The Town Council is requested to approve a revision to the Bad Debt Policy, and approve additional write-offs associated with the revision, and to review other possible alternatives for collection on bad debt.
The Town of Front Royal has had a large dollar value of uncollectable “bad debt” recorded yearly on the Town’s ledger, due to non-payment of utility bills which had not been addressed for over 30 years until 2012. The Town’s auditing firm, Mitchell & Company, requested that Town Council approve a policy that would allow the Department of Finance to review outstanding uncollectable debt annually, and abate the bad debt from ledgers after all avenues for collection had been exhausted. Town Council adopted a bad debt policy on November 13, 2012 that deemed an uncollectable account as having no activity for a period of 7 years.
Code of Virginia § 8.01-246 allows action to be taken to collect on written contracts for a period of 5 (five) years. Written agreements are used for Town of Front Royal Utility Accounts. Based on the Code of Virginia, a Town of Front Royal Utility Account would be deemed uncollectable after there has been no activity from the account holder for a period of 5 (five) consecutive years.
Town Council is requested to approve the removal of 5 years or older of outstanding accounts receivable (bad debts) on the Town’s ledger in the amount of $277,974.34 from enterprise and general fund liability accounts. This value includes 652 utility accounts. All recourse of attempting to collect these amounts has been completed and the accounts have no activity for at least 5 years.
Based on the utilities billed during FY2018, the Town of Front Royal Department of Finance currently collects approximately 99.5% of the amounts billed annually before an account is deemed uncollectable and written off. Town Council is requested to review the additional options for the collection of bad debt that follow this cover sheet and provide staff with direction if an option would like to be reviewed further.
BUDGET/FUNDING: No funding is required. Journal entry will be done effecting balance sheet only.
STAFF RECOMMENDATION: Staff recommends, to approve the revisions to the bad debt policy,approve the write-offs, and to review additional collection alternatives.
Staff has determined that the accounts presented meet the criteria for uncollectable as determined by the Town’s bad debt write off policy:
- No activity on closed account for at least 5 years
- All other methods of collection have been exhausted
The amount of bad debt approved to be removed by Council continues to decrease:
- Dec 2013 – $848,191 – approved for removal
- Dec 2014 – $144,049 – approved for removal
- Feb 2016 – $225,318 – approved for removal
- Feb 2017 – $203,808 – approved for removal
- Nov 2017 – $175,999 – approved for removal
- Oct 2018 – $166,191- approved for removal
- Mar 2019 – $277,974.34 – requested to be approved
The FY19 budgeted revenue for the sales of electric, water, sewer, & refuse totals approximately $30.8 million. The amount of $277,974.34 represents approximately 0.9% of the budgeted sales and is approximately 2 years of bad debt.
Royal Examiner’s camera was at the March 4, 2019 Town Council Work Session when this was discussed:
Re-appeal of Atwood-Buracker construction dispute repeats earlier ruling
After a three-hour appeals hearing of her complaint about alleged building code violations related to construction of her new home, built after her old one burned to a total loss, it appears Kristie Atwood and the County Building Inspections Department, County Code Official David Beahm and the Buracker Construction Company are exactly where they were two months ago.
In May the Board of Building Code Appeals, with member George Cline, upheld Atwood’s appeal as to six specific code violations. However another 60 to 125 alleged violations were not upheld. However, it was later ruled that Cline had a conflict of interest due to past associations with the Burackers.
So at 3:30 p.m. on Thursday, July 18, as a second hearing of Atwood’s appeal of County building permitting processes began, Cline was an interested spectator in the audience. But his absence apparently did not alter the board’s perception as to what it had authority to rule on and how it would rule within the parameters of that authority – repeating upholding Atwood’s appeal on those same six code violation claims. Several of those violations appeared to deal with the attachment and base of a porch to the main home structure.
Atwood was represented by David Silek; Beahm spoke for himself; and David and Martha Buracker were represented by attorney Joel Francis of the Botkin Rose law firm out of Harrisonburg. Francis cited Martha’s treatment for cancer at UVA in Charlottesville and her husband’s supportive presence with her as why his clients were not present to tell their side of the construction dispute story.
