Ferrell Parkway: Federal land grab and political payoff?  Web of intrigue surrounds issue

If successful, the U.S. Fish and Wildlife Service (FWS) will have total control over the future development of the city's Sandbridge beaches and surrounding area. And a private developer, facing serious obstacles to building houses on its property, will be paid for not building and can repay a loan to a bank in which several, including a council member has a financial interest.

The planned Ferrell Parkway property in question, involved goes back to the '80s when the city was searching for a new, safer, more direct route to the city's southern beaches.

The Virginia Beach City Council's sell out of the public's Ferrell Parkway right-of-way to the FWS, tied to salvaging a housing development on the brink of going sour, can only be explained through private agendas, opportunities for back room dealing, and corporate linkage of principal players (See: Characters). It is also linked to the  development of the so-called Town Center at Pembroke.

It is a story filled with intrigue because of the relationships of the various players to each other and their  business interests. And the Fish and Wildlife Service, if it obtains control of Ferrell Parkway right-of-way, will then control all future development in that part of Virginia Beach.  FWS will control the development of Sandbridge Road - the area's only way in and out.

FWS has long had a secret agenda to block further development in that area of the city as part of its empire building under the guise of environmental protection of allegedly fragile areas which it doesn't have the funds to buy or control otherwise.

All has become entangled in a legal web of costly proportions. One case is pending a decision by the State Supreme Court on the city's petition of appeal of a lower court ruling that the city acted illegally in trying to sell the public's property to the feds.  The vote to sell was 7-3 and the court ruled a super majority of  9 was required to dispose of public property.

A court hearing on city efforts to circumvent the earlier ruling by leasing the public's property to the feds for $1/year is set for 9:30 a.m. this Wednesday .  Friends of Ferrell Parkway and Andrea Kilmer, individually, are represented by lawyer Sam Meekins.

Earlier this year the council voted to sell the long-held public right-of-way for Ferrell Parkway to the  (FWS).  

Tied to this deal was a proposal to buy the privately owned Lotus Creek Development, a project for new homes, for $3.0M.  FWS agreed to pay $2,860,000 and the city would pay $140,000.  As part of that deal FWS, would give a piece of property it owns to the city and agree to not oppose city plans to improve the existing, narrow, winding and dangerous Sandbridge Road.

Friends of Ferrell Parkway and Kilmer, opposed to the change, filed suit alleging the city acted illegally in selling public property.  Circuit Court Judge Patricia West ruled in May that the council action was illegal.  

The city noted an appeal, and, behind closed doors, City Manager James K. Spore and the City Attorney's office, in an effort to circumvent Judge West's earlier ruling,  urged the council to lease the right-of-way to FWS for 40 years for $1/year.  (See: council approves lease)  FWS would put up $2,860,000 for the Lotus Creek property and the city would kick in $140,000 for a total of $3.0M.

One council member, in a closed session discussing the situation, questioned  Judge West's motive in making such an adverse ruling against the city.

Spore had said at its highest and best use, the Lotus Creek property was worth $3.2M.  Spore also noted there had never been an estimated value put on the city's Ferrell Parkway right-of-way.  But the deal left the city paying $140,000 to a private developer and getting only $40 over 40 years for its property.

Lotus Creek Associates LLC, owners of the development, had received all permits to build their homes, including a special variance to the flood plain regulations last year by council.  They also had a loan from Resource Bank for a reported $2.5M.  Some nearby residents opposed to the new development said original plans, on which development was approved by the city, were based on incorrect elevation data, indicating the property may be in violation of environmental regulations.

They wanted the city to stop the development which they contended would exacerbate already bad drainage problems.  But the developers had the necessary permits.  For the city to stop the project, it would likely have been sued by developers for taking property without compensation.  The city could have been on the hook for several million dollars.

