LETTERS / A Project Appropriately Named Boone-Doggle

Published Tuesday, July 12, 2016 at 2:49 pm

Dear Editor,

The $20 million loan the USDA proposes to make to the town of Boone, NC for a water intake on the South Fork of the New River in Todd, NC, 12 miles outside of Boone’s limits, at the border of the Ashe/Watauga County line was approved and earmarked in September 2009.   The Boone voters, which do not include Watauga County water customers (including those in Boone’s ETJ, extraterritorial jurisdiction, who are not allowed to vote in town of Boone elections), approved a $25 bond referendum for a new water intake. The bond according to records of the USDA is to be paid back from increases in water rates. And, while the Watauga County water customers pay double the rates of the town residents, these customers were not allowed to vote for the $25 bond referendum.

Boone acting as their own lobbyist, as reported to the state of NC in accordance with NC State lobbying regulations, and in conjunction with 3 other lobbyists, provided voters with misinformation. One of the lobbyists involved and working directly with the USDA is John Cooper, an ex-Director of the USDA – NC Rural Development.

To qualify for the USDA loan, Boone hired lobbyist to lobby US Senator Burr, US Senator Elizabeth Dole and US Congresswomen Virginia Foxx for a population waiver as Boone’s population exceeded the maximum population of small rural communities eligible for such loans. US Senator Burr submitted the special language in the 2007 federal appropriations bill (budget) that was eventually signed into law. The waiver was to expire after the next federal census. However, because the USDA had committed to the loan prior to publication of the federal census, the USDA claims the expiration in the 2007 federal law does not apply.

Boone, as part of the application process, was required to submit certain financial information (financial statements, audits, water rate projections, etc.). The purpose of the financial information was to verify that Boone could pay the costs over and above the loan and grant commitment, as well as, demonstrate how Boone was to repay the loan (increases water rates and/or taxes). It is interesting to note that in lieu of financial statements, the USDA accepted unapproved budgets, budgets that had not been adopted by and signed by the town council. And, the projected water rates were analyzed by the USDA to make sure the rates would not be a burden on the customers. So, the USDA loan (that has not yet been scheduled for closing), is being based on antiquated financial information. No prudent financial institution would loan money on a 7 year old application.

Recently, after reviewing and approving the final plans and specs, Vernon Harris, USDA staff engineer, wrote to his colleagues that he had not received up-to-date construction cost estimates, pointing out that the only estimates they had on file were from 2009. Mr. Harris, in another email to his colleagues, suggested that Boone be allowed to bid the project to get real cost estimates. The USDA received cost estimates from W.K. Dickson, Boone’s engineer, dated 12/7/2015, shortly after Vernon forwarded his email to John Cooper (lobbyist and ex-USDA Director NC Rural Development).   The 12/7/2015 estimates, according to W.K. Dickson, represented a July 2013 inflation adjustment of 3% to the 2009 cost estimates and totaled $30,093,910 (of which $23,967,555 was construction costs only). This 12/7/2015 estimate totaled $10,017,000 for construction of divisions 1, 2, and 3. The bids were opened on July 1, 2016. The lowest bid for construction of the same divisions 1, 2, and 3 was $16,293,240 (more than 62% higher than W.K. Dickson’s estimates). And, W.K. Dickson’s cost estimate for division 4 of the construction, the water transmission lines from Todd, NC to Boone, NC, was $12,931,000. Because, the town only received 2 bids, they were unable to open the bids. We believe Mr. Harris was anticipating higher costs; he hinted as much in his email to his colleagues.

Last year, Rick Miller, Boone’s Public Works Director, claimed the project was over budget by $6 million. This was based on pre-construction costs (studies, environmental assessment, engineering fees, land acquisition, appraisals, surveys, lawyer fees…). And, this was prior to W.K. Dickson’s 12/7/2015 update, settlement with the Ronald/Donald Cooper Family ($250,000 v. $23,000), additional legal fees and additional engineering fees and costs associated with reapplying for expired permits and a new flood certification. The lowest bid received for divisions 1, 2 and 3 show a $6 million increase in construction costs. This totals to a budget overage of $12 million for both pre-construction and anticipated construction costs; this is before having final figures for division 4, the single highest cost of the entire project.

