Error of Law--JacMal Private Sale

 

 

Comprehensive Legal and Regulatory Assessment of the JacMal Properties, LLC Letter of Intent for the Pocahontas County Solid Waste Authority Transfer Station Project

The proposed partnership between JacMal Properties, LLC and the Pocahontas County Solid Waste Authority (PCSWA), as delineated in the Letter of Intent dated February 25, 2026, presents an intricate framework for the development of a critical waste management infrastructure. However, a rigorous legal analysis of the "Transaction" and the "Project" reveals profound errors of law and systemic noncompliance with the West Virginia Code and the West Virginia Constitution.1 The current structure of the agreement attempts to bypass mandatory competitive bidding requirements, circumvents constitutional debt limitations through an improperly structured lease-purchase arrangement, and violates statutory protocols for the disposal of public real property. This report provides an exhaustive examination of these legal deficiencies, situated within the broader context of West Virginia’s rigorous standards for the expenditure of public funds and the management of municipal assets.

Constitutional Debt Limitations and the Jurisprudence of Public Obligations

The primary legal impediment to the execution of the Letter of Intent lies in its conflict with Article X, Section 8 of the West Virginia Constitution, which governs the creation of public debt by local fiscal bodies.2 The proposal establishes a 15-year triple net lease with a monthly rental rate of $16,759.00 and a mandatory purchase requirement at the term’s conclusion for $1,103,495.24.1 Under West Virginia law, this arrangement does not constitute a series of independent annual expenditures but rather creates a present, aggregate indebtedness for the entire 15-year term.2

 

The Spelsberg Standard and the Necessity of Non-Appropriation Clauses

West Virginia jurisprudence regarding multi-year public contracts is anchored in the distinction between "indebtedness" and "current expenses".2 The Supreme Court of Appeals has held that a municipal contract for services or property acquisition that extends beyond a single fiscal year is unconstitutional unless it contains a "non-appropriation" or "fiscal funding" clause.2 This clause must allow the public entity the absolute, non-binding right to terminate the agreement at the end of each fiscal year if the governing body fails to appropriate the necessary funds for the subsequent period.2

 

The Letter of Intent for the JacMal Project is conspicuously silent regarding such a clause.1 Instead, the agreement characterizes the 15-year term as a fixed obligation, even detailing specific exceptions to the triple net structure, such as JacMal’s responsibility for the trash crane and major structural repairs.1 Without a non-binding cancellation provision, the PCSWA is effectively pledging its future credit and taxing power to fulfill a long-term debt obligation, a maneuver that requires a vote of the citizens under Article X, Section 8.2 

 

Furthermore, the mandatory purchase provision at the end of the 15-year term removes any remaining pretense of a "true lease".1 This "must-buy" requirement ensures that the PCSWA is legally bound to acquire the assets, thereby solidifying the entire multi-million dollar commitment as an unconstitutional debt at its inception.3

 

Disguised Installment Purchases versus Service-Linked Leases

The West Virginia Supreme Court’s ruling in McGraw v. Caperton established that while the state may enter into lease-purchase agreements, these agreements must be structured as "open-end contracts" where the government is not obligated to procure any minimum orders or complete a purchase.5 The JacMal proposal, conversely, functions as a high-interest installment sale disguised as a lease.1

 

The total aggregate of monthly payments over 180 months equals $3,016,620.00, which, when added to the mandatory final purchase of $1,103,495.24, brings the total acquisition cost to $4,120,115.24.1

In contrast to valid lease revenue bond structures used by entities like the Morgantown Building Commission, where bonds are retired through periodic rents but with the risk of non-appropriation resting on the lender, the JacMal LOI shifts all financial and structural risk to the public entity while denying it the constitutional protection of annual fiscal discretion.2 The lack of a "non-binding cancellation clause" as defined in the Spelsberg decision is a fatal legal error that renders the proposed definitive agreement void ab initio under West Virginia Code § 5A-3-17.2

Financial Structure Element	Proposed Value / Term	Legal Requirement / Deficiency
Lease Term	15 Years	Requires annual non-appropriation clause 2
Monthly Rental Rate	$16,759.00	Must be tied to services actually rendered 2
Mandatory Final Purchase	$1,103,495.24	Constitutes unconstitutional present debt 2
Termination for Convenience	Not Included	Mandated by W. Va. Code § 5A-3-62(a)(15) 9
Total Aggregate Obligation	$4,120,115.24	Requires public vote if structured as debt 2

 

Procedural Noncompliance with the Fairness in Competitive Bidding Act

The Project described in the Letter of Intent constitutes a major public improvement and construction project.1 Under the West Virginia Fairness in Competitive Bidding Act, specifically W. Va. Code § 5-22-1, public entities are mandated to solicit competitive bids for every construction project with a total cost exceeding $50,000.10 The JacMal proposal represents a direct violation of this foundational principle of public procurement.

