Attorneys are still in negotiations over a possible settlement to the lawsuit filed by Peachtree National Bank seeking more than $1.5 million in unpaid loans from the city, its development authority and the tourism association.

“It’s too early to tell,” said Peachtree City Mayor Harold Logsdon, noting that attorneys involved “are in continuous talks.”

The first whiff of a possible settlement came April in a court filing to extend the discovery period, which is the time each litigant must share information related to the case with other litigants. The filing stated that the parties “have been working together on a potential resolution” in addition to sorting out the discovery issues.

The suit was filed in August 2004 by Peachtree National Bank, which issued the outstanding loans to the Development Authority of Peachtree City for improvements to the city’s tennis center and amphitheater in addition to providing funds for operating expenses.

In 2003, the authority stopped making payments on the debt after it gave up operations of the tennis center and amphitheater, the facilities for which they incurred the debt. After that occurred, the city stopped payments to the authority from the hotel-motel tax, which equalled $180,000 a year and was used by the authority to pay the outstanding bank loans.

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. But use of the city’s hotel-motel tax money to fund the authority clouds the issue.

According to Peachtree National Bank’s 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.

Peachtree National Bank has also assumed a $200,000 DAPC loan that was originally made by Regions Bank in 2002.

Named as defendants in the lawsuit are the city, the DAPC, which formerly operated both venues, and the Peachtree City Tourism Association, which currently operates both venues. Each agency is represented by separate legal counsel.

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.

The bank is seeking an order forbidding the transfer of the DAPC’s 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.

None of the current DAPC members were on the DAPC board in 2003 when the controversy began with the resignation of Vice Chairman Scott Bradshaw, who criticized the last-minute development of cash flow problems in September, 2004 despite the receipt of “highly optimistic financial reports.”

Then DAPC Executive Director Virgil Christian resigned the week following Bradshaw’s blistering criticism.

The DAPC also had financial reporting difficulties that put a black eye on the city’s audit for the year ending Sept. 30, 2003. The city’s auditor determined that the DAPC failed to maintain subsidiary ledgers for all statement of net asset accounts, failed to reconcile subsidiary ledgers to the general ledgers and had “incomplete and inconsistent posting of transactions to the general ledger.”

“The failure of the Development Authority to effectively design and operate sound internal controls, as well as the failure to maintain an up-to-date general ledger leads to untimely and inaccurate information provided to the board of directors,” the auditing firm wrote. “Additionally, failure to design and operate effective internal controls could lead to undetected misappropriation of funds or delays in finding other potential errors or irregularities.”