But speaking for his clients, Francis called Atwood’s multi-faceted claims regarding licensing, a hired consultant’s opinion on 125 or more alleged code violations “more of a shotgun approach to a windfall” related to separate threats of litigation Atwood has apparently made.
The hearing developed into many procedural arguments on exactly what had been alleged by Atwood and when; what had been done permitting or code violation-notice wise by Beahm in response; and whether or not the Buracker Construction LLC company was actually permitted to do construction in Virginia or licensed as a business in Warren County.
Silek called his client a victim whose home should have never been allowed to be constructed by an unlicensed entity.
Francis and Beahm countered that while specific Buracker LLC’s may not have been licensed, David Buracker the principal of Buracker Construction LLC was, in fact, licensed to do construction in the state. Beahm told the board that Virginia was very liberal in its permitting of intertwined companies or principals, so that his permitting of construction of Atwood’s home by Buracker Construction was essentially business as usual in the state.
Silek and Atwood, the latter injecting herself into attorney arguments at times, disagreed. Before his sudden departure from the hearing at 6 p.m., about a half hour before it concluded, Silek contended that such transferred licensing was not allowed by state code.
Perhaps the only indisputable truth uttered during the sometimes circular three-hour debate came when Beahm told the appeals board, “Whatever your decision it will go before the state – guaranteed. There is no reason for me to argue anything more and waste any more of your time.”
For those not faint of legalese heart, view the legal wrangling and finger-pointing in this 2-Part Royal Examiner video:
Part 1 is the first 2 hours and 13 minutes of the hearing.
Part 2 is the final hour.
Tederick to WC: Town can dissolve EDA unilaterally and take half what’s left
Town-County Liaison meetings have tended toward briefly informative, not to mention municipally dry in recent years – enter Interim Front Royal Mayor Matt Tederick and soon-to-be-retiring County Board Chairman Dan Murray.
While it may have been the LAST agenda item to be discussed Thursday, July 18, the Tederick-propelled discussion of dissolution of the Front Royal-Warren County Economic Development Authority was FIRST on the list of NOT brief, nor dryly peripheral in recent memory.
One can only wonder what might happen when the full County and Town elected boards and staff gather in one room to continue the discussion. That meeting is being plotted for sooner, rather than later.
Watch a surprisingly direct discussion of the future of the EDA in this exclusive Royal Examiner video – right after the dryer part of the meeting that led up to that municipal conversation:
Warren County Board of Supervisors approves financing by fire dept., regional airport
FRONT ROYAL—Financing by Winchester Regional Airport Authority and by the Front Royal Volunteer Fire and Rescue Department received approval on Tuesday from the Warren County Board of Supervisors.
Board members on July 16 adopted the two financing resolutions as part of a dozen consent agenda items.
The Front Royal Volunteer Fire and Rescue Department wants to finance up to $1.325 million to buy a 2020 Pierce Velocity Heavy Duty Rescue vehicle and a 2020 pumper from Pierce Manufacturing Inc., through Atlantic Emergency Solutions, said Warren County Administrator Doug Stanley.
“The United States Internal Revenue Code requires that for such financing to be carried out on a tax-exempt basis, the board of supervisors must first approve the financing,” Stanley told the supervisors.
The Town’s volunteer fire and rescue department on June 17 held a required public hearing on the matter.
“A total of nine people were in attendance, all members of the Front Royal Volunteer Fire and Rescue Department, there to support the process,” according to a June 18 email from District Chief Larry Oliver sent to Stanley. “No citizens and/or visitors attended the public hearing to ask any questions and/or provide comments.”
BB&T in Winchester, Va., has fully approved the total amount requested by the fire and rescue department, according to Brian Hester, BB&T Small Business Specialist II, who said the bank will use the department’s firehouse location at 221 N. Commerce Street in Front Royal as collateral to secure the loan.
“The company will receive payments totaling $200,500 in direct contributions from the County in fiscal year 2019-2020,” according to Stanley’s item report.
The second financing resolution approved by the County board of supervisors is for the Winchester Regional Airport Authority to purchase a hangar facility and related ground lease from Wells Fargo Bank for $1.25 million.