 

Pre-Selection and the Bypass of Competition

The Letter of Intent identifies JacMal as the sole entity responsible for the design, contracting, and construction of the transfer station.1 By executing this LOI and moving toward a "Definitive Purchase Agreement," the PCSWA is essentially awarding a construction contract for a facility it will eventually own (through the mandatory purchase) without any competitive process.1 Section 2(b) of the LOI even goes as far as specifying technical requirements—such as a $60' \times 80'$ steel structure, concrete ramps with grades not exceeding 10%, and a specific "Grizzly brand" trash crane—before any public solicitation has been issued.1

 

This pre-selection of a vendor and the "lock-in" of specific technical standards before the bidding phase is prohibited.11 W. Va. Code § 5-22-1(c) requires that the contract be awarded to the "lowest qualified responsible bidder" following a public advertisement.10 The JacMal arrangement attempts to circumvent this by framing the construction as "private" because JacMal initial pays the costs; however, because the public entity is contractually obligated to reimburse these costs through a 15-year lease and a million-dollar purchase, the law views this as a public construction project subject to mandatory bidding.10

 

Improper Use of "Sole Source" Rationale

The LOI alludes to the "pressing need" and "imposed timelines necessitated by the closing of the Pocahontas County Landfill" as a justification for expedited action.1 While W. Va. Code § 8-27-23 and § 5-22-1 allow for limited exceptions to bidding in cases of extreme emergency, these are narrowly defined.13 An "emergency" generally refers to unforeseen events like a natural disaster or an immediate threat to public safety.15 The planned closure of a landfill and the subsequent need for a transfer station is a predictable event that requires long-term planning, not an "emergency" that justifies the suspension of competitive bidding laws.15

 

Furthermore, any attempt to categorize JacMal as a "sole source" provider under W. Va. Code § 5A-3-10 would fail because there are numerous construction firms and waste management developers capable of building a standard steel-frame transfer station.17 The inclusion of an "exclusivity" clause in Section 6 of the LOI is particularly egregious, as it binds the Authority to ignore other potential bidders in direct contravention of its fiduciary duty to the taxpayers of Pocahontas County.1

 

Defects in Real Property Disposition and Asset Transfer

The Transaction contemplates the acquisition by JacMal of approximately 2 to 3 acres of real property currently owned by the PCSWA, along with easements and rights-of-way totaling 6.83 acres.1 The transfer of public land to a private entity is governed by strict statutory protocols under W. Va. Code § 7-3-3 and § 22C-4-23, which the Letter of Intent fails to observe.19

 

The Auction and Competitive Bidding Mandate for Land Sales

Under W. Va. Code § 7-3-3(a), the disposal of county or district property must be conducted via a public auction or through competitive bidding.19 The JacMal LOI proposes a private sale at a "purchase price agreed to by the Parties".1 This negotiated private sale of public land is an error of law. While Section 7-3-3(b) allows for transfers to other government agencies for public use without an auction, it does not permit a direct, non-competitive sale to a private LLC.19

 

Even if the PCSWA attempted to utilize the "private party sale" exception under § 7-3-3(e), it would be required to meet several stringent conditions that the LOI does not address:

1. The purchase price must be at least 75 percent of the appraised value.19

2. The Authority must publish a Class II legal advertisement for two consecutive weeks.19

3. A minimum 30-day waiting period must follow the publication of formal offers on the Authority’s website.19

The LOI's exclusivity provision explicitly prohibits the Authority from soliciting other offers, thereby making it impossible to satisfy the "equal opportunity" requirements of the land disposal statutes.1

 

Rights-of-Way and Easements as Public Trust Assets

Section 1(b) of the LOI specifies that JacMal will acquire a "right of way, to run with the land" and "all easements necessary" for the project.1 These interests in real property are also subject to the "fair and adequate consideration" standard.19 By pre-agreeing to transfer these rights to JacMal as part of a bundled transaction, the PCSWA is neglecting its duty to value these assets independently.21 The West Virginia Ethics Commission has noted that the "part-time appointed" status of most Solid Waste Authority board members does not exempt them from these rules; they must remain recused from any sale where a conflict might exist, and the method of sale must be public to ensure integrity.21

