Like a riverboat gambler on the prowl, on Monday night, June 22, the Front Royal Town Council ignored repeated public pleas not to burden town taxpayers with the cost of forming a new unilateral Economic Development Authority (EDA) with no existing assets, but with a hefty director’s salary and operational budget that the Town will be liable to fund.
By a 5-1 vote, Letasha Thompson dissenting, council passed the first of two required readings of an ordinance amendment enabling the creation of that second Town EDA. The second, binding vote enabling the creation of the new Town EDA is scheduled for the July 13th meeting at 7 p.m. at the Warren County Government Center.
Operational funding of the existing half-century-old Town-County EDA is not the Town’s responsibility since the County took on full operational funding in the last decade as part of the ongoing double-taxation of town citizens discussion and accommodation the two municipalities have been engaged in since at least the 1990s and the Route 522 Corridor Agreement.
However, the Town has continued to fund debt service on its in-town EDA economic development projects – until its recent decision not to make good on its nearly $9-million debt on principal to the EDA on the FRPD headquarters construction project.
And if the faces looked familiar on the critical side – council candidate Bruce Rappaport and community activist Linda Allen spoke against the second EDA as they have in the past – Councilwoman Letasha Thompson told her colleagues she has found no town citizen, “even on social media”, openly in favor of the second unilateral EDA idea.
As has been the case in the several months leading up to this public hearing and first vote, no one not on the council dais spoke in favor of the council and administrative staff second EDA initiative. In fact, Allen and Rappaport were the only public hearing speakers, expanding on points they had made during earlier Public Comments on the current council’s belligerence toward the re-tooled and recovering from financial scandal EDA staff and board of directors.
During her opening public comment remarks, Allen called recent assertions from the council that the EDA essentially hadn’t worked on the town’s behalf in 15 years simply “not true” and “false”.
As to Councilman Gary Gillespie’s recent assertion that the existing EDA will have a difficult time reestablishing its reputation and ability to function successfully, Allen has countered that the Town’s economic development reputation is likely to be worse in the wake of its failure to make good on its financial and moral obligation principle debt of $8.7 million on its most recent EDA-enabled capital improvement project, the new Front Royal Police Headquarters. Allen also said that the Town’s refusal to negotiate its dispute on the interest rate on the FRPD project had swollen the interest debt the Town is accumulating from $500 to $692 per day.
Allen made her point by, not only pointing to the new police station project but also the continued work on the redevelopment of the Afton Inn across the street from Town Hall and at the head of Front Royal’s Historic Downtown Business District. Expanding on a point made previously by Rappaport that two-thirds of the property assets the EDA owns are in town, Allen observed that of four properties sold this year by the re-staffed EDA, three have been in town.
However, Councilman Jacob Meza countered that a history of lost trust from the previous EDA leadership, and council’s consequent choice of a $20-million-plus civil litigation against the EDA made working together impossible – for now, at least.
Meza seemed to indicate that the second, unilateral EDA was a temporary solution to a problem council appears to have created by refusing the current EDA’s repeated offers to sit down for “good faith negotiations” to establish exactly what the Town-EDA financial situation on misdirected assets under previous EDA staff and board leadership is.
Meza even concurred with Rappaport’s positive appraisal of current EDA Executive Director Doug Parsons background, experience, and abilities, saying he would look forward to working with him, just not in the current hostile civil litigation circumstance.
Prefacing her vote with the majority, the council’s newest appointed member Lorie Athey Cockrell said she would prefer a positive relationship with the County and the existing EDA, but lamented, “This is where we are.”
But Rappaport and Allen’s counterpoint appeared to be, this is where the council majority has CHOSEN to be.
And with its concurrent continuing co-founding membership in the existing EDA, upon final approval of the ordinance amendment facilitating the creation of a new EDA it appears the Town of Front Royal is poised to go where no Virginia municipality has gone before – parallel EDA “universes” (sorry for the “Star Trek” reference, it just popped out).
And speaking of “Star Trek” and parallel universes, on Monday council unanimously approved a Resolution of Appreciation for C&C Frozen Treats proprietor William Huck for his efforts on behalf of the Town’s “Downtown Rebound” COVID-19 pandemic business reopening and walking mall initiative.
Also on the positive side: police, staff, community
And continuing a feel-good theme, besides Huck’s acknowledgment it wasn’t all citizen-council headbutting over a perceived self-destructive economic development policy in the making. During the opening public comments, four speakers rose to commend town staff, including the police chief and officers, interim town manager and public works department staff for outstanding performances in community relations and services.