The facility, built in 2008, consists of roughly 27,000-square-feet of hangar floor space divided between two bays and 4,100-square-feet of office space, according to Stanley, who said the height and width of the doors “make it the only facility at the airport capable of large business-class aircraft storage.”
The airport authority also needs an additional $300,000 to make purchases that include more equipment and installation (estimated at $125,000); construction and project improvement (est. $75,000); and to pay for related administrative expenses (est. $50,000), according to Nick Sabo, executive director of Winchester Regional Airport.
Sabo wrote in a July 8 letter to County officials that the authority is exploring financing options, including the Virginia Airport Revolving Fund through the Virginia Resource Authority, and other suitable lenders.
Warren County had to adopt the airport financing resolution authorizing the debt per the Winchester Regional Airport Act of 1987, which requires each of the airport authority’s supporting localities to approve debt in excess of $500,000.
The total $1.55 million debt is to be repaid by the airport authority, Stanley said, adding that the County board of supervisors’ resolution includes language that stipulates: “Under no circumstances shall the payment of debt service on the bonds constitute general obligation indebtedness or a pledge of the full faith and credit or taxing power of any member jurisdictions (including Warren County).”
At the top of the meeting, Stanley also provided his administrator’s report to the supervisors and summarized efforts at both the Development Review Committee and Tourism Committee and provided updates on building inspections, Crooked Run West and other projects.
Regarding the Crooked Run West project, for example, Stanley said the board held a June 13 work session and learned that the applicant is making changes to its proffer statement and plans to resubmit a traffic impact analysis. He added that a public hearing is anticipated to be held by the board this fall on the project.
The County also is working on a project to replace the outdated fountain at Seide Park with a splash pad, according to Stanley’s report, which noted that the County has received three grants to help fund the project and on June 4 awarded a roughly $94,000 contract to Seaspray LLC. The project completion date is expected this summer, he added.
And H&W Construction is making significant progress on the new Rivermont Fire Station, another example cited in Stanley’s report. This month the company plans to start pouring footers for the building, which is slated for a fall delivery.
In other new business — as part of the supervisors’ adoption of the July 16 consent agenda — County board members also designated Joe Petty as the new Warren County Zoning Administrator, effective July 1.
Petty, who started with the County last year as a zoning officer, “has also been serving as the Deputy Zoning Administrator since February 2018,” according to County Planning Director Taryn Logan, who wrote in a report to the supervisors that Petty “came to the County with prior experience” and “has quickly learned the zoning ordinance, has taken over the approval of residential zoning permits, and has more recently become the staff member in charge of the Board of Zoning Appeals.
“He will handle zoning ordinance amendments and all zoning permits,” according to Logan’s report, which added that “Joe is an asset to our planning department team.”
The video of the Board of Supervisors meeting is [posted in this related story:
Warren County Board of Supervisors appoints new EDA board member
FRONT ROYAL — The Warren County Board of Supervisors during its Tuesday meeting unanimously appointed a new member to the Front Royal-Warren County Economic Development Authority (EDA), action that seemed overshadowed by Town and County citizens concerned about the EDA’s current financial entanglements.
The board of supervisors discussed the EDA Board of Directors during its closed session last night. Ultimately, the supervisors unanimously appointed Marjorie Martin of Front Royal, Va., to fill an unexpired term ending Feb. 28, 2022.
Martin will be joining the EDA board as it tries to maneuver a financial fiasco in which two former EDA staff — Executive Director Jennifer McDonald and Administrative Assistant Michelle “Missy” Henry — each are in jail on multiple felony counts for their alleged involvement in the misappropriation or embezzlement of some $21 million in EDA assets.
The ongoing investigation and resulting lawsuits have left residents less than trusting of their local officials.
Melanie Salins of Front Royal, for instance, last night told the supervisors she was concerned about their continued closed session meetings and ongoing purchasing of properties “while we’re in the middle of this scandal.”
Under the Virginia Freedom of Information Act (FOIA), the board of supervisors during their July 16 meeting held a closed session to discuss four items: the EDA Board of Directors personnel issue; acquisition of real property located in the Fork Magisterial District within the Town limits; and two consultations with legal counsel regarding possible litigation.
