In this 2013 file photo, real estate developer Virgil Fox stands in the pumphouse of Lewis County Water Sewer District 5, a public utilities district that serves the Onalaska community of Birchfield and that is nearly $500,000 in debt. Fox has devoted more than 20 years to creating Birchfield, which, he hoped, would hold 2,700 homes.
In order to get out of its financial and bureaucratic muddle, Onalaska’s Water-Sewer District 5 needs to come up with some money — in large part to pay back more than $200,000 it owes Virgil Fox, both a district commissioner and the developer of the community which encompasses the troubled district.
To raise that money, another commissioner has proposed a pair of measures, including charging a mandatory $3,000 water connection fee on the district’s 80 undeveloped lots with no existing water service, about 40 percent of which are owned by Fox. In other words, Fox would be charged nearly six figures by the district to help fund the $200,000-plus debt the district owes him.
“There's a lot of work that needs to be done,” said commissioner Deborah Hilliard, who proposed both measures to raise revenue for the district. “That will allow us to get in a better financial position.”
The proposals come after Water District 2, also in Onalaska, in July voided an interlocal agreement to provide sewer service to District 5, after which Lewis County opted to stop issuing building permits in District 5 — since sewer services are mandatory for such permits.
To reestablish a sewer agreement with District 2 — and thus lift the county’s moratorium on building permits — District 5 must meet three points outlined by District 2, all related to Fox’s sale of water infrastructure to his district in 2003. District 5 has already met the first requirement, proving ownership of its sewer lines. The other two — proving financial viability and eliminating Fox’s conflict of interest as a commissioner and creditor — both require addressing the debt the district still owes him for the sale of the infrastructure.
With the ban on building permits limiting new revenue for the district, commissioners have had to think “outside the box,” said commissioner April Toups, who noted that other districts have taken similar measures when faced with dire circumstances.
“We’re just exploring different ways of trying to raise cash, because we are cash-strapped,” Toups said.
Fox was less enthused about paying nearly $100,000 in fees to help the district fund the debt it owes him.
“Absolutely not,” he said when asked if he supports the measures. “You need to talk to the people who made the proposals.”
He declined to speak further with The Chronicle, citing perceived unfair coverage in the past.
The second proposal put forward by Hilliard would add a temporary $30 surcharge to all accounts. That, she said, will help offset the lost revenue from sewer standby fees, which the district can no longer charge after District 2 nixed its sewer agreement.
The district will hold a public hearing on the proposals on Dec. 12 at 6 p.m. at its pump house on Middle Fork Road in Onalaska. According to Hilliard, Fox owns about 33 of the 80 undeveloped lots in question. The majority of the others are owned by developers. The district only has nine of its own water and sewer hookups, Toups added, with less than 20 outside water hookups outside the district.
“We're just trying to come up with different ideas of trying to get us out of this (building permit) moratorium,” Toups said. “Those (connection) fees will be paid someday.”
District 5 was drawn to service Birchfield, a community developed by Fox that has failed to meet its ambitions. The initial plan — under which the sewer agreement with District 2 was signed — called for 2,700 residences, a golf course, hotel and business park. That application was rescinded by Fox, leaving only Birchfield II, a 90-lot subdivision which is still largely undeveloped.
The tiny district has struggled, and a 2012 state audit found that it carried a half-million dollar debt, that Fox had exempted himself from $80,000 in water and sewer payments and that he had kept water rates artificially low to promote development of his lots. Fox and his wife Carol had long held two of the district’s three commission seats, and Fox has maintained that the discrepancies were simple errors and not corruption.
Hilliard won a seat on the commission in 2017 after the race ended in an 11-11 tie with Dennis Eros, which was settled by coin flip. Her husband, Jimmy Hilliard, lost his coin flip to Steven Nikolich for another commission seat. Nikolich quickly resigned the position in February, and the position remained vacant for months as no one stepped forward to fill the spot. Finally, Toups volunteered and was appointed by the county in July.
Now, she and Hilliard are poised to enact fees that fees that would essentially force Fox to pay off a large portion of the debt he is owed by the district. Though she conceded the move was “unusual,” Hilliard said the district’s attorney has determined it is appropriate. She also noted that the Foxes — past owners of the water infrastructure and developers of the district’s land — making up a majority of the commission for more than a decade was also “unusual.”
The $3,000 connection fee was set more than a decade ago and is not changing as part of the proposal, she said.
“(The total raised from connection fees) is going to be about $240,000,” Hilliard said. “It will make a pretty large dent in the balance of the loan.”
