20071505 Ver 4_SELC Letter_20121207

SOUTHERN ENVIRONMENTAL LAW CENTER
Telephone [phone] SOUTH PACK SQUARE, SUITE 700-`,,�`, Facsirraile 828 X58 2CS24
ASHEVILLE, NC 28801-3494
December 5, 2012
DEC 7 2012
M First Class U.S. Mail and Electronic Mail
A "
Jefferson Ryscavage -------
Colonel, U.S. Army District Commander
Department of the Army
Wilmington District, Corps of Engineers
69 Darlington Ave.
Wilmington, NC 28403-1343
Re: Seven Falls Development; AID 2007-3367
Dear Mr. Ryscavage:
I write on behalf of the Environmental and Conservation Organization (ECO) to express concerns
about potential new construction activity impacting jurisdictional waters at the Seven Falls subdivision
in Henderson County, North Carolina.
As you may know, the developer of the Seven Falls subdivision is in dire financial straits, and
infrastructure at the site is incomplete. Some roads are half complete and remain unstabilized, while
maintenance has been neglected. The result has been severe erosion and sedimentation of streams and
creeks, in violation of state and federal law. Seven Falls has also failed to satisfy its mitigation
obligation under the terms of the 404 permit issued by the Army Corps. We are grateful to the Corps for
its close supervision of the project and for taking prompt action to revoke the Seven Falls 404 permit
when the developer failed to comply with permit conditions and mitigation requirements.
Recently, Henderson County recovered on a surety bond issued by Lexon Insurance Company as
guarantor of the Seven Falls developer's Performance Guarantee, required by the county subdivision
ordinance. The Performance Guarantee, signed in 2009 and incorporated by reference into the surety
bond, assures completion of promised infrastructure and, significantly, also compliance with
environmental obligations. See Performance Guarantee Agreement, July 20, 2409 (attached). The
Performance Guarantee applies to "all stormwater drainage improvements, seeding, [and] all erosion
control measures" and assures that "[tjhc required improvements will be done to any and all local, state
and federal standards." The referenced standards include the Army Corps' own 404 regulations and
related permit conditions.
Recently, Henderson County staff and elected officials have signaled their belief that the county is
obligated to use the recently - released bond funds to complete infrastructure at the Seven Falls
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development, including construction of new roads and extension of incomplete roads. In November of
last year, we wrote to the county expressing our legal opinion that the proceeds of the bond could be
applied to bring the neglected project into compliance with state and federal laws and that the county
was required to prioritize that remediation over construction of new infrastructure, See Letter to
Anthony Starr, November 23, 2011 (attached).
Construction of new infrastructure at the Seven Falls Development that will impact jurisdictional
waters cannot proceed without a valid 404 permit. Currently, there is no valid 404 permit for the Seven
Falls development. On Nov. 19, 2008 the Army Corps suspended the Seven Falls' permit for
noncompliance with permit conditions and permanently revoked the permit on April 27, 2010 pursuant
to 33 C.F.R. 325.7(d). The Corps also required the permit holder to remove "all fill materials that have
been placed in to water of the U.S." and to restore the area "to pre-construction conditions." Letter to
Mr. Keith Vinson, 27 April 2010,
The county must obtain a new 404 permit if it proposes to (1) construct new roads that impact
jurisdictional waters or (2) extend or improve existing roads that were constructed pursuant to the now-
revoked 404 permit issued to Seven Falls. We urge the Army Corps to acknowledge that the Clean
Water Act and Army Corps regulation's require remediation of past degradation caused by
noncompliance with permit conditions before a permit can be issued for new construction at the site.
If the county proposes to stand in the shoes of Seven Falls and operate under the now-revoked 404
permit issued to the developer, it will have to bring the development into compliance with the terms and
conditions of that permit. Those conditions include meeting unfulfilled mitigation commitments and
bringing existing infrastructure into compliance with state and federal laws.
The county cannot avoid those obligations by seeking a narrower permit that addresses only new
construction. All road construction proposed by the county was included in the development plan for
Seven Falls and is part of the 404 permit issued by the Corps to that project. Furthermore, the county
proposes to build new roads for the purpose of fulfilling the development plan for Seven Falls, as
submitted to the county for subdivision approval and previously permitted by the Army Corps. If the
Corps is to issue a permit to Henderson County for road construction in the Seven Falls subdivision,
such additions must be considered in the context of the existing, unified development plan, for purposes
of environmental impact. Any analysis must take into account the impacts of the entire development, as
did the now-revoked 404 permit, including currently existing unfinished infrastructure and erosion and
sedimentation impacts. To do otherwise would improperly segment the project, in violation of 33C.F.R.
§ 325. 1 (d)(2), and disregard the requirements of the permit revocation letter.
The County must also demonstrate that any new impacts to jurisdictional waters are necessary and
unavoidable. The Army Corps cannot issue a permit for impounding streams if there is a "practicable
alternative ... which would have a less adverse impact on the aquatic ecosystem." 40 CFR 230.10(a).
The county will be unable to demonstrate that new roads are necessary, for purposes of ACE permitting,
if the proposed new construction has no utility independent of segments already constructed by the

