all County emails would be back online at the beginning of the coming week, possibly coinciding with the arrival of the new computers and a rewrite of the County IT network. The system overhaul is to assure whoever was behind the intrusion no longer has access to the system, Daley explained. In a late update Monday morning, Daley said it now appeared the computers would not arrive until Thursday, delaying the restored email use until later in the week.

“We’re just busy buying computers and throwing computers out and wondering why we still have 2007 computers… – It’s a new experience every day,” Daley began his report to the EDA board Friday morning.

“Well, we wish the County well – it’s a horrible problem,” EDA Board of Directors Chairman Jeff Browne told his former fellow EDA Board member and chairman. EDA officials later told Royal Examiner the separate EDA server had not been impacted by the County intrusion, though a downed 10-year-old router had temporarily taken the EDA system offline for about a day this past week.

As noted in our original story on the hack – “A new municipal ‘normal’ – large scale software ‘intrusions’ and targeting an international human organ harvesting business?!?” – Daley said that while the beginning date of the intrusion hadn’t been established, it was verified it did not involve or impact election data from last November.

Interim County Administrator Ed Daley at early March county supervisors meeting. A portion of his recent reports, regardless of to whom, has traced the impact of and reaction to the county software intrusion discovered earlier this month.

Daley told us that discussion of acquiring upgraded technology for the County was already underway when the intrusion was discovered March 7 to 12. In fact, the old County Information Technology was only capable of support of Windows 7, which will soon be non-serviceable as Window 10 and beyond continue development.

“So this gave us a reason to upgrade now,” Daley told Royal Examiner of the County IT software intrusion. One sign of the upgrade will be an eventual switch from .net to .gov in the County network, including staff and other official emails.

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EDA authorizes escrow fund use to help cover FY-21 debt service

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Following a multi-faceted hour-and-a-half closed session Friday morning the 26th at its regular board meeting of March, the Warren County-Front Royal Economic Development Authority Board of Directors authorized use of a portion of the $158,598.31 balance of an escrow account related to the Leach Run Parkway loan to make regularly scheduled loan payments for the Avtex loan and the Leach Run Parkway loan for April, May and June 2021. It was pointed out this will provide some relief to the County’s financial burden in covering the EDA’s debts for the remainder of Fiscal Year-2021 in the wake of the EDA financial scandal predating the current board and staff.

EDA attorney Sharon Pandak prefaced the motion by reviewing circumstances surrounding the Leach Run Parkway Loan escrow account, which also predates the current board and executive director’s tenure, and its recent reimbursement in part by United Bank following the bank’s finally closing with the Town of Front Royal on the assumption of responsibility for a loan to pay off the balance of the $8,440,797 FRPD headquarters construction project.|

The clouds have begun to clear from the FPRD headquarters financing situation – but about that $640k in previously paid interest … – Royal Examiner Photos by Roger Bianchini

Contacted later, EDA Executive Director Doug Parsons explained the original balance of the Leach Run Parkway Loan escrow account was $250,000 that had never been accessed. However, United Bank elected to draw on that Leach Run Parkway Loan escrow account for the interest and principal payments on the FRPD construction loan during the four months – November 2020 to February 2021 – it was awaiting finalization of the Town’s FRPD loan. The delay, as explained by both Town and EDA officials, was due to the discovery of a needed partial release of the deed of trust of the former Avtex Superfund site, for the 5.24-acre parcel upon which the FRPD headquarters is situated at 900 Monroe Avenue, had never been realized.


The Warren County Board of Supervisors chose to stop covering the EDA’s original FRPD loan payments that the Front Royal Town Council refused to accept moral responsibility for in the wake of the EDA financial scandal during the tenure of former EDA Executive Director Jennifer McDonald, after the October 2020 payment. That was when the EDA FRPD loan payments went from 3% interest-only in the $21,000 monthly range to over $50,000 in principal and interest monthly payments.

Parsons cited the United Bank Leach Run Parkway Loan reimbursed escrow account amount based on fluctuating monthly principal payments at $116,246.84, as noted above bringing the escrow account balance to $158,598.31. With a virtual ZOOM meeting torrent of numbers dancing through our heads, we asked Parsons for a rundown of exactly what was approved regarding the use of the escrow funds.

File photo of Doug Parsons, speaking center, dating to Feb. 2020, pre-pandemic and virtual ZOOM meeting world days.

“In an effort to help the County service our debt, the Board of Directors voted this morning to apply $53,953.29 toward the loan payments of the Leach Run Parkway loan and the Avtex loan for the remaining three months of FY-21 – April, May, June 2021,” he began, breaking that number down further: Avtex loan monthly payments of $14,021.80 and Leach Run monthly of $3,962.63 totals $17,984.43 x 3 = $53,953.29.

With the FRPD loan future principal and interest payments finally assumed by the Town, as had always been anticipated by the EDA upon completion of the project it financed for the Town, the lone remaining sticking point on the FRPD financing situation between the Town and EDA appears to be reimbursement of the approximately $640,000 of construction loan interest previously covered by the EDA and the County. And it is likely that number was part of a closed session discussion of the EDA’s countersuit against the Town, the second of three closed session topics adjourned from open session to at 8:06 a.m. Friday.

