Sewer deal flushed?

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Confusion over letter, Authority's involvement cloud future of partnership

By John Barnhart
and Tom Wilmoth
Staff Writer

    A letter written by School Board Chairman Gary Hostutler to the Bedford Regional Water Authority (BRWA) may have created some confusion about the Moneta Elementary sewer project.
    But, according to Brian Key, executive director of the water authority, the letter isn’t the issue at all.
    At the beginning of Monday night’s board of supervisors meeting, George Aznavorian, a local developer, told the supervisors that the school board had written a letter to the BRWA stating that they want to start the sewer line project right away.
    “Somehow they have been able to come up with $400,000,” Aznavorian said.
    Aznavorian had been trying to put together a public/private partnership under which the school division and the county would each pay for a third of the project. Aznavorian had personally pledged $100,000 to make up the remaining third. He had obtained estimates that showed the BRWA sewer line could be extended to serve the elementary school for between $270,000 and $300,000. He had also lined up local businesses who would be willing to hook onto the sewer trunk line.
    Aznavorian told the supervisors that he has been told the BRWA is now no longer interested in the public/private partnership.

The issue for BRWA
    But Key said Tuesday morning that’s not the case. In fact, Key said the board hadn’t even seen the letter prior to its June 17 meeting last Tuesday. What is at issue, Key said, is whether the BRWA board would be willing to have a financial stake in the project.
    In  a phone interview, Aznavorian said he was approaching this as a smaller version of the method used to finance public sewage for his Moneta developments 10 years ago. This involved getting credits for connection fees.
    Aznavorian intended to finance his $100,000 contribution to the sewer project using connection credits as collateral. He said without the credits, he can’t get the loan.
    He said he has encouraged Hostutler and members of the school board to talk to the water authority.
    “It may get turned around,” he said. “Maybe there is an opportunity to clear the air.”
    But Key said Aznavorian’s request will be what the BRWA board will have to make a decision on, because it involves offering the connection fee credits. A typical home connection to public water costs $2,500 and Key said that would mean giving Aznavorian credits for 40 home connections for his $100,000 contribution.
    Key said the water authority’s role is to facilitate the project, not fund it. Any funding issues would have to be approved by the board, he said.
    “In essence he would be prepaying for future connections,” Key said of Aznavorian’s request for the credits. “George’s request is to have it applied to future connection discounts. That in essence means the authority would be funding a portion of the project.”
    As of this point, Key said the board hasn’t received a request for those credits and haven’t taken any action to approve them.
    “The board of directors of the authority hasn’t taken any action on the project,” Key said. “The only thing we have so far is a letter from the school board.”
    He added that any request for the credits hasn’t been rejected, or approved.
    “If there’s money involved, we need to have a resolution that’s approved by the board,” he said. “We didn’t say no, we just didn’t say yes. We haven’t had a proposal even to consider.”
    That doesn’t mean a request can’t be made in the future. It also doesn’t mean, if brought to the board, it would actually be approved.
    “If we didn’t collect the fees when those connections are made it’s lost revenue to the authority,” Key said of credits, if they’re offered.

The supervisors’ response Monday
    District 5 Supervisor Steve Arrington said, in a phone interview,  he and the other supervisors were going to move forward Monday night but the private/public partnership he was anticipating has been negated because Aznavorian can’t get the loan to provide the $100,000 that he has promised without having the credits as collateral.
    “Last night, we were prepared to move on it,” he said.
    Arrington understands Hostutler’s letter as a commitment that relieves the BRWA of the need to give credits to the developer for the project.
    “They would be foolish to give George the credits,” Arrington said.
    The following is the letter, dated June 17, that Hostutler wrote to Key.

    On Thursday, June 5, 2014, the Bedford County School Board conducted a special meeting to consider maintenance to the failed drain field at Moneta elementary School. During this meeting the School Board approved replacing the existing drain field at Moneta Elementary School with a proposed extension of a public sewer line. On Thursday, June 12, 2014, the Bedford County School Board proposed adopted the school division’s FY 2015 budget, which included $400,000 of maintenance funding to support the extension of the sewer line to Moneta Elementary School. As you may be aware, we have also received a verbal commitment from Mr. George Aznavorian to contribute $100,000 towards this sewer line project, and we are also hopeful that Bedford County will elect to contribute to this project based on discussion at the Board of Supervisors meeting on June 9, 2014.
    With all of the uncertainty surrounding the failed drain/septic system at Moneta Elementary School, we would like to begin this project immediately. Since Bedford County Public Schools has committed to funding up to $400,000, an amount we believe will cover the entire scope of this project, we request that you begin this project as soon as possible.
    Pleas feel free to contact Dr. Doug Schuch, Superintendent, Mr. Randy Hagler, Chief Financial Officer, if you have any questions or require any assistance regarding this request or the project itself.

    Tuesday morning, Hostutler said there seems to be confusion between the various parties involved in the proposed public/private partnership—the school board, board of supervisors, BRWA, Economic Development Authority and George Aznavorian. “The School Board is looking for all the support that it can get and certainly will support a PPEA agreement if that reduces our net cost,” he stated in an email. “The BRWA board may not support PPEA but the school board certainly would.”