CulpeperWater ...Steve Vento Published: June 13, 2008 cstarexpo

Last year, a study of our wastewater and water needs in Culpeper County uncovered that the county lacks the reliable sewer and water infrastructure needed for a sound financial future. Without it, the county can never attract any new businesses with good-paying jobs. And if the county does not act soon, there is a potential that it will lose a large portion of our wastewater allocation and will be reliant upon unproven resources to meet future capacity needs. To ensure that the current 2011 deadline could be met, Culpeper Utility Partners forged a partnership to work with the county through a public-private partnership. Culpeper Utility Partners will finance, engineer and build the system for the county so it can meet its water and wastewater needs for the next 50 years. Culpeper Utility Partners offers a breadth of experience developing and constructing major projects throughout the region. Our partners are the leaders in financing, building and engineering public-private infrastructure projects in the commonwealth. One partner, Angler Development, has been the target of a lot of talk about recent financial challenges. Angler Development, and entities it manages, have a proven track record of completing quality projects across Virginia. Based in nearby Warrenton, we have a strong connection to Culpeper, developing numerous projects here over the past 10 years. Like every other developer, the slumping housing market has impacted our projects. As we all have seen or read in the news, this market downturn has had its consequences, meaning some of our projects could not move forward and needed to be placed in bankruptcy for reorganization. One of those projects was Copper Ridge in Culpeper, which was a promising project. Unfortunately, at the end of 2006 as the market had turned and our builder partner pulled out, we could not find another builder partner for the project. After fighting on all fronts for more than a year, it was very clear we had absolutely no choice but to place Copper Ridge under the protection of bankruptcy. This was not the path we wanted, but it was the path our legal and financial advisers strongly recommended. Our Culpeper Crossroads project is a different story. Despite being impacted by the economic downturn, the solid financial strength of the deal is not impacted, only its timing. It is in reorganization, and we expect to file a refinancing plan within the next 90 days. It is anticipated that this new plan will be approved and construction will commence in 2010. These are not easy days for many industries. We work hard to be transparent with our partners, financers and the communities we work within. We strive to do the right thing, no matter how hard. And sometimes the right thing is to use the legal system to protect our landowners and financiers. We could only wish that all of our development projects are as solid as the Culpeper Utility Partners project. This water and sewer project is very different. n First, unlike a marketplace project with phased funding based on market conditions at any given time, the Culpeper Utility Partners project has 100 percent financing from day one — meaning no matter what, the project will be paid for and completed with our team of experts. n Second, those working in partnership on this will not be waiting for the market to sell. They are ready to build right now to meet the challenging deadline that ensures Culpeper County gets the wastewater capacity it needs. n Third, water and sewer taps will be sold for many uses — industrial, commercial and residential — so this project does not depend on any single sector of the market. Working with our public-private partnership, the county will get its water system built on time without one dime of taxpayer dollars, and without increasing demand for residential development. A reliable future water supply and wastewater treatment capacity will bring jobs. Today, employers with good-paying jobs see the talent here, talent that is forced to commute a long way to a job every day. And while these employers would love to tap that talent for good-paying jobs by moving here, they need to see that Culpeper County has a reliable, long-term supply of water and the wastewater capacity before they will move. The Culpeper Utility Partners project is about Culpeper’s future. We can take the steps today to ensure we have the infrastructure to bring new employers with good-paying jobs for our citizens and at the same time ensure there is a tax base to continue to protect the quality of life here. Steve Vento is manager of Culpeper Utility Partners, executive vice president of Angler Development and is involved in real estate development projects throughout the region. He wrote this column at the request of the Star-Exponent editorial board. Call me with questions If you have any questions, or would like to talk, call me at (540) 905-4480 or e-mail me at steve@culpeperwater.com.

Questions & Answers on Culpeper Utility Partners

From Steve Vento

June 8, 2008

1. Q: As part of the proposed plan to finance this massive project, the County would have to sell 128 taps (connections) a year for 25 years, starting at $30,000 a piece and increasing 5.5% annually.  How can the County guarantee the first 5 years of sales as the housing market and economy get progressively worse?

A: Culpeper Utility Partners will pre-sell taps for this project, and these pre-sales will mitigate most of the fifth-and tenth-year milestones. The housing sector is currently suffering, but there remains life in the commercial and job growth markets, and these taps service both residential and commercial projects. 

