A Polluted Proposal

Addendum: Related to the PSD's $2.5M proposal, there are now 3 letters that you can print and send yourself under the Letters menu:

1. May 15 letter from Jim Smith to the Pocahontas Public Service District.
2. May 5 letter from David Fleming to the Pocahontas Public Service District.
3. May 5 letter from David Fleming to the WV Public Service Commission.

Go to the Letters menu to read/print/send them.

“The wholly-owned subsidiary of Snowshoe Water & Sewer operates every year at a substantial loss, and I’m talking a large, 6-digit loss.” — J. D. Morgan, Director of Business Development for Snowshoe.

Introduction

In the April 26 edition of The Pocahontas Times, staff writer Drew Tanner covered the story of the April 19 "special meeting" of the Pocahontas Public Service District (PSD). At that Thursday meeting, the PSD and their attorney Mr. Tom Michael discussed a bold new proposal to get the Snowshoe/Slatyfork sewer project moving forward. The PSD voted to submit the proposal to the state.

The proposal entails 2 aspects: a request for a $2.5 million advance of bond money, and the taking over of Snowshoe's own sewage operations by the PSD. These are easily the most controversial aspects this project has seen since the uttering of the words "eminent domain."

Background

Rather than discuss this proposal at the next regularly scheduled meeting, Mr. Michael stated that the reason for holding a special PSD meeting was because the deadline for requesting the $2.5M advance from the West Virginia Infrastructure and Jobs Development Council (IJDC) was Friday, April 20—the very next day.

Perhaps so, but it's fair to presume instead that the real reason for the special meeting being held the "day before" was to minimize any chance of public participation in a move that would have undoubtedly stirred major debate. In this regard, the special tactic worked well.

A brief history of the financing-to-date for this project is in order. Pendleton Community Bank was first to offer a loan to the PSD for this project. Originally for $100K, Snowshoe served as the guarantor for this loan. Over time, the loan amount was increased to around $300K (although never fully used). In a February PSD meeting, Mr. Michael presented the PSD with paperwork to arrange for a different loan, this time through Davis Trust. This new loan would be for $400K and would be used in part to pay off the balance of the Pendleton loan, thus ending the former agreement. In addition to more money, this loan was likely intended to create some "distance" between Snowshoe and the whole eminent domain ordeal (i.e. a private company securing a loan related to a public project). Also, the new loan might have helped to quell any potential fallout regarding the audit of Pendleton and the PSD that had recently begun.

The PSD signed the paperwork. However, for reasons unknown to us, the new agreement with Davis Trust never came to fruition. Which brings us to the current situation: the PSD needs money now to move this embattled project forward, and the $2.5M advance request from the IJDC is the latest attempt.

However, moving the project "forward" is most decidedly not the goal firstly being served by this proposal.

The Proposal Explained

In the beginning of this project, the agreement was that the engineering design firm Thrasher Engineering and PSD attorney Tom Michael wouldn't be paid until final bond closing. However, the new proposal would undo this agreement.

In the special meeting, Mr. Michael explained to the PSD the budgeting of the $2.5M request. In part and in particular, $1.3M would go to Thrasher Engineering and $194K would go to Mr. Michael. This is an about-face from the original "get paid after" agreement, and suggests the true rationale behind this maneuver: to get paid now and then go "forward" from there. Promise.

Besides the money sought for Thrasher Engineering and Mr. Michael (among other money items), this new proposal also serves the desire for Snowshoe to get rid of the sewage operations of their subsidiary: Snowshoe Water & Sewer. This outfit has been cited by the Department of Environmental Protection (DEP) for violations, and is a financial liability for Snowshoe:

“The wholly-owned subsidiary of Snowshoe Water & Sewer operates every year at a substantial loss, and I’m talking a large, 6-digit loss.” — J. D. Morgan, Director of Business Development for Snowshoe.

In the beginning of this project, the agreement was that the PSD wouldn't take over Snowshoe's sewage operations until final bond closing. This aspect was covered by phase 2 of the so-called "three phase transfer agreement."