“I would like to ask you to please listen to your citizens,” Salins told the board of supervisors. “Stop doing this, right now at least — not forever, but at least for right now. Please stop buying more properties until we get this mess figured out.”
Paul Gabbert of Front Royal agreed.
“To talk about purchasing more land right now, that’s ludicrous,” he told the County supervisors. “What are you all thinking? You buy this, you buy that, like money is coming off trees and then you raise taxes.”
Following the board of supervisors’ hour-long closed session, members returned to the dais.
The supervisors then made their EDA board member appointment, which wasn’t without a bit of drama.
Supervisor Thomas Sayre first put local EDA activist Mark Egger’s name into nomination, seconded by Supervisor Archie Fox. The move drew confused looks from Supervisors Linda Glavis and Tony Carter, who joined Board Chairman Daniel Murray in defeating Egger’s nomination by a 3-2 vote.
Murray then commented on the Fork District acquisition discussion held during the board of supervisors’ closed session.
“For clarification, since 2011 we have had an individual coming to the County offering their property for sale,” Murray explained. “The only reason why it was on our closed session tonight is because another letter came. We’ve taken no action.”
“A citizen sent a letter asking if we were interested in his property,” Supervisor Carter told the Royal Examiner. “The board has no interest at this time in this property.”
Residents continued to lament the EDA situation during the general public presentations comment portion of the supervisors’ regular meeting prior to adjournment.
“The EDA scandal is by far the No. 1 topic on the minds of most citizens and they feel angry and they feel betrayed,” said Walter Mabe of Front Royal, who announced his candidacy to represent the Shenandoah District, currently represented by Sayre, on the Warren County Board of Supervisors.
“I will work hard to renew their confidence in our local government leaders,” said Mabe, who among his professional skills has 21 years of experience as a project manager in the telecommunications industry and five years of service in the U.S. Marine Corps.
Mabe said that citizens have discussed many of their concerns with him and he’s chosen six topics to include in his platform: a balanced budget; managed taxes; improving the educational system; keeping the Shenandoah River clean; tourism; and smart county growth.
“I believe it is extremely important for the board of supervisors to put the county first,” Mabe said.
Bentonville, Va., resident Kristie Atwood voiced her concerns about the local $600,000 that she said has been spent to receive a preliminary report on the EDA’s current situation by the accounting firm Cherry Bekaert LLC.
“I have found so many errors in this report that it’s unbelievable,” Atwood said. “They were guided on a trip that someone wanted them to take” because the company had limited information to work with in its investigation and subsequent report.
“Now you four board of supervisors members, I am pleading with you,” she said, palming the podium, “you need to step in — and I take Mr. Carter and Doug [Stanley] and Whitten out of the picture,” she said, referring to the supervisor, county administrator and county attorney. “Y’all need to ask the FBI and the Virginia State Police … to come in here and do something that is fair because what’s going on now is not fair.”
Atwood thinks there is much more money unaccounted for than what’s been reported thus far.
“But you’ve gotta get the people’s hands out of it that want to cover their butts,” she told the board of supervisors.
The Royal Examiner’s camera was there:
Town ups lost assets claim resulting from ‘sophisticated’ fraud scheme
In addressing the Town of Front Royal’s amendment to its lawsuit upping its estimate of lost assets due to financial fraud in the workings of the local Economic Development Authority from $3 million to $15 million, Town Attorney Doug Napier commented on what he perceived as a somewhat surprising degree of sophistication in how alleged embezzlement and misdirection of EDA, and consequently Town, assets was accomplished.
In its July 12 filing to amend the amount being sought for recovery from the EDA, the Town legal department notes that the “Financial Study” it had unsuccessfully been seeking a copy of from Warren County and the EDA over several months of FOIA requests had been “voluntarily” sent to it by County-contracted investigative accounting firm Cherry Bekaert. Information from that 2900-page report on signs of fraud within the EDA in hand, Town staff amended its original complaint upward by $12 million.
Asked about the additional loss estimate Napier told Royal Examiner, “During our review of the Cherry Bekaert financial study of the EDA, including the interviews of the EDA Board of Director and staff members some new facts and circumstances were brought to light which caused me to think that the Town’s consequential damages in particular, and even direct damages, might be larger than the Town had originally thought. So I thought the Town would be well served by getting out in front of this.”
