20071505 Ver 4_SELC_20111123

Southern
Envirompental
Center
November 23, 2011
Anthony Starr, Planning Director
100 North King Street
Hendersonville, NC 28792
Re: Seven Falls development
Dear Mr. Starr:
22 South .Pack Square, ;Suite 700
Asheville. NC 28801-3494
828-258-2023
Fax [phone]
SouthernEnvironment.org
On behalf of the Environmental and Conservation Organization (ECO), I would like to share my
appreciation to Henderson County staff for their efforts to address erosion and other problems arising out
of the failed Seven Falls development. lit particular, we welcome efforts to collect against the
performance bond posted by Seven Falls to fund needed work at the site.
I have had the opportunity to review a memorandum prepared by the Henderson County Attorney
regarding the allowable uses of any funds collected on that surety bond, As I understand the
memorandum, it is the opinion of the County Attorney that the funds may be applied only to the
improvements outlined in the Performance Guarantee executed by Seven Falls pursuant to the
requirements of the County's then- applicable subdivision ordinance. I can only agree with the analysis
offered by the County Attorney.
I would like to offer an additional insight however, on a question not yet asked of the County
Attorney, relating to the scope of expenses covered by the surety bond and the County's authority to
prioritize some covered expenses above others. In shod, the Seven Falls Performance Guarantee, the
Lexon Insurance Company surety bond, the County's former subdivision ordinance and state law all
empower, indeed, require, the County to apply funds collected from the bond to address erosion and
sedimentation problem related to incomplete improvements that violate federal, state and local law. -
The extended July 20, 2009 Performance Guarantee, which superseded and replaced the original
guarantee posted by Seven Falls, encompasses all environmental compliance obligations associated with
the promised improvements. See Performance Guarantee Agreement, July 20, 2009. The Guarantee
defines "required improvements" to include, among other obligations, "all stormwater drainage
improvements, seeding, [and] all erosion control measures . . . ." The definition of "required
improvements" further specifies that "[t]he required improvements will be done to any and all local, state,
and federal standards." I read the Performance Guarantee as plainly obligating Seven Falls not only to
install promised improvements, but to make necessary expenditures to meet federal, state and local
environmental standards and requirements.
The surety bond issued by Lexon Insurance Company incorporates those same requirements by
reference, obligating Lexon to ensure completion of improvements "as described in the Performance
Guarantee." The penal sum under the surety Wnd is due "[fln the event [Seven Falls] does not construct
the said improvements or if these improvements are constructed in a poor and not workmanlike manner. .
is
.. Subdivison Performance Bond #1017266, Lexon Insurance Company.
I
Charlottesville # Chapel Hill ® Atlanta - Asheville - Birmingham ® Charlacon - Richmond - Washington, I>c
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The local, state and federal requirements incorporated by reference into the Seven Falls' Performance
Guarantee and Lexon's surety bond mandate that substantial remediation and stabilization work be
conducted on site before any new road construction begins.
For example, the former subdivision ordinance incorporated by reference the requirements of the
Henderson County Erosion Control Ordinance by mandating that the developer submit, with his plat,
confirmation that he had filed an Erosion and Sedimentation Control Plan. Henderson County
Subdivision Ordinance, Sep. 1, 2010, § 200A-81(A). In addition, the former subdivision ordinance
required that "[s]tormwater drainage improvements shall be designed and constructed to: minimize
erosion and downstream sedimentation, filter pollutants from stormwater before it reaches surface water,
follow natural drainage (where possible), minimize flooding or standing water conditions, maintain
desirable groundwater conditions and avoid excessive storinwater discharge." Id. § 200A- 81(L). Thus,
under the county's own subdivision ordinance, the Seven Falls Performance Guarantee encompassed both
erosion and stormwateor control requirements.
