Wednesday, December 11, 2002
|
Wednesday, December 11, 2002 |
|
Mayor tells Authority: 'Resign!' Development Authority accused by PTC's Brown of 'financial mismanagement' By JOHN MUNFORD
Claiming the Development Authority of Peachtree City has been fiscally irresponsible, Mayor Steve Brown is calling for all seven authority members and its executive director to resign. Brown cited "massive" cost overruns on the recent tennis center expansion project which he calculates at over $450,000, the authority's failure to help fund the hotel-motel tax shortfall and its use of a bank loan to fund operating expenses such as payroll. Brown also said if the situation isn't resolved he may ask the U.S. Department of Justice to investigate the matter, although he considers that "a last resort"; instead he wants to create a recreation authority to take over the tennis center and amphitheater operations. Development authority executive director Virgil Christian, who oversaw the day-to-day construction of the tennis center expansion, said the cost overruns on the project actually total $287,000 and most of the changes couldn't be avoided. The cost overruns include $25,000 for overages on the construction of the covered tennis courts and $23,000 to the architect of the project, Christian said. "They were specifically told adamantly to stay within the $2.5 million budget," for the expansion, Brown said Tuesday morning. "And then we find out they're using debt funding to do it. ... This is not what I would call a well-oiled machine." Development authority Chairman Tate Godfrey pointed out that the authority offered to participate in the anticipated hotel-motel tax shortfall with an agreement it presented to council earlier this year but council declined to authorize the agreement. Godfrey also defended the authority's use of a loan to meet payroll obligations since its income from operating the tennis center and amphitheater are seasonal. The loan will be repaid in the coming months once more revenues are available, he said. Those debts are temporary "just because we don't have the same cash flow each month," he added. Christian said the changes that brought the tennis center expansion over budget were necessary, including changes to the parking area, a new electrical distribution panel, new wiring for lighting fixtures (the fixtures were donated by Cooper Lighting) and upgrading the electrical and HVAC system to accommodate a restaurant on the second floor of the office/pro shop building. Although Brown contends the development authority needed city permission for the increased costs, Christian contends the development authority was the entity that contracted with Group VI and other subcontractors for construction of the expansion, and the authority decided to use a loan to fund the cost overruns. "I'm proud of the product I have delivered to the citizens of Peachtree City," Christian said, adding that he wishes the project would have stayed under its original budget of $2.5 million. The building will probably be appraised at over $3.5 million once an appraisal is conducted, Christian said. Group VI, the contractor for the project, worked with the authority to provide improvements not in the contract which helped add value to the project, Christian said. Christian noted that he kept council members up to date on the project monthly via e-mail and he was glad to answer any questions about the project. Brown has also called the authority's loans "illegal" but he will commit to having the city pay off the loans, which total over $1.45 million. Godfrey contends the loans are legal and that previous city councils were aware of the loans and the authority's financial status. That information was also shared with the council committee that helped hammer out the recently-approved intergovernmental agreement between the authority and council, Godfrey said. "We were going to get that all paid off eventually," by using long-term financing Godfrey said. A recent full audit of the authority listed all the loans it had outstanding and that information was also shared with the City Council, Godfrey added. "It documented in the report that the loans were legal," Godfrey said. "If they were illegal, why didn't the auditors bring it up before now?" Although the authority doesn't "like" to be in debt, that was one of the reasons the authority was asked by the council in 1993 to run the tennis center and amphitheater, Godfrey said, "because we could take risks that the council couldn't." One such example is taking out a loan several months in advance so deposits could be paid for artists in the amphitheater's summer concert series, Godfrey said. The loans were repaid once the amphitheater got its revenue for ticket sales, Godfrey added. "They didn't have the resources to do that," Godfrey said. Godfrey also pointed to one occasion several years ago when the city council directed the authority to borrow funds to make improvements to the amphitheater as the city council agreed to fund the second phase of the tennis center to add a number of clay courts to the facility. Brown wants a new recreation authority to operate the tennis center and amphitheater, which the development authority has done since 1993. "That way they can be run in a more cost-efficient manner and leave economic development to the development authority," Brown said. He floated a similar concept to city council earlier this year, but it was ultimately voted down in favor of keeping the current arrangement with the venues operated by the development authority. A recreation authority could issue tax free revenue bonds at better rates than the authority is currently getting, Brown said. "The big problem is figuring out how to pay all that debt service," Brown said. Brown said he will commit to having the city pay off the development authority's debt. The city has been advised the only legal way for the city to issue revenue bonds to cover the debt with long-term payments would be through creating a new recreation authority, Brown said. "I am fully in favor of paying all the authority's outstanding debt ..." Brown said. Current and former authority members strongly dispute Brown's allegations, about authority loans, saying everything has been done legally, above board and