The USDA has ignored Boone’s certification to disclose lobbying and their regulatory duty to require Boone to do so and the USDA’s filing of such disclosure with federal authorities. Boone has filed for extension after extension and with every extension approved, each time certifying to disclose lobbying activity. We do applaud the USDA auditors for finally questioning the amount of time the loan had been set aside. (The town’s attorney has suggested in statements made to various judges that the final deadline is September 2016; we sincerely hope this is the case.)

The USDA has accepted the town attorney’s certification of necessary easements and property rights for construction with full knowledge that the main access road is based upon a license agreement, a license agreement entered into to avoid an easement because Ashe County Commissioners (in accordance with NC state law) refuse to grant Boone an easement through property in Ashe County. And, the USDA accepts the same attorney’s certification that does not include easements for the portions of the riverbed and stream beds (land according to NC State law) under which Boone’s transmission lines will be laid. According to NC state law, some of the riverbeds/stream beds are owned by the State of NC and some by the adjoining property owners. The USDA has claimed that the riverbeds and stream beds are not real property. Do they suggest that the riverbeds and stream beds are not land?

There is a process by which easements are obtained from the State of NC. Records show that Boone hired Max Justice, attorney with Parker and Poe and are fully aware of ownership of the riverbed, as well as riparian water rights (including the possibility of law suits once construction in the river commences). And, we now understand that a local attorney has been hired by a member of the Ray family because Boone’s attorney failed to contact the property owner during the condemnation process. And, we understand another member of the same family is contacting an attorney. We believe the USDA needs to perform its own title searches.

The USDA has ignored the errors, omissions and misrepresentations of the Environmental Assessment and the volume of misrepresentations made, by the town of Boone staff, consultants and engineers, to the USDA (and other federal, state and local officials) regarding every phase of this project, most importantly the demand for future water. Boone’s engineers claimed Boone had exceeded 80% capacity in 2006 and recently we discovered that Boone has had massive leaks (some that may or may not be repaired depending on cost). Despite Boone’s claims, the water demand reported to State authorities has hovered around 50% and 60% since 2008. We believe the USDA’s past relationship with John Cooper has unduly influenced the USDA’s otherwise required process of due diligence. And, we believe the USDA needs to have Boone revise their water demand projections.

The USDA, in addition to addressing the aforementioned, should be reviewing the financial data again; obtain the latest audited financial statement, budget, water rate projections, etc. and verify all certifications made as part of conditions of the loan. To allow Boone to proceed with a project that the USDA knows is at least $12 million more (almost 50% more) than voters approved is a travesty. And, this figure is prior to considering the bids for the most costly part of the project.

With this said, we have been referring to Phase 1, a new intake and expansion of existing treatment plant. How about Phase 2, another 2009 estimate of $22 million; is the USDA going to loan $20 million on a $46 million project (Phase 1) with Phase 2, the water treatment expansion, which may cost another $50 million. Phase 1 renovations to the existing treatment plant increase treatment capacity from 3 million to 4.5 million gallon daily, while the new intake increases the water supply from 3 million to 7 million gallons daily. Phase 2 will increase the capacity of the treatment plant to match the increased water supply from Phase 1. Finally, how is the increased sewage to be treated?

This whole project truly deserves the name Boone-Doggle (derived from “boondoggle, a project that is considered a useless waste of both time and money, yet is often continued due to extraneous policy or political motivations”).

These funds would be best used if loaned to Beech Mountain, NC, whose water and sewer systems are in disrepair, leaking water pipes and dumping raw sewage daily into the Watauga River. And Beech Mountain, NC meets the population requirement, as well as the need.

Deborah Greene

New River Advocates, Inc.

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