Property Interest	Proposed Disposition Method	Statutory Requirement	Legal Status
2-3 Acre Parcel	Negotiated Private Sale	Public Auction or Competitive Bid	Noncompliant 19
6.83 Acre Easements	Part of Transaction Bundle	Fair and Adequate Consideration	Procedural Error 19
Land Fill Road ROW	Transfer with Property	Subject to public use easements	Restricted 22
Structure Ownership	Private (JacMal) for 15 years	Bidding for public construction	Noncompliant 10

Design-Build Procurement Act Violations

The Project, which integrates design, construction, and financing into a single "turnkey" package, falls squarely within the definitions of the West Virginia Design-Build Procurement Act, W. Va. Code § 5-22A-1 et seq.23 The PCSWA’s attempt to execute this project through a negotiated LOI with JacMal represents a comprehensive failure to adhere to this mandatory regulatory framework.

 

The Role of the State Design-Build Board

A public agency in West Virginia cannot pursue a design-build project without first obtaining explicit approval from the Design-Build Board.25 The board must determine that the project delivery method is appropriate based on specific criteria, including the need for early cost commitments and a construction timeline faster than traditional methods.24 The JacMal LOI makes no mention of this board, nor does it provide the necessary written plan for funding that must be submitted for state review.25

 

Failure to Appoint an Independent Criteria Developer

A critical safeguard in the Design-Build Procurement Act is the requirement for the agency to select an independent "performance criteria developer".26 This individual, typically a licensed architect or engineer, must define the technical and aesthetic standards for the project and cannot be a member of the design-build team.24 In the JacMal proposal, JacMal itself—through the LOI and the attached April 2025 plans—is defining the performance criteria.1 This creates an inherent conflict of interest and violates the statutory requirement that the public entity maintains independent professional oversight over the project’s technical specifications.24

Invitation for Qualifications and Price Proposals

The Act requires a two-step competitive process: an invitation for qualifications followed by an invitation for proposals from three to five of the most qualified design-builders.27 The PCSWA’s pre-selection of JacMal and the negotiation of a $16,759.00 monthly lease rate in a private LOI bypasses these transparency measures.1 Any contract entered into without following these steps is a violation of state law, and the Design-Build Board has the authority to withdraw approval or halt the project at any time prior to the start of construction.25

Property Taxation and the "Straw-Man" Ownership Strategy

Section 1(c) of the Letter of Intent explores the possibility of the PCSWA retaining ownership of the land "in order to reduce or eliminate the possibility that the real property will be subject to real property tax assessments".1 This strategy is legally flawed and suggests a potential intent to circumvent West Virginia’s tax laws.

 

The Anti-Evasion Clause of W. Va. Code § 11-3-9(b)

West Virginia Code § 11-3-9(b) explicitly states that "no property is exempt from taxation which has been purchased or procured for the purpose of evading taxation".28 If the Authority retains title purely as a "straw-man" owner to shield a private developer’s profit-generating asset from assessment, the property may lose its exempt status.28 Tax exemptions for government-owned property are predicated on the "public use" of the asset.28 In this case, while the transfer station serves a public function, the facility is owned by a private entity for the first 15 years and is operated as a profit-generating leasehold interest.1

 

Taxation of Leasehold Interests in Public Property

Even if the PCSWA retains the fee simple title, the "leasehold interest" held by JacMal may be separately taxable.30 W. Va. Code § 11-3-9(a)(27) provides an exemption for property subject to a lease-purchase agreement only if the "title to the leased property rests in the [public entity] so long as lessee is not in default".28 The LOI, however, specifies that JacMal shall own the transfer station during the lease term.1 This structure places the ownership of the improvement in private hands, which generally subjects it to ad valorem property tax under West Virginia law, regardless of the landowner’s status.29 The proposal’s attempt to "reduce or eliminate" these taxes through artificial ownership splits is legally unsustainable and likely constitutes a "non-public use" for tax purposes.28

Prohibited Contractual Clauses under 5A-3-62

The "Definitive Purchase Agreement" contemplated by the LOI is required to contain terms "customary for transaction of this kind".1 However, for a public entity in West Virginia, "customary terms" are strictly limited by W. Va. Code § 5A-3-62, which identifies several prohibited contract clauses that are "void ab initio".9