developer under its now-revoked 404 permit, Stream crossings associated with the developer-
constructed roads are now illegal and must be removed pursuant to the Army Corps order revoking the
404 permit. The county cannot assume, for purposes of its 404 permitting, the continued existence of
crossings and associated fill that the Corps has ordered the developer to remove.
The development is failing and there is little reason to believe that the lots proposed for sale in the
Seven Falls development plan can or will be sold. The county has expressed a real concern about
providing access to lots already purchased by innocent third parties from Seven Falls. However, as you
may know, the Seven Falls developer has been investigated for creating shell corporations and engaging
in sham lot sales to increase the appraised value of the development. See Asheville Citizen Times
September 30, 2012 (attached). There is a real question as to the number and location of lots
legitimately sold to innocent parties through arms-length transactions. Our cursory review indicates that
many lots are held by banks as a result of foreclosure proceedings. If the county's stated purpose and
need is to provide lot access to legitimate buyers, the county cannot meet its 404(b)(1) sequencing
obligations on a new permit without first demonstrating that such buyers exist and that they own lots
that would be accessed by new construction. Given that many lots appear to have been sold internally
through Seven Falls dominated shell corporations, proof of legitimate buyers is a precondition for
assessing overall project purposes.
For all these reasons, the county will also be unable to satisfy avoidance and minimization
requirements under state law sufficient to obtain a 401 Certification from the NC Division of Water
Quality.
These complications can be avoided if the county prioritizes restoration and required mitigation as
the best use for the newly-collected bond money. SELC and ECO share the county's concern for any lot
owners who bought land in the Seven Falls development in reliance on false promises made by the
developer. Any legitimate buyers, however, will only be served by efforts to remediate ongoing
problems and comply with federal, state and local laws. Their interests will best be served by the
application of the Lexon surety bond to erosion problems before they grow over time and create
increased liability for lot owners who must ultimately share in the burden of maintaining any community
infrastructure.
Sincerely,
.
nn DJ Gerken
Senior Attorney
On Behalf of the Environmental and Conservation Organization
Enclosures (3)
Cc (with enclosures)
David Weintraub, ECO
Chuck Cranford, N.C. Division of Water Quality
3

r r s • ;
PERFORMANCE GUARANTEE
THIS AGREEMENT made and entered into this 0,0 day of , 24
by and between Seven Falls, LLC, represented by its authorized agent, hereinafter referred
to as "Developer," and Henderson County through its Planning Department, hereinafter
referred to as "County,"
WITNESSETH:
WHEREAS, the Developer has sought approval of one or more Final Plats for Phase
i (including I(a) and I(b)) and Phase ii(a) of the Seven Falls Golf & River Club major
subdivision, hereinafter referred to as "Project," located in Henderson County, north
Carolina; and
WHEREAS, Henderson County conditionally approved the Phase I Development
Plan on June 21, 2007 for the project under Chapter 170 of the Henderson County Code,
which is entitled Subdivision of Land; the Phase II Development Plan (including Phase Ila
and ilb) for the project was approved by the Henderson County Planning Department on
September 21, 2007 under the Henderson County Land Development Code, and
WHEREAS, Section §200A -87 of the Henderson County Land Development Code
requires the completion of certain Improvements prior to Final Plat approval, and Section
§200A -88 allows the Developer to post an Improvement guarantee with Henderson County
to ensure the completion of said improvements;
WHEREAS, the County and the Developer originally entered into an Agreement for
Phase I of the Project on July 2, 2007 (hereinafter "the original Agreement"), concerning an
improvement guarantee for the major subdivision known as Seven Falls Golf & River Club,
located in Henderson County, North Carolina; and
WHEREAS, the County and the Developer originally entered Into an extension of the
Agreement for Phase I with the addition of improvements for Phase II(a) of the Project on
July 22, 2008 (hereinafter "the extended Agreement "), concerning an improvement
guarantee for the major subdivision known as Seven Falls Golf & River Club, located in
Henderson County, North Carolina; and
WHEREAS, the Developer posted with Henderson County a surety bond in the
amount of $6,000,000.00 pursuant to the terms of the extended agreement for Phase I
(including I(a) and I(b)) and Phase ll(a), without any releases being granted by the County;
and
WHEREAS, pursuant to Henderson County Code Chapter 200A -88, the Developer
is requesting that the Planning Department, as authorized by the Board of Commissioners,
approve of an extension of the extended agreement for Phases I (including I(a) and I(b))
and II(a) to .tune 1, 2010; and