In the special meeting, Mr. Michael proposed a change to phase 2 wherein the PSD would take over Snowshoe's sewage operations forthwith, rather than after final bond closing. This, too, is an about-face from the original "Snowshoe's off the hook after" agreement, and strongly suggests a conflict of interest on the part of Mr. Michael as he tries to serve two masters: his advisement to the PSD and his effort to effectively rid Snowshoe of their problem.

Mr. Michael's rationale for the premature takeover of Snowshoe's wastewater operations by the PSD is predicated on the "hopes of using the revenue from resort customers to cover the cost of studying a different site for the controversial treatment plant," according to The Pocahontas Times. But this is unlikely the case, as this cost had previously been established to be a relatively meager $25,000. Additionally, the PSD had already approached West Virginia Senator Walt Helmick (D-15th District) for assistance in securing funding for this study. While Senator Helmick stated at that time that he "couldn't guarantee" success, this process is currently underway and should be allowed further opportunity before resorting to the comparatively exorbitant measure of the PSD's takeover of Snowshoe's "whole system," as Mr. Michael succinctly put it.

The What-Ifs, the Which-Site

The $2.5M request also has $270K earmarked for "contingencies." This project has already had some contingencies arise, such as additional costs by Thrasher Engineering for further design work relating to cooling equipment and alternative site designs. These overages invoiced by Thrasher Engineering have been rolled up in the $2.5M request within a $400K portion of the $1.3M (i.e. $900K + $400K).

Most of these "further design" items have arisen due to inadequate evaluation and planning over the course of this project. Given this pattern, it is reasonable to expect that more such design expenses are on the horizon—and could quickly use up the earmarked $270K.

Another contingency to consider is with respect to the PSD taking over Snowshoe's sewage operations in their current, troubled state. With Snowshoe being absolved of this liability, the PSD would face the undeniable risk of having to pay for expensive repairs—and of being responsible for violations in the eyes of the DEP. Again, $270K would likely not go far.

Undoubtedly, since the requested $2.5M is predominantly budgeted for payments to the primary stakeholders, the largest contingency needing accounted for concerns the possibility that no further funding is ever approved—that no new facility, of any kind, is ever constructed. The PSD and we taxpayers would be stuck with more than just an ailing facility, we would be saddled with a $2.5M debt that we couldn't hope to pay back. It would be the worst kind of "here's $270K, call someone who cares."

A final and most egregious aspect of this proposal is the amount of $130K earmarked for "land acquisition." This portion of the $2.5M request is familiar to followers of this project, because it is the same amount long-ago established for the same purpose: in part to compensate the landowner should eminent domain be invoked.

Make no mistake. Eminent domain is still in the budget.

Conclusion

The initiative put forth by Mr. Michael and the PSD is too risky and should be denied. It plays exceedingly to the interests of the parties who stand to gain the most from this project: Thrasher Engineering, PSD attorney Tom Michael, and Snowshoe. It does nothing to guarantee that a new facility—of any kind—will ever be constructed. It does nothing to ensure that our PSD won't be abandoned by then-satisfied stakeholders with only Snowshoe's troubled, cited system and a $2.5M tab to show for it. Lastly, it does nothing to ease the concern that eminent domain would still, ultimately, be used to acquire the inadequate Sharp Farm site.

The new initiative simply plows forward as before, ill-advised and unaffected. In light of this, we should therefore rightly expect two wholly different things to come of it:

1. A formal declaration by the Pocahontas PSD to free the Sharp Farm site from consideration for a sewage facility, to once and for all dissolve the spectre of eminent domain.
2. A ruling by the West Virginia Public Service Commission (WVPSC) to deny the proposed $2.5M bond advance and to deny the proposed PSD takeover of Snowshoe's sewage operations.

In his December 2005 ruling, WVPSC Administrative Law Judge Keith A. George issued this command to the Pocahontas PSD regarding the sewer project:

"IT IS FURTHER ORDERED that Pocahontas County Public Service District petition the Commission to reopen the proceeding should the cost, scope or financing of the project change for any reason."

It is obvious, it is unmistakable that this project's cost, scope, and financing have all changed—and continue to change—dramatically.

Therefore, the responsibility lies with the WVPSC to deny the Pocahontas PSD's request and, in so doing, to serve stark notice that this project will not be allowed to go forward as currently envisioned.