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Mayor says no tax increase expected from $920K lawsuit settlementTue, 11/28/2006 - 4:40pm
By: John Munford
Peachtree City Mayor Harold Logsdon is confident the City Council will take a vote at 6:30 tonight to settle two lawsuits over monies owed by the city’s development authority for tennis center improvements by paying $920,407 to a bank and two contractors. Logsdon said he didn’t think the proposed settlement, which would be financed through a 10-year bond, would require a property tax increase, but that must be hashed out in the annual budget process, he noted. “The bond payment isn’t going to be that great,” Logsdon said. “I do not see a tax increase in the immediate future for this.” The city does face some tough budget-related decisions in the future, however, he added. The Development Authority of Peachtree City will meet at 6 p.m. to consider the settlements followed by a 6:30 meeting of the City Council, which will also consider the settlements. The authority will meet downstairs in the Floy Farr room of the Peachtree City Library while Council will meet in City Hall. Under one of the settlement agreements, the city would pay Peachtree National Bank $714,000 instead of the $1.5 million sought by the bank in its suit. In another proposed agreement, the city would pay Foley and Group VI $206,407 of the $228,000 balance those companies sought in its suit. All told, both lawsuits were seeking $1.72 million in compensation. A third contract that’s part of the settlement agreements would require the city to pay $54,588 for Group VI and Foley to construct the grading and drainage improvements at the tennis center, which has flooded several times during rainstorms. But part of the agreement allows the city to withhold $32,605 of the $206,407 due Foley and Group VI from the settlement, pending completion of the drainage and grading improvements. The settlement agreements were released Wednesday afternoon on the city’s Web site and in a press release to the media. The $920,407 settlement would eventually be paid out of the city’s treasury by means of a complicated revenue bond issue and lease-back arrangement with the city’s Development Authority, officials said. The initial yearly payment on the bond would start at $75,000 in 2008 and increase to a high of $135,000 in the final year, 2017. The terms of the settlement have been approved by Peachtree National Bank, Group VI and Foley Design Associates, Logsdon said. Council has been kept abreast of the negotiations in executive (closed) session under an exception in Georgia law that allows meetings to be closed to the public if they involve active litigation. But Logsdon said the settlement agreements were published Wednesday in an effort to notify the public before council took a vote even though the city could likely have kept the settlement under wraps until the moment it was approved. “We wanted to do everything in a public forum,” Logsdon said. “We are not doing some kind of back-room deal.” Logsdon said the city did a lot of research to determine the actual costs of the projects involved. “If we can see it, feel it, touch it, then we know we owe that money,” he said. Logsdon said he approached the issue to determine what was “the right thing to do without getting to the courtroom.” “It’s just a chapter in the life of the city that we need to get behind us,” Logsdon said. “... The whole thing gave a negative image to the community.” The pending lawsuits did not hurt the city’s ability to borrow money nor its bond rating or interest rates on financing, Logsdon said. Logsdon said he assumed that Peachtree National Bank is “assuming some business risk” by accepting the settlement in lieu of the full amount owed on the loan. One of the benefits of the settlement agreements, Logsdon said, is that it will lead to repairs of the stormwater drainage system at the tennis center, which has been blamed for flooding the bottom floor of the center on several occasions. The $1.5 million Peachtree National sought in the lawsuit included roughly $1 million that was financed for the expansion of the tennis center, plus another $200,000 loan that was initially made to DAPC by Regions Bank for finishing out the restaurant and the bottom floor of the tennis center, and interest. Peachtree National Bank acquired the Regions loan after Regions sought to acquire the authority’s assets to pay off the loan. The $228,000 owed Group VI and Foley Design Associates stems from the change orders on the project, which former mayor Steve Brown said were never approved by Council. Those change orders were signed for by former DAPC executive director Virgil Christian, who resigned shortly after the DAPC relinquished facility operation back to the city. The change orders involved finishing up the ground floor space in the tennis center clubhouse which later housed college classes offered by Clayton State University. Finishing the ground floor cost $54,000, while other items included changes to clubhouse lighting ($52,000), landscaping and irrigation design and installation ($21,000), and paving of the south parking area behind the indoor courts ($12,000). The expanded facility opened in spring 2003. Later that year, the authority relinquished operation of the tennis center and amphitheater back to the city, which owns both facilities. When that occurred, the city stopped making monthly $180,000 hotel-motel tax payments to the authority which previously were used to pay the monthly financing owed to the bank. Without those payments, the authority had no other funds to pay the debt, authority officials have said. Although the city later created a tourism association to run both facilities, that entity did not resume making the payments to the bank. Also left hanging in the air were the outstanding bills owed to Group VI and Foley Design Associates for the tennis center expansion. The bottom floor of the tennis center has flooded several times during periods of heavy rain, and city officials have said the drainage system installed when the expansion was built was inadequate. Last month, the city filed a counterclaim against Group VI and Foley Design Associates in reference to the drainage problem. Court officials recently put attorneys on notice that the trial on the matter would be held sometime in January. The Citizen reported back in April that attorneys indicated in court filings they were working toward a possible settlement in the case. Logsdon said during his 2005 campaign that he hoped to settle the case. Because the DAPC and the tourism association were named with the city as defendants in the suit, each entity has had its own legal counsel on the case. As the lawsuit has dragged on in the pre-trial phase, the city has argued that the Development Authority of Peachtree City is a separate and legal entity from the city government itself, and thus the city should not be held liable for its debts. The crux of the city’s argument is that the city did not authorize the DAPC to seek loans for the expansion, although the expansion of the tennis center was discussed at several City Council meetings before the loans were executed. Bank attorneys have argued in filings 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 all are responsible for paying the authority’s loan obligations. Logsdon said the pending settlement is for the lawsuits only and does not encompass money owed by the DAPC to other creditors who still have outstanding bills. Logsdon said since the news broke Wednesday of the impending settlement, no citizen has broached a conversation with him about the matter. Anxious to get some feedback, he spoke with several people who were nonchalant about the issue, he said. login to post comments
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