Performance Guarantee Agreement July 17, 2008
Seven Falls Goff & River Club, Phase I (including Ila) and l(b)) and Phase 11(a) Extension Page 2 of 4
WHEREAS, the Developer is requesting to bond an amount of no less than
$5,926,374.00 to cover the cost of Phase I (including I(a) and I(b)) and Phase II(a); and
WHEREAS, the Developer is requesting the Planning Department approve the use
of a performance surety bond;
NOW THEREFORE for valuable consideration and mutual promises exchanged
between the parties the Developer and the County agree as follows;
1. Required Improvements. The Developer will, on or before June 1, 2090, complete
as required the following Improvements to serve units in Phase I (including i(a) and
I(b)) and Phase 11(a) of the Seven Fails Golf and River Club: clearing and grubbing,
roadway grading, roadway paving and roadway stone base, all stormwater drainage
improvements, seeding, all erosion control measures, construction of bridges,
installation of the water distribution system including the water storage tank and
installation of the sewer distribution system including the wastewater treatment plant
as shown in the attached cost estimates prepared by Mr. William Lapsley signed and
sealed on May 21, 2009, as shown on the latest version of the Phase I Development
Plan originally approved by the Planning Board on June 21, 2007 and the Phase 11
Development Plan approved by the Planning Department on September 21, 2007
and as shown on the attached Master Plan. The required improvements will be done
to any and all local, state, federal standards. Henderson County staff may inspect
improvements as appropriate.
2. Guarantee. The Developer must provide to Henderson County a performance surety
bond covering Phase i and Phase 11(a) in the amount of at least $5,926,374.00 with
such bond securing and guaranteeing completion of said improvements by the
required date stated in Paragraph 1, above. The performance surety bond will be
verified by the County Planning Department and of the Office of the County Attorney
to ensure the validity of the document and the amount. Upon execution of this
Performance Agreement and receipt of acceptable documentation verify the
performance bond, the Planning Department shall release the standing letter of
credit.
3. Expiration Hate. A surety performance bond in proper form shall be submitted to
the County, prior to the expiration of the original surety bond. Said bond must
guarantee completion of the improvements by the required date, and have an
expiration date not earlier than 45 days after the completion date stated above. The
improvements detailed in this Agreement must take place on or before June 1, 2010
and thus the surety performance bond must not expire prior to July 15, 2010.
4. Extensions. The completion date for Phase I (including I(a) and I(b)) and for Phase
11(a) is June 1, 2010. The performance guarantee agreement for Phase I (including
I(a) and 1(b)) and Phase 11(a) is not eligible for another extension pursuant to §200A-
88 of the Henderson County Land Development Code unless approved by the Board
of Commissioners ( §200A -88 LDC). Any extension requests must be made and
granted prior to the expiration of this Agreement.

Performance Guarantee Agreement
Seven Falls Golf & River Club, Phase I (including l(a) and l(b)) and Phase 11(a) Extension
July 17, 2009
Page 3 of 4
5. Supersede Agreements. At such time as this Agreement is fully executed, this
Agreement will supersede prior Agreements between the Planning Department and
the Developer regarding the improvement guarantee.
6. Release of Funds, The Planning Director shall have the authority to approve the
release of portions of the improvement guarantee as work progresses, provided the
amount remaining under the Improvement guarantee meets or exceeds 125% of the
cost of the remaining improvements, The Planning Director has the discretion to
require the Developer to provide, at the Developers expense, an Independent
verification of the remaining work.
7. Failure to Complete Improvements. In the event that the developer does not
complete the required improvements or obtain an extension by the expiration date of
this Agreement, the full amount of the surety bond will be executed and collected to
ensure the improvements are constructed. Failure to complete the necessary
requirements prior to the expiration date and calling the bond may affect the
developer's opportunity to obtain Improvement guarantees on future phases of the;,I
development.
IN WITNESS WHEREOF, each pa rtV has caused this Agreement to be duly executed this
the
j kO day of - Md xj _., 2001.
7--
APPROVED AS TO FORM:
Office of County Attorney
HENDERSON COUNTY
ICP, Henderson County Planning Director
EVELOPER:
BY:
Seven Falls, LLC.

i
Performance Guarantee Agreement July 17, 2009 f
Seven Falls Golf & River Club, Phase I (including I(a) and I(b)) and Phase 11(a) Extension Page 4 of 4
STATE OF O- CAROLINA
COUNTY _ i,.
1, NS��, Notary Public for said County and State, certify that
Anthony • • - before day - • • • • • he is the
Planning Director for Henderson County, a municipal corporation and that by authority duly
..g1ven-aad as-the—ict-of-the corporation, the foregoing instrument wassigned in its name by
himself as w • Director /
THIS the Aj2j.�day of it)" 20&L
f
No blic
My Commission Expires: [NOTARIAL SEAL]
STATE OF NORTH CAROLINA
COUNTY OF HENDERSON
1, !' &A-04"otary Public for said State and County certify that
I'xi -t LAso , Manager of Seven Falls, LLC, personally came before me this day and
acknowledged the due execution of the foregoing instrument.
THIS the day o , 2003
N Public j
M Commission Expires: %G�r / NOTARIAL SEAL
My xp � f � �,