2. Q: At what rate could the County borrow through Davenport?

A: We don’t know an exact answer to this, but we think it would be in the range of 3.5-4.5%.  More importantly, however, if the County borrows the money for this project, it would affect the County’s ability to fund other needed public projects because of debt limitations.  In addition, any County general obligation debt would require a referendum if this project were to be done by the County. Moreover, the public heard from DEQ at the Board meeting of June 3^rd, attempting to finance this project in a different manner than is presently proposed would inevitably cause a delay that would almost certainly cause the County to lose 40% of its waste load allocation, which means that it would lose a substantial ability to control its own destiny.  A wastewater treatment plant sufficient to secure that allocation must commence construction this summer.  DEQ advised the public that the cost of recovering a lost sewer allocation in the future, assuming that credits are available for purchase, is simply unknowable but will fluctuate with the market for those credits.  As Mr. Brockenbrough of DEQ said, the cost will not go down. 

3. Q: Why doesn’t the County build its own water and sewer plant and serve Brandy & Elkwood?

A: See no. 2. 

4. Q: Can the County finance the new facility with grants and low cost loans of 0-3%, instead of 6%?

A: See no. 2.  This should be directed to the County, but we are doubtful this could be done.   

5. Q: Why build the extra line from Three Flags? Doesn’t the town already serve Three Flags?

A: The Town does serve Three Flags under a three-party agreement. This agreement, however, gives the County the ability to take over the system and receive the revenue at any time that the County can provide the service.  It is a secured way to assure start-up flows and revenue.  This allows the County to provide service to County residents.  Moreover, the most important area in the County planned for growth that will require public utilities is in the immediate vicinity of Three Flags, and thus the sewer interceptor must be extended to that portion of the County at the outset. 

6. Q: What are the Town’s current water and sewer tap fee?

A: In Town the tap fee is $16,500 and outside the Town the tap fee is $24,750.  These prices were last raised in August 2006. 

7. Q: How can builders and consumers pay the fees?

A: The fee structure proposed by Culpeper Utility Partners is very similar to the current rates charged by the Town, rates that we believe must necessarily increase with the increased cost of the Town’s facility. Note that the Town already has a proposal to increase out-of-Town tap fees to $33,000.  All such fees and costs become part of the cost of the business or home constructed. 

8. Q: What will happen if local geography is not able to recharge groundwater supplies fast enough?

A: As was stated before the Board in public session, the CUP PPEA project proposes to use the benefits of modern advances and cutting-edge environmental management practices to minimize this concern.  By re-circulating the effluent discharge to farms and water users along the interceptor line, this non-point discharge will recharge the aquifer over a vast geographic area instead of a point discharge into a running stream.  The proposed reclamation of water from the WWTP can recharge the system more efficiently than a proposed point discharge system at Mountain Run, alone.  As DEQ representatives told the Board, this is an environmentally desirable reclamation and reuse of our groundwater water, and DEQ wishes that every jurisdiction would contemplate such a program.  New Kent County is doing so right now, so that reclaimed water may be beneficially used. 

9. Q: Has the DEQ given the County a 2 million gallon (MGD) per day allocation and the Town an allocation?

A: DEQ has authorized the Town to discharge sufficient nitrogen and phosphorous (its waste load allocation) to support only a 4.5 MGD plant.  Although the Town is upgrading its facility to 6 MGD, it cannot use that extra capacity unless its meets its waste load allocation of those two chemicals.  The County has separately received an allocation for sufficient N and P to support a 2.5 MGD plant at Mountain Run.    

10. Q: Was there double counting?

A: No.  As noted, the Town is currently expanding its facility to 6 MGD, and the County can build to 2.5 MGD..  The area that would be serviced by these plants by conservative estimate and depending on limits of technology, will ultimately need treatment capacity of 10 million gallons per day, based on current zoning and by-right development.  The Town cannot treat this much sewage at its plant, and both facilities are critical to the long-term needs of the community.   

11. Q: Will Angler pay the same $30,000 tap fee when this LLC comes out of Bankruptcy?

A: Yes, everyone will pay this rate for projects that access the sewer and water facilities that are to be built.  Neither Angler nor any of the other Culpeper Utility Partners or their consultants will receive any preferential treatment.    Even though CUP will finance and build the water and sewer facilities, the County will own and operate them. 

12. Q: Has Angler been able to obtain a bank loan to develop the Cross Creek shopping center site?

A: Angler has a signed Memorandum of Understanding to establish a joint venture with a well-funded partner and we expect to finalize negotiations within the next 60 days, and commence construction 60 days thereafter.   

13. Q: When the clock starts ticking towards what could become a major yearly expense for the County starting in 2010, how will that affect the County?

A: The first time that the County would be responsible for any payment toward its own sewer and water systems would be five years after the facilities are granted a certificate to operate, potentially 2016.  With the pre-sales referenced above, the 2016 and 2021 potential “reconciliation years” should be covered and the County have no out-of-pocket cost. 

14. Q: How many new houses will be needed within the next 25 years to make this project work?

A: This project was calculated using the current zoning and by-right density, so whether the service is provided by the Town or a County-owned system, the density would be the same.  No new residential or commercial rezonings are needed for this project to succeed. 