Asked to elaborate, Napier added, “There are some indirect losses – we can’t blame it all, or say she took it all herself. But there are consequential damages or peripheral losses, a sort of ripple effect. And we wanted to be careful and aim higher, rather than lower in estimating our total losses.”
“She” is former EDA Executive Director Jennifer McDonald, jailed since May 24 on financial fraud charges. Related to some of the Cherry Bekaert information Napier observed, “In ways it is really complicated – her ability to figure out how to alter the books, forge documents – if what is in the report is what happened, if the (EDA) board is telling the truth about not signing those documents, it is really sophisticated. It makes you wonder if she had an advisor or she’s just really smart, or both. I really don’t know – but it took somebody who really knew what they were doing, to pull off.”
In the Town’s initial June 21st filing of a nine-page civil action against the EDA there was scathing criticism of a lack of oversight of McDonald through 2018, even after the May 2018 Town staff discovery of years of debt service overpayments to the EDA totaling over $291,000; and an apparently volatile August 23 confrontation between town officials and auditors with McDonald in the presence of then-EDA Board Chairman Greg Drescher and EDA Attorney Dan Whitten.
“It was Town employees and agents who, on August 23, 2018, caused McDonald to admit, in person and while in the presence of the EDA/County Attorney and in the presence of the Chairman of the Board of Directors of the EDA, that McDonald had personally submitted false, and thereby knowingly and fraudulently, billing invoices to the Town for payment … Notwithstanding the events of August 23, 2018, the EDA Board of Directors, inexplicably, allowed McDonald to retain her position as Executive Director of the EDA with all of her rights, privileges and duties as before, with no known restrictions as such,” paragraphs 18-B and 18-D on page seven of the nine page complaint states.
As Royal Examiner reported at the time “inexplicably” was the operative word in the Town suit’s description of EDA board and staff behavior over the following four months preceding McDonald’s resignation under mounting evidence from the EDA and County’s own investigation by contracted accounting firm Cherry Bekaert.
“The EDA Board of Directors inexplicably did not immediately fire or otherwise discipline McDonald … inexplicably did not restrict McDonald’s access to the EDA offices or her duties … inexplicably did not immediately call law enforcement to investigate McDonald or her activities … not withstanding that the Town’s auditor on that date rightfully and appropriately personally called out McDonald for committing fraud upon the Town in the presence of McDonald … the EDA’s Chairman of its Board of Directors and in the presence of the EDA’s attorney,” paragraph 18-D of the initial Town complaint reads.
But if the EDA and County Boards remained “inexplicably” oblivious to possible financial misdeeds by McDonald post-August 23, the Town did not.
“It was the Town …who almost immediately after August 23, 2018 contacted the Virginia State Police (VSP) and requested a complete law enforcement investigation of the EDA and McDonald, which the Virginia State Police immediately began, and continue to investigate to this date,” the Town complaint of June 21, 2019 reads.
The June 21st Town Complaint was served on two of those involved in that August 23, 2018 meeting: Whitten at his County Office as EDA attorney and McDonald at the Fairfax Adult Detention Center to which she was transferred from RSW Jail on June 11. The third recipient was new EDA Executive Director Doug Parsons, served at his Kendrick Lane EDA office. Parsons told Royal Examiner on July 17 that he hopes an accurate assessment of any money owed to either municipality by the EDA can be agreed upon and that the EDA will eventually be able to make right on its legally-verified debt to both the Town and County.
McDonald was arrested by VSP on May 24, after the first four of what now stands at 12 felony embezzlement and fraudulent movement of EDA assets indictments were handed down by the Warren County Special Grand Jury empanelled on April 1, 2019.
That empanelment followed a March 26 request to do so by Warren County Commonwealth Attorney Brian Madden. Madden’s request came the same day the EDA’s $17.6 million civil suit was filed. That suit is now amended up to $21.1 million the EDA is seeking recovery of from McDonald, her two real estate companies and five other surviving defendants: ITFederal and its CEO Truc “Curt” Tran; Earth Right Energy LLC and its principals Donald Poe and Justin Appleton.
