CAPE CHARLES: Town and Bay Creek settle utilities dispute, allowing construction to resume

An aerial photo of Bay Creek. Submitted Photo.

BY STEFANIE JACKSON, Eastern Shore Post —

Cape Charles and the developer of the Bay Creek residential and golf community have settled a longstanding legal dispute involving water and wastewater services that stalled construction projects, the town’s municipal manager said. 

The settlement means construction projects are no longer impeded. 

Town Manager John Hozey said on Tuesday, July 25, that the town is back to “business as usual” after the issue was resolved. 

The dispute began more than 30 years ago when the approximately three-square-mile area now known as Bay Creek was annexed into the incorporated town limits of Cape Charles.

According to the annexation agreement, Cape Charles would extend its town water and sewer service to the area now known as Bay Creek. 

In exchange, Brown & Root Inc., a Texas-based company that owned the property, would pay a portion of the cost to upgrade the water and sewer systems when it exceeded current capacities.

The problem was that the annexation agreement failed to supply a percentage, dollar amount, or means of calculating how much the developer should pay, Hozey said. 

In 2022, when Cape Charles decided to sell its water and sewer plants to private company Virginia American Water, town officials were prompted to solve the longstanding legal issue with the two utilities.

The town paid nearly $50,000 for a study of its water and sewer system capacity, which included projected future demand.

Bay Creek’s current developer, Preserve Communities, agreed to fulfill its obligation by paying Cape Charles a $3,000 impact fee for every remaining lot sold in Bay Creek.

The fee will be deducted from the seller’s proceeds at the close of each property sale.

Hozey said he had paused some Bay Creek construction projects previously because he didn’t want to sign off on entire subdivisions without the new legal agreement in place.

Even though the sale of the water and sewer systems prompted Cape Charles officials to act, construction in Bay Creek was put on hold due to concern over the annexation agreement — not the town’s water and sewer capacity, he said.

The study of the water and sewer plants suggested that neither facility will reach capacity for years, Hozey said.

The two utilities will be the responsibility of Virginia American Water long before then. 

Hozey expects the State Corporation Commission, which regulates Virginia utilities, will approve the sale within the next four to five months.

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