15. Q: Is there a duplication of water and sewer systems between the County and the Town?

A: No.  The Town has stated on numerous occasions and in written statements that even if the Town plant is expanded to a 6 million gallon per day capacity, and the Town can legally discharge that much into Mountain Run, it has no capacity to serve the Town environs.   

16. Q: What are the credit checks on Angler? 
    A: The funds for this project must be 100% in place prior to commencement.  Proof of that financing will be the best credit check you can get.

 

17. Q: What is Mr. Hazel’s (primary owner of Angler) guarantee?

A: See answer for  16.  Because the project is fully funded from the outset, no personal guarantees will be sought or required. 

18. Q: What is the status of Culpeper Crossroads? 
    A: Our Culpeper Crossroads project is moving forward and will be a substantial development for Culpeper.  We currently have a term sheet from a new lender, and we continue to work on letters of intent and leases with potential tenants. 

 

19. Q: Why doesn’t Culpeper County build the sewer plant and maintain control of services?

A: The entire concept behind the Virginia Public-Private Education Facilities and Infrastructure Act of2002 (the PPEA) is to permit the public and private sectors to work together to produce public infrastructure in a timely and efficient manner.  Once a Certificate to Operate these new facilities is issued, both the water and sewer systems constructed will be turned over the County for its ownership, management, and control.  The County will collect remaining tap fees and operate the system.   The PPEA speeds up procurement and construction of such facilities, and the public benefits directly from that.  There are dozens of such PPEA projects throughout Virginia, including, most recently, construction of the Virginia Fairgrounds. 

20. Q: How much would it cost the County to build its own sewer plant?

A: The County has stated previously that it believes it could build the sewer plant and interceptor lines for $70 million.  This assumes that the sewage treatment plant would cost $19 million.  We anticipate the cost of this plant more realistically to be $25 million.  We do not know if the County included in that estimate any costs of financing or construction interest in its estimate, and that estimate does not include the critical water system that CUP has proposed. If one eliminated the cost of financing, interest and contingencies from the PPEA proposal, and subtracted from the result the difference of the cost to build the wastewater treatment plant, we believe our proposal to be within 10% of the County’s estimate, and therefore very competitive.   

21. Q: Will Culpeper use the Municipal Bond market for debt?

A: No, one of the principal benefits that the General Assembly saw in the PPEA process is that the County will not need to borrow any money for this project. Tax-exempt bonds will be issued through the Culpeper County Water and Sewer Authority, a legally independent County Authority with the power to issue bonds that are not subject to the full faith and credit of the County.  The County will be the issuer, but CUP will be the borrower and ultimately responsible for repayment, as provided in a Comprehensive Agreement that must be approved by the Board.   

22. Q: What is the status and cost of the Clevenger’s sewer and water plant?

A: The plant is on schedule, and it is expected that it will be transferred to the County on August 1^st.  It is within budget and on schedule.  The water plant and sewer treatment plant cost $21 million.  

23. Q: Have the neighboring landowners been advised and consulted?

A: Some landowners have been consulted directly, and we continue to reach out to landowners along the interceptor route.  All of the information regarding CUP’s PPEA proposal has been available from the County, and on its website, for several months. 

24. Q: What are the environmental issues?

A: There are no consequential environmental issues that are unaddressed by this project.  If this PPEA proposal is accepted, the facilities to be constructed according to plans approved by DEQ and the County, will be state-of-the art, and will satisfy all current Virginia and federal standards.  The proposed reclamation of water from the WWTP is endorsed by DEQ as superior to simple discharge even of treated effluent into a receiving stream.  Water that is reused for irrigation purposes assists agricultural users, results in recharge of the aquifer, and reduces discharge into state waters and ultimately into the Chesapeake Bay.  If approved, this project would advance Culpeper County into the forefront of environmentally sound water management practices. 

25. Q: Will the present stench of Culpeper town sewage be repeated in the Swamp Poodle Sewage Plant?

A: Culpeper Utility Partners claims no naming rights in this facility, and everyone is free to suggest names.  You may have to tussle with the folks in Sonestown, Pennsylvania, who are partial to their own Swamp Poodle Street, or with the folks in DC who call an area behind Sibley Hospital Swamp Poodle, or those who claim it was actually a section of Georgetown behind the old Hydle Brewery. 

All wastewater treatment plants create odor, because of the aerobic action required to consume organic material.  It can be minimized by modern technical developments, but not entirely eradicated.  Take a visit to any state-of-the art facility in the Commonwealth, and you can see for yourself.  The County’s Mountain Run location, in a very rural area, will dissipate odor dissipate, farther from centers of population.  The foliage in rural areas clears the air faster than can occur in more developed areas.