Two of those speakers were Front Royal Unites representatives Samuel Porter and Stevi Hubbard who lauded Chief Magalis and his department for its proactive stance in working with, rather than against the group’s marches in support of civil rights and improved race relation in this community and nation.
“We come to the table very peacefully … to build bridges, not burn them,” Porter told the council, calling Chief Magalis, who was definitely on a citizen-driven high Monday night, “an awesome person”.
Paul Aldridge presented Chief Magalis with a plaque acknowledging the chief and his department’s positive contributions to the community; while Edward Irre commended the “courteous” behavior of a patrol officer while giving him a ticket for admittedly “breaking a traffic law”. – “That is why he got that award tonight,” Irre observed of the department’s professionalism from top to bottom. Irre also noted repeated excellence in public works and utility service responses over recent years.
Also on council’ table, Monday evening was a first vote – unanimous to approve – following the County’s vote last week to jointly move forward on tourism marketing. The plan as previously reported is, to begin with fully outsourced to the private sector tourism marketing for the Town and County, with a hope to eventually transition to outsourced marketing overseen by a Town-County overseen advisory board such as the existing Joint Tourism Advisory Committee.
It was that advisory committee’s vice chair, Kerry Barnhart, who developed the options moving forward presentations to the Town and County from which the decision toward the outsourcing option, first brought forward by the interim town manager at the time of his late January firing of the Town’s top tourism official Felicia Hart.
However, earlier Rappaport questioned analogies made during Barnhart’s presentation regarding the Town’s potential marketing similarities to tourist destinations like Sedona, Arizona and Asheville, North Carolina. Rappaport noted he has been to Sedona five times, pointing to significant differences in tourism funding and community wealth.
He also questioned Barnhart’s metrics as to accommodation capacities and revenue-generating potentials, pointing to what he said were Sedona’s 103 hotels and Asheville’s 138, compared to Front Royal’s “about 15”. Rappaport also noted a median property value in Sedona of $446,000 and a “bed tax” on tourist accommodations, the latter which he said paid for a bulk of Sedona’s tourism marketing costs.
And on the COVID-19 pandemic consequences front, during the interim town manager’s report, Tederick explained the evolution and harsh economic reality of the Town delinquent utility accounts situation related to the pandemic economic hardships – a $175,000 upswing in unpaid accounts compared to last year – and some peripheral taking advantage of that situation to just forego paying bills as long as possible without penalty or interest.
See that presentation, as well as the pivotal conversation on the future of economic development and municipal cooperation in this community, and council’s other business in this exclusive Royal Examiner video recording. You might even get as big a chuckle as the interim town manager did when Allen wondered whether the new EDA and its triple-figure executive director’s position council was poised to move toward, might be a more permanent soft landing for council’s former interim mayor and current interim town manager appointee.
Town press release says it was working on FRPD financing when EDA suit filed
In a press release issued at 3:15 p.m., Friday afternoon, from the office of Town of Front Royal Information Technology and Communications Director Todd Jones, Interim Town Manager Matt Tederick responds with astonishment, and some astonishing news, in reaction to the EDA filing of a lawsuit Thursday to recover the nearly $9 million cost of the new FRPD headquarters.
That news is that the Town was in the process of acquiring bank financing to pay the principal amount, if not interest, on the new town police headquarters this week.
As previously reported, at Monday’s Front Royal Town Council meeting, Councilman and mayoral candidate Chris Holloway read a three-page prepared statement into the record on the Town’s stance on its lack of obligation “legal, moral or otherwise … to repay these unlawful debts” to cover what was termed “a fraudulent, unauthorized loan” acquired by the EDA to finance the FRPD headquarters construction project for the Town.
Holloway confirmed that the statement was prepared by the Town’s contracted Damiani & Damiani law firm that is handling its $20-million-plus lawsuit against the EDA, in response to his inquiry on the matter.
The statement also states that the Town “has explored other means of resolving the issue” and “is willing to make payments to the EDA for the Police Department Headquarters that are equal to the payments that Town Council authorized, which include the entire principal debt at the authorized interest rate.”
It would seem somewhere along the negotiating lines between the Town, County, and EDA, there has been a failure to communicate essential information.
