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Bank sues PTC for $1 million bad loan

By JOHN MUNFORD
jmunford@thecitizennews.com

To recoup almost $1 million in loans to the Development Authority of Peachtree City that have gone unpaid since November 2003, Peachtree National Bank has sued the authority, the Peachtree City Tourism Association and the city of Peachtree City, according to bank President and CEO Ron Duffey.

The authority is unable to repay the loans because it has no income since the City Council took over management of the city’s tennis center and amphitheater, a task later handed to the tourism association after the venues were run briefly by the city beginning in November.

In the suit, the bank accuses the city of acting in bad faith to convert the authority’s $1.6 million in assets to the city’s ownership, which would shield them from being taken by the bank in return for failure to pay off the loans.

The city has refused the pay the loans, which including accrued interest now total $1.04 million, according to the suit.

The bank alleges that the city conspired to convert the authority assets to the city by having Regions Bank, which the authority owed $200,000 in a separate loan, take all the authority’s $1.6 million in assets, and then sell the assets to the city in return for $100,000.

Doing so would technically render the authority “insolvent,” the suit noted.

Bank attorneys also argue that the city council sanctioned the loans made by the development authority, and the tourism association is the “alter ego and successor” to the authority ... thus both are responsible for paying the authority’s loan obligations.

The bank is seeking an order forbidding the transfer of assets, payment in full of the loans issued to the authority (with interest) and an order “compelling the defendants to use the authority’s assets to pay the legitimate debt to Peachtree National Bank.”

The bank is also seeking attorneys’ fees, alleging the defendants “have acted in bad faith, been stubbornly litigious and caused Peachtree National Bank unnecessary trouble and expense.”

According to the loan documents, the bank loaned the authority $879,000 on May 15, 2002 to combine two existing loans, which were initially made for improvements to the amphitheater and working capital. A year later, the bank issued a $200,000 line of credit to the authority also.

City Attorney Ted Meeker and bonding attorney Earle R. Taylor have advised city officials that Georgia law forbids the city from assuming any debt created by the authority without seeking approval from city voters in a referendum.

If such a move were approved, the city could create a recreational authority to operate and manage the tennis center and amphitheater, and the authority could issue revenue bonds to repay the development authority, which could then repay the indebtedness, Meeker and Taylor wrote in an opinion last year.

In a statement released Monday, Duffey said the decision to pursue legal action was “difficult.”

“We regret that this situation has reached this point and are hopeful that it can be resolved in a reasonable manner,” Duffey wrote, adding that the move was made “in the interest of successfully and responsibly managing our business for the rest of our customers, team members and shareholders.”

Duffey noted that the bank has been in discussions with city officials and authority representatives for more than nine months. He added that the loans were requested by city leaders more than 10 years ago.

The tourism authority, which now operates the tennis center and amphitheater, was appointed by city council and includes sitting council members Steve Rapson and Murray Weed along with city Finance Director Paul Salvatore.