Perhaps most significantly, neither the developer nor the county can continue with construction of
roads and other infrastructure in the Seven Falls subdivision without first complying with requirements of
the.federal Clean Water Act. Federal regulations require permits for the "discharge of fill material into
water of the United States ." 33 CYA. § 323.3. Culverts and other alterations to streams fbr roads and
road crossings require permits under this provision. These permits, under pursuant to Clean Water Act §
404 are administered by the U.S. Army Corps of Engineers. 33 C.F.R. § 323.1. Seven Falls obtained a
permit from the Army Corps allowing for the discharge of fill material into 6,990 fed of linear stream,
1.48 acres of wetlands and .57 acres of open water, See Department of the Army to Mr. Keith Vinson,
Verification Letter, 8 Aug 2008. On Nov. 19, 2008 the § 404 permit was suspended for noncompliance
and on April 27, 20 10 it was permanently revoked pursuant to the authority in 33 C.FR § 325.7(d). With
the revocation of the permit, the Corps has placed a binding duty on the permit holder (Seven Falls) to
"[remove] all fill materials that have been placed in to water of the U.S.... land to restore the area] to
pro-construction conditions." Letter from the Army to Mr. Keith Vinson, 27 April 2010; see 33 U.S.C. §
144(s)(1).
The implications of the § 404 requirements are two-fold. First, if any entity plans to conduct
construction activities in the Seven Falls subdivision that involve the "discharge of fill material into water
of the United States," they must obtain a § 404 permit. 33 C.F.R. § 323-3. Currently, no entity bolds a
valid § 404 permit for the Seven Falls area Consequently, if any entity is to conduct any activities which
result in discharges of fill material into U.S. waters they must go through the § 404 application process
found in 33 CY.R. § 325. If such an applicant seeks to stand in the shoes of Seven Falls and operate
under the now revoked permit, they will have to ensure, that the development meets the terms and
conditions of that permit Alternatively, an application for now permit approval will have to demonstrate
that any impacts to streams are both necessary and unavoidable: it may be difficult to defend construction
of new roads to service platted but unsold lots, under that standard. Secondly, pursuant to the Army
Corps permit revocation, Seven Falls still is under a legal obligation to restore the area to pre- construction
conditions by removing fill materials from waters of the United States, Because the, Performance
Guarantee and surety bond provided by Seven Falls specifies that "[tjhe required improvements will be
done to any and all local, state, and federal standards," it is obligated and properly expended to take steps
necessary to achieve compliance with those standards.
Additionally, any entity conducting activities which may result in a "discharge into navigable waters"
must obtain certification from the State, providing that it will comply with state water quality standards.
33 U.S.C. § 1341(a)(1). These are generally referred to as § 401 certifications and, in North Carolina, are
administered by the Department of the Environment and Natural Resources. Absent a § 401 Certification,
the § 404 permit cannot be approved. 33 U.S.C. § 1341(a)(1). Thus, to obtain a § 404 permit any entity

desiring to discharge any fill material into U.S. waters for new infrastructure construction at the Seven
Falls development will have to complete the §401 certification application proms found in 15A North
Carolina Administrative Code 02H .0501-.0507,
Finally, under the federal Clean Water Act, § 404 rcquirenients and state § 401, anyone proposing to
deposit fill materials in jurisdictional waters must mitigate for their unavoidable impacts. To the extent
Seven Falls has failed to comply with required mitigation requirements and the County proposes to
employ the Lexon surety bond to complete Seven Falls' development plan, it must comply with those
mitigation requirements before obtaining renewed authorization to further impact jurisdictional waters
with additional road construction.
I sham the County's concern for the lot owners who bought land in the Seven Falb development in
reliance on false promises made by the developer. I gather from press coverage of ongoing criminal
investigations that there renutins ambiguity as to how many lot sales were arras-length transactions with
third party buyers (as opposed to inside transactions to boost property sales). Any legitimate buyers,
however, will only be served by efforts to remediate ongoing problem and comply with federal, state and
local laws. Roads and other infrastructure for the development will most likely end up in the ownership
of the Homeowner's Association. Ultimately, each lot owner risks owing a share of the cost of meeting
outstanding environmental obligations related to the development. Their interests will best be saved by
application of the Lexon surety bond to address those problem before they grow and create increased
liability over time.
Sincerely,
'A'O tin DII Gen
Southern Environmental Law Center
On behwof
Environmental and Conservation Organization
cc: Charles Russell Burrell, County Attorney
Sarah G. Zambon, Deputy County Attorney