Here is the Town press release and Tederick’s statement in its entirety:
The EDA Sues the Town of Front Royal on the Verge of Obtaining a Loan
24 Hours After the Town Receiving Bank Term Sheet, EDA Sues. Coincidence?
The Town of Front Royal filed a $20,226,153 lawsuit against the Warren County Economic Development Authority (EDA) in an effort to recover money fraudulently obtained by the ex-Executive Director, Jennifer McDonald, and perhaps others under the failed oversight of the Economic Development Board of Directors.
Interim Town Manager Matt Tederick commented, “This lawsuit is really bizarre, less than twenty-four hours after I received a formal Term Sheet from a lending institution to pay the principle balance which the County, the EDA, and the Town do not dispute, the EDA calls a Special Meeting, one day before it’s normal meeting date, and decides to file a Complaint and Writ of Mandamus against the Town, effectively preventing the Town from obtaining the very financing being demanded. Coincidence?
“Just yesterday I received a call from Ed Daley, Interim County Administrator, who asked me if the EDA’s Finance Director could meet with the Town’s Finance Director to reconcile Leach Run Parkway accounting. Of course, I eagerly and happily agreed. Then, 24 hours later, the EDA sues the Town. Coincidence?
“As much as I would personally like to litigate this matter in the court of public opinion, as the EDA has done, I will not. This much I will say, the EDA has caused great harm to the citizens of the Town of Front Royal, and yet, no one has been brought to justice and the EDA continually claims to be the victim. The EDA is responsible for the negative consequences flowing from the actions of its ex Executive Director. The Town is trying to assist in dealing with the economic fallout, but ultimate responsibility remains with the EDA. The Town intends to continue its efforts to finance the Police Department Headquarters.”
Acting EDA Chairman reflects on September 17th legal action against Town
Following Thursday morning’s announcement of the filing of civil litigation against the Town of Front Royal to recover nearly $9-million dollars spent to construct the new town police headquarters, Acting Front Royal-Warren County Economic Development Authority Board of Directors Chairman Jeff Browne told Royal Examiner that United Bank officials, holders of the EDA’s FRPD loan, were aware of the developing situation that could see those debt service payments stop next month.
As reported in our lead story, September’s payment will be the last made by either the EDA or Warren County in support of the EDA debt service on the police station project. Town officials have been informed of this situation, Browne told us. So, as noted in our companion story unless the Front Royal Town Council authorizes assumption of that United Bank debt service, payments on the new town police station will go into default by mid-October. Those payments come due 10 days after receipt of monthly payment-due notices at the beginning of the month.
Of the Town’s stance in previous direct negotiations on the matter, Browne said, “The only thing that they consistently said is that ‘we believe you guaranteed us a one-and-a-half percent interest rate.’ Okay, you can state that, and we can get to deciding that. But that would mean that you would go ahead and pay the principal off; you pay the one-and-a-half percent – none of which is there is any question about.
“The new wrinkle was this week when the argument was made that the loan, I’m not sure what, is fraudulent. Therefore the Town doesn’t need to pay it,” Browne said again referencing Councilman Chris Holloway’s September 14 reading of a contract attorney-prepared statement into the council meeting record about why the Town has no obligation to pay for its police station. – Though it sure makes it easier to accomplish capital improvements while promising to never raise taxes, as Holloway did during the recent County Republican Committee Candidates Forum.
“But again, disingenuous that your police force is sitting in a building that’s been approved, and they approved it,” Browne observed.
Queried about that approval, Browne continued, “They actually have several resolutions, in the lawsuit you’ll see we hung our hat on the last one, which increased the amount to $12 million dollars. And again a resolution, no indication of what the interest rate was or anything regarding it.”
He added that the EDA was in possession of correspondences from the town finance department acknowledging approval of various aspects of the construction project and payment of those aspects.
“The lawsuit is very clearly written – it isn’t 500 different contentions. It’s just a simple story and then alternate legal theories as to why we ought to get it,” Browne said, revisiting a perceived difference in the new EDA litigation and the Town’s now amended litigation that has grown from an initial estimated $2 million amount to “over $20 million” at this point.
As our post-meeting conversation was winding down, Browne said, “What I would leave you with, is when you direct someone to build something for you; you approve all the construction invoices; and then you occupy the place, to have an argument for any real reason that you don’t owe that sum of money seems to me to be disingenuous. And it’s time that the Town pay its bill,” Browne said.
“We’re sad that it’s come to this – but we had no choice. I didn’t get into the EDA to fight with the Town,” Browne said in wrapping up. “I loathe that we have to be doing this when we should be concentrating on economic development. If the Town wanted to help resolve all this they would help work on our lawsuit (against McDonald and her co-defendants).
“I hope they come to their senses, get financing and we can begin all working together. We are one community,” Browne concluded.
Whether it is one community on the up or down side of future economic development will apparently be decided over the next 23 days or so as the deadline on payment of the October FRPD debt service, the final interest only payment of $21,000-plus to United Bank, approaches.
The ball, to use a sports metaphor, has landed with a thud on the Town side of this legal and financial court (pun intended).
No more Mr. Nice Guy – EDA files suit to recover FRPD costs from Town
Following a 50-minute Special Meeting closed session on Thursday morning, September 17, the Front Royal-Warren County Economic Development Authority Board of Directors unanimously authorized attorney Rosalie Fessier of the Timberlake-Smith law firm to file suit against the Town of Front Royal to recover the current approximate $9-million cost of construction of the new Front Royal Police headquarters.
Fessier is Staunton-based Timberlake-Smith’s lead counsel representing the EDA in the Town of Front Royal’s $20-million-plus civil litigation against the half-century-old Town-County EDA.
The motion, made by Tom Pattison, seconded by Greg Harold, passed by a 6-0 vote with all board members virtually present. Chairman Ed Daley’s seat remains vacant in the wake of his appointment as Warren County’s interim county administrator. The plan is for him to return to his EDA board seat following the hiring of a permanent successor to Doug Stanley.
In Daley’s absence, Vice-Chairman Jeff Browne chaired the virtually conducted ZOOM meeting from the EDA’s Kendrick Lane headquarters. In the wake of the 8:55 a.m. adjournment of the special meeting this reporter met Browne at the EDA office complex about a half block from the police station.
When we arrived, Browne was still going over paperwork on the civil litigation with Fessier. Following her departure, Browne said the attorney was going to the Warren County Courthouse to file the lawsuit, after which copies would be made available to the media.
Browne explained that the suit is for principal and interest at the rate of the actual United Bank loan, initially 4% then adjusted to the current 3% rate, for a total of just under $9 million dollars. He elaborated that the suit is for money due to the EDA that is in no way impacted by the alleged embezzlements, misdirection of assets or other financial misdeeds attributed to former EDA Executive Director Jennifer McDonald.
“There isn’t any question about that,” Browne said flatly. “And I’ll say this, on anything that we’re asking the Town payment for, we would not ever include anything that was not a legitimate bill. We’re not trying to get them to pay for illegal activities we believe other people did, it’s not going to happen.”
We asked the acting EDA chairman what led to this decision.
“Well, I think the EDA and the County have paid on the Town’s obligation for over a year. And the goal there was to give the Town time to get the financing that it needed and to do the right thing. And they kept promising this in meetings that we had with them.
“So, in good faith we went ahead and did that even though there’s no obligations to pay anything on the police station. So, between just the lack of forward progress on the negotiations, and more recently what came out of town council this week suggested that the timing was something that we had to do to get them to focus on this,” Browne said.
His “this week” reference was to the Town’s EDA civil litigation contract attorney-prepared statement on the Town’s legal stance on the FRPD financial situation read into the record by Councilman and mayoral candidate Chris Holloway on Monday, September 14.
As previously reported, as of November 1 debt service payments on the FRPD project go from interest only in the $21,000 range to principal and interest to around $50,000 monthly.
“And we’re not going to be paying October either, neither is the County,” Browne said of the FRPD debt service coming due in two weeks that the EDA is no longer in a position to cover financially. “The County informed us, we’ve informed the Town that we’re not going to be paying any more on the police station.”
Truth or dare?
As to a timeline other than the litigation being immediately filed at the courthouse, Browne said, “We waived a jury trial, jury trials are going to take a long time given the COVID circumstances.” As a note, the Town is seeking a civil jury trial in its suit against the EDA.
“It’s a very clean case, when you read it, it describes: here’s the facts; they’re all very well documented; and here’s our arguments about why we should get the money,” Browne said of what was on its way to the Warren County Courthouse as we spoke.
Browne elaborated that the EDA case documentation is based in real documents, signed by town officials among others, as opposed to revolving around alleged verbal promises of the former EDA executive director that contradicted known, verified facts about FRPD project financing options. It was a none-to-subtle poke at the foundation of the Town civil action against the EDA.