Adding to the intrigue:  

• In what some called an unprecedented act, City Atty. Les Lilley 'was ordered' to hire outside lawyer Donald Clark to represent the city in its appeal.  Lilley originally declined, but reconsidered after Mayor Meyera Oberndorf and Vice Mayor Will Sessoms had six (6) other members of council call him and urge the same thing.
• Councilman Louis Jones, the city's chief negotiator for plans to build a so-called Town Center complex with hotels, office structures, and a parking garage with public assistance to developer Armada Hoffler, abstained from voting on the Ferrell Parkway issue because of a conflict of interest as director of Resource Bank, where Lotus Creek Associates obtained their loan, he said.
• On June 20, Jones bought $420,000 worth of additional bank stock at $14/share just 20 days after West ruled against the city.
• Partners of Lotus Creek Associates LLC, who borrowed the money from Resource Bank for the development (which they'd intended to build back in the '80s) included, among others, Alfred E. Abiouness, A. Russell Kirk, Daniel A. Hoffler, and Louis Haddad.
• Abiouness and Kirk each bought $10,000 more stock on the same day Jones did.
• It turns out that Abiouness and Kirk also are on the board of directors of Resource Bank with Councilman Jones.
• Kirk is also vice chairman of the board of Armada Hoffler which got into the public coffers to develop the Town Center.
• Haddad is president and CEO of Armada Hoffler Holding Corp. 
• Hoffler is chairman of the board of Armada Hoffler.
• And Abiouness just happens to have the contract as the structural engineer on the Armada Hoffler Town Center project.
• Lotus Creek Associates, a spokesman for City Treasurer John Atkinson's office said last week, has not paid its real estate taxes on the Lotus Creek property for the years 1999, 2000, 2001.  Its 2002 taxes are due December 1.

City Atty. Lilley said the decision to hire Clark as outside counsel was "my decision and hiring outside counsel does not require city council action if funds are available."

But Councilwoman Reba McClanan, who opposes the the deals and supports building Ferrell Parkway, said she was told by Lilley that Oberndorf and Sessoms told him to hire Clark.  When he declined to do so without council approval, he said six (6) members called and asked the same thing and he proceeded, McClanan said.

McClanan said she, Councilwomen Rosemary Wilson and Margaret Eure were among those who didn't know about the deal to hire Clark until after the fact.  "Hiring Clark was never discussed by council.  I've never hear of anything like that ever being done before in my entire public life," McClanan said.

Lilley declined to comment on McClanan's version of events.  Sessoms denied the report emphatically and Oberndorf could not be reached for comment. 

Jones said that no conflict exists between him and efforts to negotiate the contract to build Town Center just because he and Armada Hoffler Vice Chairman Kirk serve on the same bank board.  Armada Hoffler, since Jones negotiated the contract, has obtained financing from Resource Bank.  Jones said that has resulted in his withdrawing from further negotiations and votes involving Town Center.

Purchase of the stock was coincidental, Jones said, because the bank made an additional public stock offering and to show our support for the bank, "I purchased additional shares.  I got the same deal any member of the public got."  He declined to say, however, how much stock he owns in Resource Bank.

He had told the council, when it was considering selling the Ferrell Parkway right-of-way, that he would vote if they'd separate out the Lotus Creek development project.  Lilley also said separating the two issues would have been a  preference from his standpoint.  But both deals remained linked.

A source close to the deals said they evolved because City Manager Spore stated he did not want Lotus Creek developed, presumably because previous permitting raised serious problems.  To prevent expected environmental problems, the city had no choice but to stop the development.  To stop the development would have exposed the city to considerable liability to pay Lotus Creek Associates the fair market value for its property. 

Because he didn't want to spend Virginia Beach tax assets to solve the problem, Spore concocted the idea of giving the feds its long sought after city-owned Ferrell Parkway property and control over future development of Sandbridge - a potentially long term detriment to the city's future.

According to that thinking, the city saved the $2,860,000 to purchase the property, only had to pay $140,000 to solve an otherwise expensive problem in buying out the developers.  The city would get back, however, only $40 out of the deal.

In some cases, unless blocked by legal action, a deal is a deal - some better than others.