A ninth defendant, former Warren County Sheriff Daniel McEathron, died on May 28 from what VSP described as “an unattended death with a firearm nearby”. McEathron was named in the suit due to his involvement in McDonald’s two real estate businesses and financial questions surrounding development of the criminal justice police training academy the EDA was involved in.
Recent motions filing in that EDA civil action will be the subject of coming Royal Examiner stories. In fact, a motions hearing on the EDA civil suit scheduled for today (Wednesday, July 17) was continued to an as-yet-undetermined date due to the judicial shuffling occurring in the wake of Judge William W. Sharpe’s July 12 recusal from all EDA matters.
At the time of the special grand jury empanelment request Madden said, “Since August of last year we have been working with the Virginia State Police as they investigated suspicious financial activities. Yesterday’s lawsuit filed by the EDA’s attorneys raises issues that are not presently being addressed by the VSP.
“In reviewing the bill of complaint most of the allegations arise from an outside investigation conducted at the EDA’s request. To date this office has not been able to review any report generated by the outside investigation,” Madden observed.
In the wake of Judge Athey’s May 22 order that EDA civil counsel produce the evidence upon which its now $21.1-million civil action is based, that is no longer true – even for the Town of Front Royal which had initially been blocked by EDA and County officials in its efforts to acquire information on the EDA fraud investigation.
Front Royal Town Council goes behind closed doors on councilman’s right-of-way request
FRONT ROYAL — Front Royal Town Council members on July 15 held a roughly 15-minute work session before heading into a closed meeting regarding the Town’s disposition of publicly held real property.
Specifically, Town Council members needed to discuss an application by Front Royal Town Councilman Chris Holloway, who owns the privately held Chris Holloway Construction LLC in Front Royal, Va., to purchase or have a portion of an unimproved right-of-way on Carter Street vacated by the Town.
While further details were scant on Monday night, the right-of-way request went behind closed doors because “discussion in an open meeting would adversely affect the bargaining position or negotiating strategy of Town Council,” according to the work session agenda. All council members present unanimously agreed to the motion to go into a closed meeting on the item.
Near the start of the work session, Councilwoman Letasha Thompson broached the Crooked Run 2 development company request, which seeks Town water-sewer service for primarily residential development outside the town limits.
“I’d like to get a public hearing or whatever it is we need to do” regarding the Crooked Run West project, Thompson said during the council/mayor related items segment of the work session.
Crooked Run West LLC wants to rezone from commercial to a mixed-use but primarily residential project if the Town of Front Royal will supply the necessary water and sewer for it. Currently, agreements between the Town and Warren County on supplying water-sewer services to this area only allow commercial development so the request requires a change in the comprehensive plan.
Town Manager Joe Walsh said Monday that he interprets Town Code to mean that once the County has made such a request, it’s the Town’s turn to determine how it wants to proceed.
“The way I read the code, the ball’s in our court to make a decision at this point,” Walsh told the council members, noting that the county must apply for the water prior to any rezoning.
Walsh added that the county’s letter of request was received in April, the council looked at it in April, “but we didn’t do anything about it,” he said.
Councilmen Jacob Meza and Holloway were keen on pushing the decision off until the council’s next work session until they receive more details and data from Walsh.
“We need to understand everything that goes into that, not just whether we’re going to supply water or not,” Meza said.
“That’s why I thought they were coming back to us,” said Vice Mayor William Sealock, referring to the Warren County Board of Supervisors. “The decision basically is we supply or do not supply.”
Walsh said the item could be placed on the calendar for the council’s August 15 work session. He said he’ll provide more information to better inform council members at that time.
In other work session business, Town Council members heard from Town Finance Director B.J. Wilson that no bids have been received to date for the non-exclusive cable system franchise bid opening.
“We will move forward with the franchise agreement in some fashion and come back to the council in the future,” Wilson said.
Jeremy Camp, Town director of Planning & Zoning, had pretty much the same report for Town Council members regarding bids for the Facade Improvement Program. He said only one bid had been received and “it was not competitive” and was “way out of the ballpark.”
Based on input from contractors, Camp said the program’s management team has decided to rebid it.
“We’ll get back to you once we go through that rerun of the bidding process,” Camp said.
The Royal Examiner’s camera was there: