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Council debates impacts of proposed Town ‘Economic Recovery’ programs

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~ Town would get much of COVID-19 grant money back in delinquent utility, tax payments ~

As promised in our exciting first installment of the Monday, April 27, Front Royal Town Council meeting and work session exploration of municipal finances in the age of 21st-century pandemics and tough economic decisions, here we move into Part Two’s work session discussion of COVID-19 related financial assistance through the Town.

And while no council members expressed a desire not to save local businesses if possible, or help citizens who have lost income due to State, local or voluntary restrictions on business operations enacted as part of the COVID-19 emergency pandemic management response, several wondered if what was put on the table by staff would accomplish those desired results.

Our familiar downtown Royal Cinemas movie marquee: ‘We will get through this together but apart’ – though exactly how remains to be seen as municipal governments, business owners and citizens navigate unfamiliar economic terrain. Royal Examiner Photos/Roger Bianchini

On the council’s table for consideration are two financial assistance programs, one targeting businesses that have lost income, the other citizens. The staff proposal would commit a total of $1.5 million, up to $1 million for the business “Economic Recovery” program, and $500,000 to the “Residential Utility Assistance” program. Both would be structured as grants that would not have to be paid back – exactly.

The citizen program would exclusively apply to the payment of back Town utility bills, so the money given as a non-recoverable grant to citizens would come back to the Town immediately as utility bill payments. Assistance would be based on a three-month average utility payment of the delinquent client. Applicants must have become unemployed after February 1st.

On the business side of the non-recoverable grants, the first use of funds must be to pay delinquent Town utility bills and taxes. Once caught up with Town taxes and utility payments, remaining funds can be used as the recipient sees fit “for other business expenses”.

Were the grants actually able to save a COVID-19 emergency response-induced failing business, the Town will, of course, see the additional future benefit of the surviving business’s taxes and utilities being paid without municipal assistance; and employees getting their jobs back and becoming financially solvent once again.

What’s in the numbers?

As noted at the end of our story on Monday’s council meeting actions, “there appeared to be divided as to the commitment of additional Town resources in its unknown fiscal future, as well as whether suggested recovery amounts ranging from a $500 minimum for businesses with annual gross incomes of up to $50,000 to a maximum of $13,000 for businesses grossing over $500,000 annually, could actually help a struggling local business to survive”.

We will explore highlights of the council’s discussion of that “division” later in this story after first summarizing the numbers at issue and logistical complications surrounding its implementation.

There are four tiers in the “Business Economic Recovery/Assistance Program, they are businesses with gross annual revenues: Tier 1/ of $15,080 to $50,000 (available grant of $500); Tier 2/ $50,000.01 to $200,000 (available grant of $2,000): Tier 3/ $200,000.01 to $500,000 (available grant of $4,000); and Tier 4/ $500,000 (though the penny was left out here) and above (available grant of $9,000). It was explained that the $15,080 minimum gross revenue number was based on an annual minimum wage scale, which would appear to include a small business with one minimum wage employee.

Additional assistance can be received by businesses having a Town utility account or paying Town Real Estate Taxes. Those additional assistance numbers are: Tier 1/ $500; Tier 2/ $1,000; Tier 3/ $2,000; and Tier 4/ $4,000.

So the maximum assistance across the Tier board is 1/ $1,000; 2/ $3,000; 3/ $6,000; and 4/ $13,000. Priority guidelines for business selection were included, see attached graphics pages for elaboration.

A portion of eligibility criteria for small business ‘Economic Recovery & Assistance’ program.

Due to the non-recoverable grant aspect of the proposal, the Town cannot administer the programs, Interim Town Manager Matt Tederick explained with an unanticipated analogy.

Of Towns, Kings & EDA’s

“If I can go back to the first comment I made about this matter, is towns, governments aren’t designed to be a charity, they’re designed to be the king,” Tederick offered of his perspective on the nature of the democratically-based political rule, adding, “They were designed to take the money and to receive taxes and to receive money, not necessarily pay it out in the form of a gift to the people.”

Tederick’s comment might raise an eyebrow from some in light of an American Revolutionary War fought to throw off the yoke of kingship and class elitism in the conduct of American governmental affairs, in favor of an elected, representative government designed to move the new nation to do the business of the entire citizenry “by the people and for the people”. However, the remark was delivered to explain the above-referenced state legal prohibition on a municipal government’s ability to administer a program in which money is offered as a non-recoverable grant to prop its constituency up in times of financial stress, as in this case financial stress not of their own making.

Wonder how Revolutionary War leader Joseph Warren, for whom the county is named, would feel about Interim Town Manager Tederick’s ‘governments are designed to be the king’ remark? Tederick, left, assisted Councilman Holloway, center, and Mayor Tewalt last December in hanging the donated Joseph Warren Town Hall display commemorating Warren’s service and death at the direction of one king during the American Revolution.

“That’s why it needed to be a non-profit,” Tederick said of an agency through which the proposed “Economic Recovery” and “Residential Utility Assistance” programs would have to be administered on behalf of the town government. “And the state code specifically said a chamber of commerce, and that’s why they would be administering the grant,” rather than the Town, Tederick told the council.

Whether parameters would be set to avoid any appearance that the Chamber’s business membership might be given preferential consideration for the grants was not broached during Monday’s discussion.

“The other alternative and I’ll just throw it out, for most localities that are – I won’t say most – I’ll probably go so far as to say all localities that are doing some kind of program like this if they’re abiding by the law, and that’s a qualifier, if they’re abiding by the law, by the books, they’re using their economic development authorities to do this.

“We have one, but we haven’t formed it yet,” Tederick said, perhaps first casting public light on his and the council’s current perspective on its continued membership in the existing Town-County EDA while moving toward the creation of its own, second unilateral EDA. It appears the Town’s governmental “rightsizing”, also known as downsizing, do not include EDA’s since town legal staff has publicly cited the advantage of maintained membership in the existing EDA.

Mayor Tewalt would like to maintain a working, non-litigious relationship with the existing EDA. However, it has become apparent the council he chairs and its appointed interim town manager do not.

Lori Cockrell then questioned Tederick and Finance Director B. J. Wilson on earlier meeting discussions on that state prohibition on municipalities offering grants – “So, we can’t give grants, correct?” she asked.

“We can donate to the non-profit organization and the non-profit organization can make the disbursements – we, the Town itself, cannot issue the grant is my understanding,” Wilson replied.

While complimenting finance and administrative staff for their time and effort in structuring and laying out an emergency funding relief program, Cockrell told staff and her colleagues, “I myself would just kind of like to see us slow down a little bit. I’d like to see what’s going to happen from the federal government, from the state governments, and see what kind of relief they’re going to provide to businesses.

“I know that Mr. Tederick just mentioned something about the EDA, and I believe I read in the minutes that they were even adding some type of committee or board that would have, like small business loans. And Mr. Tederick, Mr. Wilson, do you recall reading that in the minutes?”

“Yes mam, that’s correct. Their committee is doing loans, whereas this would be a forgivable grant,” Tederick replied of the existing EDA’s efforts as opposed to what he and the finance department had proposed.

Former EDA board member and Vice-Mayor Sealock observed that the EDA’s Small Business Loan Program was not newly formed in the wake of the pandemic situation, but a long-standing small business assistance effort.

“What you read today is just standard practice with them,” Sealock offered.

As Royal Examiner has reported, the newly formed SBL Committee is a tweaking of the EDA’s Small Business Loan application and review process, another fix-it-up effort to correct perceived past mistakes that allowed the EDA financial scandal to evolve in certain directions under previous EDA leadership.

Unknown variables

“Okay, but I guess what I’m saying is I’d like to see what is available out there before we move forward with a million dollars. I’ve had citizens give input to me, and they have concerns that our town has a lot of unknowns right now as to our own budget. And to what the COVID-19, the pandemic, what impact that’s going to have on us as a town.

“And their fear of how we’re going to provide services to the citizens if we do have some large deficits in our revenues. And they’re nervous about us providing a million dollars out there. And if nine months from now will we come back to them and ask them to raise taxes or raise rates and such.

“I’m not against assisting businesses or citizens; I’m not overly against this, I’m just concerned – I don’t want us to move quickly on this, I want to see what else is going to be available, first before we move forward.”

“Lori, along, those same lines, all of the arguments that were made against this, which I had a couple of too, are the same arguments that were made against … Dominion Power’s redundant water line – are the water rates going to go up? Are you going to increase taxes because of this huge project? And so forth and so on,” Letasha Thompson said in support of Cockrell’s concerns.

Vice-Mayor Sealock answered by saying, “That is why we’ve been doing contingency planning and moving dollars forward to make sure we can cover as many shortfalls in next year’s budget as possible.” However, he did not address the potential impacts of the $2.3 million in reserves council authorized earlier Monday evening to prop up the current FY 2020 budget through its final months.

In support of moving forward with a recovery plan, Sealock cited an article he said indicated one restaurant he did not name, already shutting its doors permanently as a consequence of the pandemic response restrictions on certain business operations.

“If we don’t help in some kind of recovery, our downtown is going to be a ghost town, if it isn’t already,” the vice mayor worried.

Vice-Mayor Sealock worried that without municipal economic assistance through the COVID-19 pandemic and emergency response, downtown Front Royal will become a ‘ghost town’ on a longer-term basis.

He said business owners he had consulted liked the Town draft recovery plan based on annual gross receipts. He then asked how the plan would work for multiple business owners – could they get relief for each of their business entities, or just as one owner?

Tederick replied that eligibility would be based on business licensing.

“If they have three business licenses and they qualify under the various terms, they would receive three grants,” the interim town manager replied as the draft proposal currently is written.

The questions remaining to be determined for council and staff are whether a $1.5 million dollar commitment from the Town will provide sufficient revenue to local businesses to assure their survival through this unknown pandemic and financial landscape.

“I’m not sure a thousand dollars is going to pull anybody out of the last month of a lack of receipts,” Cockrell observed. “However, I’m sure they would be grateful for any assistance. I’m encouraged by someone saying we could cap the amount differently or we could see how many people are actually interested in this type of relief – and it may be that more is, or it may be that less is. A graph presented in the draft estimated 30% of businesses in each Tier receiving assistance.

“But I like the idea of public input because the public input I have gotten has not been supportive at all,” she added, observing that with the proposal finally circulating into a wider public sphere with public discussion and media’s help, public feedback could increase and numbers on attitudes for or against could shift.

As the work session drew toward a 9:51 p.m. adjournment, a council consensus was reached to move the proposal in one form or another toward public input and a vote, if logistically possible as to advertising requirements, at council’s next regularly scheduled meeting, again likely virtually-held online, in two weeks, on May 11th.

Mayor Tewalt asked Tederick for an update on scheduling and proposal parameters by Thursday, April 30th. And with that, a far-reaching evening of budget discussion came to a close.

Hear work session discussion in the recording of the virtual meeting:

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Future look of Front Royal’s Historic Downtown prime work session topic

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In the wake of work session discussion Monday evening, July 6, the Front Royal Town Council reached a five-member consensus, Meza absent, to commit necessary funds from the Community Development Block Grant (CDBG) Program to proceed with construction of a Pavilion building in the Village Commons area anchored by the Town Gazebo and Visitors Center.

At issue is exactly where the money to fill what the staff summary update on the status of the CDBG Downtown revitalization project cited as a $150,000 funding gap will come from. It was noted that the existing CDBG budget has $130,000 committed to the pavilion/indoor restroom project.

The Council discusses the CDBG budget at the July 6th work session. Councilman Jake Meza was absent. Photos and video by Mark Williams, Royal Examiner.

The balance is likely to come from a combination of a minimally discussed “Streetscape” portion of the CDBG project, with additional funding coming out of unused portions of the Façade Grant program. Exactly how much surplus will be left out of the Façade Grant’s $325,000 remains a somewhat unknown variable.

While it was noted that only $13,395 has thus far been spent of that $325,000 façade grant total, staff and project consultants indicated that number is likely to start rising quickly as the 14 active downtown business participants begin submitting bid proposals for their façade improvements. One remotely connected consultant noted that some of those participating businesses have dual façades up for improvement. That variable is likely to bring the number of façade improvement applications close to the 21 or 22 businesses originally participating when funds were being allocated on the federal, state-enabled local economic revitalization grant funding.

Interim Town Manager Matt Tederick told the council that he thought the move to materials only bidding process from the original materials and labor, had saved that aspect of the project. Original bids including labor had come in unexpectedly high, threatening to tank that portion of the project.

Vice-Mayor Bill Sealock reminded his colleagues that a downtown pavilion catering to both tourists and local downtown visitors had been on the Town’s radar for 20 years – “I think we should make that our focus,” Sealock told his colleagues.

Mayor Gene Tewalt agreed, adding that the necessary funds should be located from somewhere within the project or Town assets “to show we’re doing what we’re supposed to be doing.”

Also discussed was a downtown “Mural” aspect of the CDBG revitalization tied to the “Façade” Program. Individual murals were estimated at individual costs of $25,000 to $40,000. Artistic themes, general standards, and qualifications of applicants were discussed.

Christopher Brock, Town Zoning Officer explains the process for applying for a mural/sign permit.

Vice-Mayor Sealock recalled the downtown mural work of the late artist Patricia Windrow as a very positive, if now largely abandoned and painted over, part of downtown’s visual history.

While the future look of downtown and the Historic Downtown Center was a prime topic of Monday’s work session, there was no mention of the future of the Visitors Center operations and staff under the announced Tourism Marketing management of the recently contracted Norfolk LLC “Strategic Solutions by Tricia”. Currently, the Visitors Center continues to be open into FY-2021 with existing staff and management, though for how long no one involved directly seems to know. An online search of “Strategic Solutions by Tricia” indicated a past focus of the newly hired consultant in non-profits fundraising activities – but that is a topic for another day.

Watch the discussion of progress toward the revitalization of Front Royal’s Historic Downtown Business District, as well as other topics including debt service variables on the cost of the I&I (Infiltration & Inflow) Abatement infrastructure improvement to the Town’s stormwater and sewer system mandated by the state; upgrades and replacement of Front Royal Police Department equipment such as body-worn and in-car cameras, the 911 radio system and radio consoles; the coming Town-County Liaison Committee agenda; FRIBA’s (Front Royal Independent Business Alliance) request for the placement of the “LOVE” letters downtown; and an expiring planning commission term in this exclusive Royal Examiner video:

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Tederick contract extended through council’s town manager search

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At its special meeting of June 30th the Front Royal Town Council approved a new contract extending the service of Matt Tederick beyond his previous contract’s end of the fiscal year termination date. The new contract commencing July 1 is on a month to month basis and differs from Tederick’s previous contract in that it is with him as a person, rather than a business entity.

That adjustment led Councilman Jacob Meza to comment prior to the unanimous vote of approval. Meza observed that the previous contract’s structure which did not deduct taxes or include benefits “saved” the Town what he estimated at $50,000. The new contract is at the same monthly rate of $12,500 as Tederick’s previous contract, but notes that the $12,500 “shall be paid net of any applicable withholding or deductions required by Applicable laws and Authorities.”

Without deductions Tederick’s contract equated to $150,000 take-home pay annually. Despite the lost “savings” Meza said he would support the new contractual arrangement.

The new contract observes that Tederick’s tenure will continue “until such time as a new Town Manager is appointed” and the “new Town Manager assumes his/her duties … following a suitable and appropriate transition period for the new Town Manager to familiarize himself/herself with the position …”

Matt Tederick presides as interim mayor during October 2019 meeting. Royal Examiner File Photo

As previously reported, council adjourned to closed session Tuesday evening for a “personnel” matter believed to be the first of two interviews of town manager candidates scheduled this week.

Tederick’s initial interim town manager appointment was approved by a 5-1 vote, Tewalt dissenting, in October 2019, effective November 9, the day after Joe Waltz’s resignation took effect. The October majority council vote to transition Tederick from interim mayor to interim town manager coincided with its vote, also 5-1 Tewalt dissenting, to hire the Damiani & Damiani law firm that shares an Alexandria business address with Tederick, to handle the Town’s civil litigation against the Town-County Economic Development Authority (EDA).

Perhaps ironically, Tuesday’s extension of Tederick’s contract coincided with council’s unanimous approval of a “Reservation of Rights Agreement” concerning its EDA litigation and claim of no liability to compensate the existing EDA for its financing of the Town’s new $9-million police headquarters.

Legal questions surround Town offer of one-time, recoverable FRPD payment

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EDA in Focus

Legal questions surround Town offer of one-time, recoverable FRPD payment

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Without accepting any responsibility for the nearly $9-million cost of its new police headquarters building, at a hastily called Tuesday evening Special Meeting to accommodate the turn of the fiscal year today, Wednesday, July 1st, the Front Royal Town Council unanimously approved a “Reservation of Rights Agreement” allowing the Town to pay a portion of the first debt service payment of Fiscal Year 2021 on that Town/EDA capital improvement project. The project was completed in October 2018 and the Town has yet to compensate the EDA for any of its costs in financing the project as will be elaborated on below.

Also approved during the eight-minute meeting prior to an adjournment to closed session for personnel matters believed to be the first of two town managers interviews scheduled this week, was an extension past June 30, and alteration to the contract payment terms of Interim Town Manager Matt Tederick. That will be covered in a separate Royal Examiner story.

Councilman Jake Meza says the Town saved about $50,000 by hiring Matt Tederick as a contractor, but as of July 1 that arrangement no longer exists. Royal Examiner photos and video by Mark Williams.

As to the Reservation of Rights Agreement with Warren County, the authorized one-time payment of $10,528.95 covers half of the Front Royal-Warren County Economic Development Authority’s interest-only payment of approximately $21,102 due at the July 1st start of FY-2021.

Contacted Wednesday morning, EDA Executive Director Doug Parson explained the EDA’s loan to facilitate construction of the Town Police headquarters have thus far been interest-only payments based on a 30-day month. That will change on November 1, when the United Bank loan moves to principal and interest payments. Parsons estimated that would take the monthly payments to about $50,000 from the $21,000 interest-only range.

The United Bank’s interest rate on the loan is 3%. However, the town council has taken the legal stance that it should only have to pay a 30-year, 1.5% interest rate it asserts was verbally promised to it by former EDA Executive Director Jennifer McDonald. As previously reported by Royal Examiner, that 1.5% rate was tied to the construction project qualifying for a 30-year New Market Tax Credit Program (NMTC) loan with a nine-year waiver of interest payments. However, the NMTC program loans are for municipal capital improvement projects that create new jobs, which the FRPD project did not.

Councilwoman Lori Athey Cockrell took the opportunity of council’s passage of the agreement facilitating a one-time, half monthly payment on the FRPD debt service as an indicator that the council and its staff are working proactively with the Warren County government to resolve outstanding legal and financial issues surrounding the EDA.

Prominent among those Town-County/EDA issues is what EDA officials have called “an undisputed” $8.4 million Town “moral obligation” debt on principal to the EDA on the police headquarters construction project. With interest, the balance on that debt is $8.8 million, EDA Director Parsons told Royal Examiner Wednesday.

EDA Board of Directors Chairman Ed Daley was present to watch Tuesday’s council action unfold. Asked for a reaction prior to having a chance to read the Reservation of Rights Agreement, Daley said, “Anything that moves it forward is positive.”

However, after a closer read, exactly how far forward Tuesday’s council action takes the Town-County-EDA discussion, remains a question.

$440,000 invoice – $10,500 (recoverable) payment

The opening paragraph of the Reservation of Rights Agreement notes that the Town had received a June 2 invoice “ostensibly setting out all costs incurred by the EDA in constructing and financing the construction of the Town of Front Royal Police Department (‘Costs’), including the costs and expenses associated with the loan from United Bank obtained to finance construction (‘Loan’)” and continues to note those costs and loan “are currently the subject of dispute” in the Town’s civil action against the EDA.

It is a civil action in which the Town’s contracted Damiani & Damiani law firm appears to have mirrored much of the language in the EDA’s initial civil litigation against Jennifer McDonald and 14 civil co-defendants and which seeks essentially all ($20 million-plus) of the $21.3 million the EDA alleges was misdirected by its former executive director and her first group of co-defendants. In April the EDA filed a second civil action, adding nine defendants and “not less than” $4.45 million in recoverable assets to its litigation.

But as to that June 2 invoice from the EDA, an invoice implying a request for payment on a debt, according to numbers in that invoice what the EDA presented to the Town was a bill for slightly over $441,300 spent thus far on the $8.8 million FRPD headquarters construction loan balance.

What the County and EDA got in response was the above-cited agreement facilitating a recoverable $10,529 payment that on a closer examination appears to try and legally tie the County and EDA’s hands in future court proceedings.

Legal ties that bind?

That agreement references ongoing “discussions” between the Town and County “which may result in amending the Town’s claims in the Litigation (against the EDA)”.

Contacted Wednesday, County Administrator Doug Stanley said county staff had not been involved in those discussions. Attempts to reach Board of Supervisors Chairman Walt Mabe, Vice-Chair Cheryl Cullers, and County Attorney Jason Ham for information on the referenced discussions and council proposal were unsuccessful prior to publication.

Reservation of Rights Agreement, Condition 1 states – “The Town denies that it owes any moral or legal obligation to repay the Loan”

So, referencing the “Reservation of Rights Agreement” passed 6-0 by council Monday, it states:

“WHEREAS, to facilitate the discussions, the County has asked the Town to make the disputed July 1, 2020, payment on the Loan and the Town has agreed, subject to the terms and conditions stated herein.” – As noted above, what was agreed to was a payment of $10,528.95, or half of the interest-only payment due for July, under the following conditions:

Condition 1 – “The Town denies that it owes any moral or legal obligation to repay the Loan” followed by Condition 2, noting that its payment is calculated on the unrealized New Market Tax Credit interest rate of 1.5%, rather than the actual 3% bank loan interest rate.

Condition 3 – “The County and the EDA acknowledge that this payment shall not be construed as, considered to be, or argued to be, in any forum, admission for any purpose, including but not limited to of liability of the Town for the Loan or the Costs.

Condition 4 – “The County and the EDA acknowledge that the Town’s payment is for a disputed debt, under a reservation of rights, and the Town reserves the right to continue to deny liability for the Loan or Costs and to recoup this payment should the discussions prove ultimately unsuccessful.

And drum roll, please, Condition 5 – “All parties agree that payment hereunder shall be inadmissible for any purpose except by the Town to recover this payment as damages in the Litigation.”

So, while Councilwoman Cockrell called the agreement a sign of good faith negotiations in the public interest by the Town, adding that news reports the Town is acting other than in good faith concerning the EDA as creating “a false narrative”, is she right?

Perhaps the EDA’s and County’s attorneys would be the best judge of that – hopefully prior to the signing of the “Reservation of Rights Agreement” by County and EDA officials. For at issue appears to be whose rights are being reserved, and in exactly what legal context regarding the Town’s civil litigation against the EDA and any related litigation over the Town’s responsibility to pay for its $9-million police station.

Because according to the document approved unanimously Tuesday night by the Front Royal Town Council, the Town has no “moral or legal” obligation to pay the EDA-undertaken $8.8-million loan that financed the construction of the Front Royal Police headquarters.

Is that something EDA and Warren County officials really want to sign off on in exchange for a one-time, recoverable, half monthly debt service payment?

Let’s see, a total of $20 million or more at stake versus a “recoverable” $10,500 payment – what do you think?

Ed Daley – File Photo.

We asked EDA Board Chairman Daley his opinion on Wednesday after he had a chance to review the Reservation of Rights documents more closely.

“The first the EDA heard of this was last night, which seems odd in that we are asked to sign off on it. But we’ll need to consult with our attorney first,” Daley reasoned.

Of the contention on a lack of Town liability to pay for its police station included in the document, Daley observed, “The EDA was happy to facilitate a project like that. But it was their (the Town’s) contract, their design, we just helped finance it. I think they need to get their financing together and pay for their police station.”

After we read the conditions in the agreement to her over the phone, EDA Attorney Sharon Pandak lauded the opportunity for further communications on Town-EDA/County issues but was skeptical as to a recommendation on the EDA signing off on the Reservation of Rights Agreement as worded.

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Tederick likely to continue with Town

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It looks like the Town of Front Royal’s interim manager may get an extension to his employment contract, which expires today, the final day of the Town’s fiscal year.

Town council members will hold a special meeting at 7 PM tonight at the Warren County Government Center, to consider a contract to extend Tederick’s post.

Matthew Tederick began working as the interim town manager on Nov. 9, 2019, after the council approved a contract by a 5-1 vote with Councilman Eugene Tewalt dissenting.

Tederick has earned a $12,500 monthly salary and a $300 monthly car allowance, while working on a contractual basis.  His contract came under public scrutiny when it was learned that the contract stated Tederick “may transfer and assign this Agreement to Manager’s wholly-owned limited liability company (LLC), which transfer and assignment shall not relieve in any manner the personal duties, obligations and responsibilities of Manager.”

Some citizens have questioned whether Tederick should have been classified as an employee, rather than a contractor.  The state corporation commission’s database lists Tederick as the registered agent of a number of LLCs.

A source close to the negotiation indicated that the new contract could name Tederick as an employee, rather than having him continue as a contractor.  If that happens, at the same rate of pay, taxpayers would pony up even more to offset payroll taxes.

According to the IRS website, employers and employees both contribute to FICA taxes, each paying half. Social Security is 12.4% and Medicare is 2.9% for a total of 15.3% as of 2020.  That means that Tederick would be responsible for contributing 7.65% of his salary; the taxpayers would then be on the hook for the remaining 7.65%.

According to a June 29 Town of Front Royal website posting, there will be a second council meeting this week, on July 2, for “the purpose of consideration or interviews of prospective candidates for employment with the Town.”

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Town to vote on agreement to make FRPD debt service payment

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According to an agenda summary distributed to the media for tonight’s June 30th Special Meeting, the Front Royal Town Council is poised to vote to approve an agreement with the Warren County government and the joint Economic Development Authority to make a scheduled July 1st payment on construction of the new Front Royal Police Department headquarters.

Thus far the now $8.7 million debt to the EDA on principal payments has been publicly referred to, without contradiction from town authorities, as “undisputed” with the dispute over that debt revolving around the amount of interest the Town asserts it is obligated to pay based on verbal promises of former EDA Executive Director Jennifer McDonald.

Perhaps appropriately, this June 22 photo of council is without Mayor Tewalt, who has been a lone Town voice against litigation with the EDA amongst his council colleagues. Tewalt has unsuccessfully sought acceptance of the EDA’s offer of ‘good-faith negotiations’ to determine exactly what the EDA owes the Town in misdirected assets.

It is believed the county supervisors and EDA board have discussed stopping covering what they believe is the Town’s “moral obligation” debt on the town police construction project as of the end of Fiscal Year 2020, which is today, June 30. The specter of which entity, the EDA which has been covering the payments on a contracted agreement on bank financing of the project it oversaw for the Town, or the Town itself, which up to now has had an uncontested and implied “moral obligation” to cover that debt upon completion of and receipt of the FRPD headquarters, will suffer the most credit-wise upon non-payment has likely been a HOT TOPIC of conversation behind closed doors of council, the county supervisors who fund EDA operations, and the EDA board as July 1 approaches.

The June 30 council meeting agenda summary states:

“The County of Warren has asked the Town of Front Royal to make a good faith payment for the disputed July 1, 2020 payment for a loan incurred by the Economic Development Authority (EDA) in constructing and financing the construction of the Town of Front Royal Police Department and the Town has agreed, subject to the terms and conditions stated in the Reservation of Rights Agreement. Council is requested to approve the Reservation of Rights Agreement as presented.”

Whose police headquarters is this – the EDA’s or the Town of Front Royal’s? – Is likely to be an early question if Town civil litigation against the EDA reaches trial.

Contacted, Town Administrative Assistant and Acting Town Clerk Tina Pressley explained a copy of that Reservation of Rights Agreement would not be made public until it and the payment have been approved, if they are, by council. However, by the above wording it appears an agreement in principal between the three involved parties has been reached, rather than to continue a tenuous legal gamble on whose credit reputation will suffer the worst if payments stop being made by anyone on Wednesday.

But on exactly what terms that agreement is poised to be reached will remain a mystery until it is, if it is, reached and that consequent July 1 payment made.

Background

As eventually came to light, the FRPD headquarters capital improvement project did not even qualify for the New Market Tax Credit Program (NMTC) 1.5% rate McDonald purportedly told town officials was secured on the police headquarters construction. A phone call or appropriate question to the program’s administrator, Brian Phipps of People Inc. with whom council met several times would have revealed that fact.

Phipps even advised council during late 2017, early 2018 discussions, including at a January 2018 work session, to take a 30-year 2.65% interest rate guaranteed by a private sector bank because the Town was competing with multiple other municipalities for a limited amount of NMTC funds. It was advice also recommended by then Town Manager Joe Waltz and Finance Director B. J. Wilson.

However, led by Jacob Meza’s stated desire to hold out for the chance at nine years of interest-free payments on a long-term NMTC loan, council ignored the advice of its staff and the program administrator. Consequently, council continues to assert in its subsequent civil litigation claiming $20-million-plus in damages against the EDA that the gap in actual versus verbally “promised” interest payments are part of those damages.

A now pandemic masked Jacob Meza held sway over his colleagues in pre-pandemic times in gambling the new FRPD headquarters would qualify for NMTC funding designed for projects creating jobs, rather than just moving them from one place to another. Below, hard to miss that EDA-overseen in-town redevelopment initiative next door to Town Hall.

Despite the overwhelming amount of EDA projects centered inside the town limits on behalf of the town government, council is also claiming it had no oversight responsibilities regarding EDA activities during McDonald’s decade-long term as EDA executive director during which alleged misdirection of EDA and municipal assets occurred.

Tonight’s vote and the content of that Reservation of Rights Agreement may be an indicator of how long council intends to hold the course on that double-edged legal gamble.

The smart money is on “until after the November election” – depending of course, on the results of that election. Several candidates, most notably Bruce Rappaport and Betty Showers, have aimed pointed criticism the current council’s way regarding their actions toward the existing EDA, and the Town’s planned new unilateral EDA.

As he has on more than one occasion, council candidate Bruce Rappaport, at podium June 22, makes a case against the current council’s actions regarding the EDA – both the existing and envisioned new and totally Town-funded one. But council appears committed to a legal gamble that $20-million in civilly awarded assets from the old EDA would help that new start-up project.

It has been noted by public critics of the County Republican Committee-dominated council and recent austerity moves initiated by Interim Town Manager and long-time County Republican Committee official Matt Tederick, aimed at reducing governmental functions, particularly regarding Tourism, that the Town alone will be responsible, not only for debt service incurred by its new EDA, but operational funding as well. Since an agreement several years ago on double taxing of town citizens, the County took over full operational funding responsibility of the existing joint County-Town EDA.

That new EDA operational funding will include an anticipated six-figure executive director’s salary one Town critic, Linda Allen, recently publicly asked council if it might be considering directing the current interim town manager’s way once his six-figure interim manager’s salary is gone. As captured on Royal Examiner’s video of that June 22nd meeting, Tederick reacted with laughter at that notion.

Properly social distanced, the interim town manager and town attorney during June 22 regular council meeting. Tederick was left laughing at the suggestion he was poised for a third council appointment, though without an ‘interim’ attached to it if council’s new EDA gets off the ground.

Speaking of the interim town manager, the other primary agenda item on tonight’s special meeting of council involves extending Tederick’s interim town manager agreement beyond its current termination date of June 30, until a permanent replacement is named. In that regard, council has also scheduled a work session for Thursday evening to adjourn to closed session for town manager interviews. The field appears to have been narrowed down to a few candidates called in for in-person interviews.

And so the wheels of town government turn as Fiscal Year-2021 approaches tomorrow with the calendar’s turn to July and an election just over four months away.

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Local Government

It’s back – The Front Royal Golf Club will remain open for coming year(s)

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Like a Phoenix rising from its own ashes, on Monday, June 29, the VA. Golf LLC management team gathered a four-person majority of the Warren County Board of Supervisors, Archie Fox dissenting, to resurrect the Front Royal Golf Club less than two days before its planned closing. That closing seemed cemented for the July 1st start of the new fiscal year after another four-person county board majority, Tony Carter dissenting, rejected the VA. Golf LLC’s initial management offer six days earlier.

All it took was the “little more skin in the game” County Board Chair Walt Mabe asked for on Tuesday, June 23rd. That skin amounted to a $49,000 turnaround in year one of a three-year initial lease period, followed by a minimum $37,000 turnaround in the years that follow.

Rather than the County paying the largely in-house management team $25,000 per year to try to turn an operation losing somewhere over $110,000 annually in recent years, Va. Golf LLC will pay the County $2,000 a month in the first year, followed by $1,000 per month in subsequent years, plus 5% of the management team’s profits, if there are profits.

I’m growing fond of this perspective of our now-resurrected municipal golf course – maybe I’ll learn to yell ‘Fore’ in my declining athletic years. File Photo/FR Golf Club website

And that Louis Nicholls and Ray Nash expect to be able to turn a profit from an aggressively managed, member and guest-friendly golf and clubhouse-based recreational facility along the banks of the Shenandoah River, seems apparent. And it is a belief shared by past members, including a recent Royal Examiner Letter to the Editor writer with membership and golf course work experience, skeptical of the County’s ability or interest in the successful management of a municipal golf club.

Louis Nicholls and Ray Nash expect to be able to turn a profit from an aggressively managed, member and guest-friendly golf and clubhouse-based recreational facility. Royal Examiner photo and video by Mark Williams.

How long that municipal golf club-based management lease will run depends on a variety of variables. The base term is a three-year lease with three, three-year renewal options at the management team’s discretion for a potential 12-years at the helm of what had become a money-pit for a county management team that, as noted above, some club members in recent years felt was unequipped, or uninterested in the successful management of the course on land gifted to this community’s citizens for golf and other recreational opportunities 82 years ago.

In making the motion to accept the proposal and authorize Chairman Mabe to sign a contract on behalf of the County to facilitate operations not ceasing between Tuesday and Wednesday, Cheryl Cullers told Nicholls and Nash that unlike the earlier rejection of a $100,000 management proposal the County would have had to pay to keep the course open, she had felt the passion of the VA. Golf LLC team and had felt bad about its rejection on a fiscal hard line that the County would pour no more money into the support of the course.

“You’re on my prayer list,” Culler said for their success.

“We’re on our prayer list too,” Nicholls said of the new offer that promises payment to the county regardless of when the course turns profitable for VA. Golf LLC.

Only the Fork District’s Fox decided to look this “gift horse in the mouth” saying he preferred an extra $500 cash added to the $1,000 per month payments as opposed to 5% of profits over subsequent years of the lease.

Supervisor Carter countered that 5% of profits could reflect additional income if the course became profitable in the coming years. And he told Fox, VA. Golf LLC would also be paying BPOL and sales taxes to the county on its operations, again adding income the County would not otherwise have.

Not enough, want more cash, not anticipated profits, Archie Fox told the management team.

However, Fox remained negative to the proposal, casting the lone dissenting vote.

There was no public comment, and since the special meeting was for reconsideration of a counteroffer made in the wake of last Tuesday’s public hearing and rejection of their original proposal, no public hearing at Monday’s 35-minute meeting.

See the VA. Golf LLC presentation, their counter to Fox’s arguments, and the board discussion and vote in this exclusive Royal Examiner video:

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