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Brown: Bankruptcy only option for DAPC

By J. FRANK LYNCH
jflynch@theCitizenNews.com

Peachtree City bears no liability for the nearly $1 million in debt owed to Peachtree National Bank by the Peachtree City Development Authority, Mayor Steve Brown insisted Wednesday, suggesting that the authority should declare bankruptcy to settle the matter.

The city, the Development Authority and the Peachtree City Tourism Association were all named in a lawsuit filed late last week by attorneys for Peachtree National. The bank is seeking payment on hundreds of thousands of dollars in loans now in default that it made to the Development Authority over a period of time ending in 2003.

The authority hasn’t made any interest payments on the loans since last fall, when it gave up management of the city’s amphitheater and tennis center and the hotel-motel tax revenue that came with that responsibility.

Brown has alleged the Development Authority used the borrowed money to expand facilities at the tennis center, but also to meet operational expenses,Êwhich is a violation of state law.

The city’s Tourism Association now operates both venues. In transferring the management to the Tourism Association, the suit alleges the city handicapped the Development Authority so it couldn’t make good on its debt.

“They’re talking about how we created a situation where the Development Authority couldn’t pay the debt, but they didn’t have the means to pay it even when they were getting the hotel-motel tax,” Brown argued. “Don’t tell me we cut off your method of paying the debt when you weren’t paying the debt in the first place.”

Even in the best of times, according to Brown, the authority was making interest payments only on the loans, and was still having to borrow to make ends meet.

“What is going to come out of all this is we're going to see the authority did not manage its affairs properly and was running in conflict with state law,” Brown said. “The bank was lending money without collateral; these were non-collateralized loans.”

Brown said the bank shares some of the blame because it readily made loans available to a known credit risk.

“Why would a bank lend a million dollars with absolutely no collateral required to an entity that could have had its funding cut off with just 30 days notice?” Brown asked, referring to an intergovernmental agreement between the city and the authority which gave the authority a “30-day out” clause to surrender management of the venues, along with its biggest source of income —Êthe guest tax revenue.

The Tourism Association has been operating both the amphitheater and tennis center since mid-January solely on income generated by each venue. In a tentative 2005 fiscal year budget released last week, the Tourism Association proposes using its portion of the hotel-motel tax revenue to cover expenses related to tourism-related events in the city, such as the Great Georgia Airshow and the city’s Fourth of July celebration.

The city has 30 days to respond to Peachtree National’s suit.

“We the city are very comfortable in our position,” Brown said Wednesday. “I'm definitely stating for the record that the Development Authority and the city are two separate legal entities under state law and the city had absolutely no control over the actions of the Development Authority.”

Brown suggested that the authority’s only recourse at this point is to declare bankruptcy.

“What other option do they have? I don't think there is a legitimate option,” he said. “This is just 10 years of bad management come to a head here.”