in the open, and with approval from the previous city councils. The current council has agreed to take on the authority's debt, providing the city gets an appropriate line-item listing of what the debts were incurred for. In exchange, the council will dramatically cut the amount of hotel-motel tax funds the authority receives from the city. Brown has also questioned what collateral was used to secure the loans since the city owns the tennis center and amphitheater buildings, not the authority. Godfrey said the loans were approved by the banks based on last year's agreement with the city that guaranteed $265,000 a year of hotel-motel tax revenues to the authority for the next 15 years. The banks also calculated in the sponsorship and membership commitments the authority received as revenues for the tennis center and amphitheater, Godfrey said. While Brown has concerns some of the authority's loans were being paid on an interest-only basis that stood to benefit the banks, Godfrey said the authority only makes interest-only payments on a temporary basis until they can afford to resume principal payments or combine loans with terms more favorable to the authority. Former longtime authority members Bob Truitt and Jim Fulton said the city council asked the authority to operate the venues back in 1993 specifically because it could take more "risks" by seeking loans such as those used to pay deposits for acts coming to the amphitheater's summer concert series. The authority could also seek sponsors for the amphitheater and tennis center whereas the city council could not, said Fulton, who along with Truitt served on the authority for over 20 years. If any of the loans were illegal, they would have been reported to a number of authorities including the city council and bank examiners, Truitt said. "They (the city council) told us to run it like a business," Fulton said, adding that doing so involves borrowing money for the business to grow. In addition, there were several occasions when the council would ask the authority to use loans to pay for improvements to the amphitheater, Truitt said. One occasion involved work on the cast house area of the amphitheater and another was for a project to add new lighting and a catwalk to the amphitheater, Truitt and Fulton said. In both instances, council told the authority to seek a loan to fund part or all of the projects, Truitt said. When the authority sought lines of credit and other loans for projects and operating expenses, they got "very competitive interest rates" Fulton said, giving credit to the late Tom Farr, another longtime authority member who helped engineer many of the loans through his employer, Peachtree National Bank. "They were favorable rates and favorable terms," Truitt said. Money earned from the projects was always put back into the venues for improvements, particularly in the amphitheater's case, Fulton said. Truitt said he thought the tennis center and amphitheater combined, which are both owned by the city, would have a value between $7 and $10 million. "In the 20-plus years I served on the authority, nobody on the development authority or airport authority ever did anything that wasn't in the best interest of the city," Truitt said. Although he admitted some mistakes were made, "nobody ever did anything maliciously." "We didn't have time to develop a conspiracy," Truitt said. And though sometimes there were disagreements with elected officials on the best course of action to take, the dispute was always worked out, Fulton said. "We just figured out the right way to do it," Fulton said. "It was never 'I win, you lose.'" Fulton and Truitt said the authority initially resisted council's request for them to manage the amphitheater and oversee construction and management of the tennis center, which at the time didn't exist. The amphitheater, which needed numerous construction improvements, was being managed by volunteers previously but the authority turned it into a venue that brings in nationally-recognized performing artists, Fulton noted. "The volunteers did the best they could, but they didn't have a $200,000 check to hire acts," Truitt said. Truitt pointed out that the venues are supported with funding from the hotel-motel tax, and each time the tax was raised authority officials explained the projects to the local hotel operators to get them on board. "The idea that taxpayers are having to pay more money than (council was) aware of is ludicrous," Fulton said. The reduction in hotel-motel tax funds the authority agreed to with the city council will require an increase in ticket prices and court fees, Godfrey said. But with the new covered courts, the tennis center is expected to boost revenues from lessons and court fees that normally would have been cancelled due to rain. There will also be a concentrated effort to secure more sponsors for both the tennis center and amphitheater, Godfrey said. Godfrey said the authority agreed to cut its funding from $300,000 to $265,000 with last year's council, and although that "made it tough" the guaranteed money for 15 years allowed the authority to refinance its loans and pay it off in a longer term, Godfrey said. The further cuts agreed to with this year's council further hurts the authority's ability to repay its debt, which is why the authority wants the city to take over paying the debt. The authority and city have agreed to cut the authority's hotel-motel tax funding next year from $265,000 to $180,000. The following year it would shrink to $140,000 with a goal of reducing it to $100,000 the third year. "It's going to be tough, but we agreed to it," Godfrey said. Fulton said the tennis center and amphitheater were so successful because of the quality staff who operate the facilities like Christian, who "has the contacts and the expertise." Truitt said he also takes issue with claims the authority did little for economic development in later years. To lure the National Weather Service here, the authority purchased land for the project to donate to the federal government, he said. "That created 60 high-quality jobs," Truitt said. While the authority cannot take all the credit, it has participated in luring a host of local businesses that are located in the industrial park, Truitt added.
|
||