 

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Supervisors try to absorb County budget numbers: past, present and future

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Early Tuesday evening, March 9, the Warren County Board of Supervisors, particularly its three newest, first-term, second-year trio of Chair Cheryl Cullers, Delores Oates and Walt Mabe, tried to get a handle on the County’s finances. First up on the work session agenda starting at 6 p.m. in the main meeting room of the Warren County Government Center was an Audit Report from Robinson, Farmer, Cox Associates’ Michael Lupton. That was followed by Deputy County Administrator Taryn Logan’s report on the status of a two-decade-old joint County-Town Wayfinding Sign project aimed at directing tourists toward the county’s myriad natural and historical attractions on both sides of the town-county line. And batting cleanup were Interim County Administrator Ed Daley and new Finance Director Keith McLiverty for an update on the Fiscal Year 2022 County Budget process.

Audit Report and Budget time – everyone’s favorite time of the year: the county supervisors, minus 1, prepare to get the numbers – lots of numbers. Below, Audit company rep Michael Lupton opens with a report on County finances for completed FY-2020. Royal Examiner Photos by Roger Bianchini

Audit company representative Lupton gave an overall positive report, with some gaps in financial reporting. Lupton cited those gaps as a likely result of a high turnover among upper-level staff, most prominently at the head of the County Finance Department. Stabilization in that area with the arrival of County Finance Director McLiverty, who with Interim County Administrator Daley, helped guide the board through some of their logistical questions on the audit report summary, was cited as a positive turn for the future. Also acknowledged was interim help from former Finance Director Andre Fletcher, as well as Carolyn Stimmel, the latter mostly on the EDA side of the equation.

Some board questions revolved around what Lupton called “finicky numbers” related to asset versus debt ratios that are impacted by market fluctuations. Of particular attention were debt service numbers between $147 million and $155 million. It was explained that the $8 million discrepancy related to the County’s pension fund, which unlike past Capitol Improvement Project (CIP) debt, is not liable to a bank call, unless as Daley observed, the entire County staff hit retirement age at the same time.


As the actual numbers stand, Cullers cited an annual debt service of $953,000 to be covered. So, the supervisors are likely to be encouraging bond consultant Davenport & Company to be keeping a close eye on the approaching market numbers impacting potential savings on a group re-financing of a large portion of the CIP debt related to past public school and other construction projects.

Variables related to the aftermath of the Town-County Economic Development Authority (EDA) financial scandal, including still being prepared 2018 and 2019 EDA audits, as well as legal expenses were also prominent on the supervisors’ radar. Replying to a question from the chairwoman, Interim County Administrator Daley noted that the audit report “does not include EDA debt” but “did include County expenditures” on the EDA’s legal and operational expenses. There also was a $1-million discrepancy in EDA legal fees that seemed to be floating as an unresolved number.

Chair Cullers, above, and North River’s Oates, below, absorb the numbers – lots of numbers.

Overwhelmed by “finicky numbers”, floating numbers, and delayed reporting of some budget variables during the past year, Board Chair Cullers commented several times, “It’s clear as mud” to which North River Supervisor Oates added, “Now, I’m really confused.”

Perhaps trying to cheer the supervisors up after their emersion into the depths of municipal finances, Daley suggested next year’s process would be easier after their “training” with this year’s budget and all its staffing and emerging post-EDA financial scandal variables.

Which way to tourism dollars?

On the Wayfinding Sign front, long-time County Planning Director and new Deputy County Administrator Logan reviewed the 20-year joint Town-County effort and new signage planned on both sides of the town-county line. She explained an urgency on the Town side related to new signage that would be paid for through the Town Community Development Block Grant (CDBG) that carries a spending deadline approaching at the end of the month.

She said that an MOA (Memorandum Of Agreement) between the municipalities was anticipated to be presented to the Board at its March 16 meeting.

Recently elevated to Deputy County Administrator, Taryn Logan explains the latest chapter in a 20-year joint County-Town effort to direct visitors to the myriad tourism destinations on both sides of the town-county line.

Responding to a question from Fork District Supervisor Archie Fox, Logan explained that Wayfinding sign guidelines on the State side prevented Wayfinding Signs directing motorists to specific private business locations like motels, restaurants etc. However, she noted that other types of municipally developed signage, particularly in town, could be utilized outside the Wayfinding Sign Project to alert tourists to those types of amenities available in the town and county.

Logan also reviewed how the changes from a Town Tourism Department and move to outside private-sector contracted marketers advised by the Joint Town-County Tourism Committee were impacting Tourism promotion on both sides of the town-county line.

Approaching the two-hour mark, Daley and Finance Director McLiverty’s report was fairly brief, with Daley telling the supervisors, minus absent Happy Creek Supervisor Tony Carter, that they would return at the end of the following week with the FY-2022 Budget summary.

One down, empty table at right, three pictured including the back of one head, and one, Walt Mabe, out of frame, the supervisors listen to the audit report for completed FY-20. Below, Interim Administrator Ed Daley, left, and Finance Director Keith McLiverty try to make the numbers and the process resulting in them as understandable as possible.

It was noted near the work session’s end that the planned Joint Meeting, Retreat or “Advance” as it is now being referenced, with the Front Royal Town Council is targeted for May, though no date has yet been established.

For more detail on all these discussions watch the linked County meeting video and/or view the linked PowerPoint presentations.

VIDEO HERE

  1. Warren County Audit Presentation – FY2020
  2. Wayfinding Sign Report – March 2021
  3. Warren Comp Annual Finance Report – 2020
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