 

Indemnification and Liability Limitations

Section 1(f) of the LOI states that the PCSWA "shall be responsible for intentional or accidental damage to structure or trash crane".1 This functions as an indemnity clause, shifting the risk of loss from the owner (JacMal) to the public tenant. W. Va. Code § 5A-3-62(a)(1) explicitly prohibits terms that require the state or its subdivisions to "indemnify or hold harmless any entity".9 Furthermore, Section 5’s requirement for the PCSWA to reimburse JacMal up to $200,000 for expenses if the project is not constructed is a form of prohibited liquidated damages or penalty that likely violates the prohibition on "limit[ing] liability for direct damages" caused by third parties.9

 

Cancellation for Convenience

W. Va. Code § 5A-3-62(a)(15) requires that all state-related contracts must allow the government the ability to "cancel a contract for convenience with 30 days' notice".9 The JacMal LOI proposes a 15-year term without any such provision.1 Any agreement that lacks this cancellation right is fundamentally noncompliant and would be unenforceable if challenged in a court authorized by the West Virginia Legislature.9

 

Choice of Law and Governance

While the LOI correctly identifies West Virginia law as governing in Section 8, the proposed structure involves "customary" terms that might inadvertently include prohibited arbitration clauses or extra-judicial dispute resolution.1 W. Va. Code § 5A-3-62(a)(2) and (a)(7) strictly prohibit binding arbitration and require all disputes to be heard in a West Virginia authorized court.9 The PCSWA must ensure that the "Definitive Agreement" does not contain these standard commercial clauses that are illegal for government entities.9

 

 

Summary of Errors of Law and Noncompliance

The proposed agreement, as structured in the Letter of Intent, fails to meet minimum legal standards across six distinct areas of West Virginia law.

Legal Category	Specific LOI Deficiency	Controlling Law / Regulation	Consequence
Public Debt	Mandatory purchase and lack of non-appropriation clause.	W. Va. Constitution Art. X, § 8	Agreement is unconstitutional and void.2
Procurement	Pre-selection of JacMal for construction without public bid.	W. Va. Code § 5-22-1 (Bidding Act)	Civil and criminal penalties for officials.8
Design-Build	Integration of design/build without board approval or criteria developer.	W. Va. Code § 5-22A-1 et seq.	State can halt project and withhold permits.25
Land Sale	Negotiated private sale of PCSWA land to an LLC.	W. Va. Code § 7-3-3	Transaction is illegal; requires public auction.19
Taxation	Splitting title to evade taxes while JacMal holds leasehold.	W. Va. Code § 11-3-9(b)	Forfeiture of exemption; potential tax fraud.28
Contractual	Prohibited indemnity and lack of 30-day convenience cancel.	W. Va. Code § 5A-3-62	Clauses are void ab initio; contract unenforceable.9

 

Narrative Conclusion and Strategic Findings

The Letter of Intent between JacMal Properties, LLC and the Pocahontas County Solid Waste Authority is not a viable blueprint for a lawful public-private partnership. Every material aspect of the proposal—from the financing of the construction to the transfer of the land and the structure of the lease—violates established West Virginia law or regulatory policy.

 

The most critical failure is the creation of unconstitutional debt. By committing the Authority to a 15-year payment schedule and a mandatory million-dollar purchase without a non-appropriation clause, the document ignores over a century of West Virginia fiscal jurisprudence.2 This is compounded by the "Exclusivity" provision, which serves as a contractual blockade against the competitive bidding required for both the construction of the facility and the sale of the land.10

 

Furthermore, the "Design-Build" nature of the project has been initiated without the mandatory oversight of the state Design-Build Board, and the technical specifications have been pre-ordained by the developer rather than an independent professional.26 This lack of independent oversight, combined with the "straw-man" ownership strategy designed to evade property taxes, suggests a transaction structured for the primary benefit of the private developer rather than the public health and welfare of Pocahontas County.28

 

To proceed, the PCSWA must abandon the current Letter of Intent. Any future development of the transfer station must begin with an approved siting plan, followed by a competitive procurement process that adheres to the Fairness in Competitive Bidding Act or the Design-Build Procurement Act. Any land disposition must occur via public auction or a rigorously documented competitive process, and any lease must preserve the Authority’s constitutional right to annual fiscal discretion. Proceeding under the current LOI exposes the Authority to litigation, the loss of state grant eligibility, and potential criminal sanctions for its officers.8

Works cited

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