“And to call them verbal promises even, is perhaps too much,” Browne said of the Town litigation, litigation justified in the above-mentioned attorney-prepared three-page statement read into the Front Royal Town Council meeting record four days earlier by Councilman Holloway.
“When you say you anticipate one-and-a-half percent (interest), it’s like me going fishing and saying I anticipate I’ll catch fish – I sure hope to. But in this case the Town bet and lost. It thought it could get the one-and-a-half percent, was hoping it would get it but knew full well it wasn’t a guaranteed thing. And it turned out it wasn’t,” Browne commented of the underlying Town litigation logic.
Clean or not, the odds are short in “Vegas” that the EDA civil litigation against the Town will be heard within the next month when payments on the police station will stop being made if the Town does not pick them up.
And if they don’t, the Front Royal Town Council is perhaps staking an entire community’s ability to finance future projects on a new “gamble”. That gamble is that it will be judged legally and financially immune from the consequences of its own lack of due diligence, oversight or verification that the 30-year, 1.5% interest rate it hoped for based on verbal “promises” of a now-discredited EDA executive director was even available to it, much less a done deal.
It seems a steep gamble in that those verbal promises flew in the face of what Browne says are signed documents, as well as information from the New Market Tax Credit program administrator, and information and recommendations from its own administrative and financial staff at the time.
If you want to see the consequence of those kinds of gambles, I have been told an exploration of the experience of the Virginia community of Buena Vista, also known colloquially as “Una-Vista”, went some 10 years ago when it declined to meet a financial moral obligation debt service. Spoiler alert – they have not been able to acquire public or private financing for anything since.
Now officials in two municipalities here are left to ponder whether that is a gamble worth taking on the strength their relative civil legal filings, directly or indirectly through their half-century old joint EDA.
Town Planning Commission approves EDA rezoning request
The Front Royal Planning Commission held its regular meeting September 16th at the Warren County Government Center. There were no public presentations, and the commission had only one item to consider and solicit public input for. The commission reviewed a proposed rezoning of approximately 62.7 acres at the end of Progress Drive, adjacent to the Happy Creek Technology Park. The proposed rezoning, from Residential (R-1) to Industrial Employment (I-2) is a preliminary step to potential future development. Any development would require permits and approvals separately from the rezoning request. The purpose of the EDA action is to improve the site status from Tier 1 to Tier 2 of the Virginia Business Ready Sites Program and possible future expansion of the adjacent Technology Park.
The proposal contained several proffers, or terms and conditions, that enhance the proposal’s value to the town. The proffers are:
- A 25-foot landscaping buffer for visual screening, to preserve existing woodland and add trees and shrubs along the border of the non-wooded areas.
- A By-Right land use will not be restricted, but business and professional offices, technology businesses including data centers, veterinary hospitals, pharmaceutical and/or medical schools, public facilities and special childcare services will be preferred.
- A dedicated Right-of-way of 60 ft for the continuation of Progress Drive will be provided to meet all town and Virginia Dept of transportation standards when a final site plan is developed for future use.
- A Traffic Impact analysis was estimated at a peak hourly rate of 124 trips, but a new analysis will be provided upon any development in the future.
Chairman Douglas Jones opened the floor for public comment, but there was none.
A motion to approve the proposal was made by Commissioner Merchant, Seconded by Vice Chairman McFadden. Brief discussion ensued regarding whether the acceptance of the proffers should be made part of the motion to approve. An Amended motion including the proffers was unanimously approved.
The Planning Department Staff announced the new Director of Community Development and Planning, Timothy Wilson. Commissioner Merchant asked if there was progress on recruiting new planning commission members. Director Wilson indicated that action was underway by Town Council.
There being no other business, the commission adjourned at 7:15.
EDA releases statement on litigation over police station debt
At a Special Board meeting this morning, the EDA Board of Directors unanimously approved a resolution to sue the Town of Front Royal for the recovery of $8,946,742 in principal and interest on the loans the EDA obtained on behalf of the Town to build the new Front Royal Police Station. Rosalie Fessier with the firm of Timberlake Smith was retained to represent the EDA in this matter.
The EDA initiated negotiations multiple times over the last year to get the Town Council to honor its obligations to pay for the Town’s Police Station. Despite promises to secure financing, the Town Council has not paid any principal or interest on the loan.
As a result of the Town’s failure to pay for its own building, the EDA and Warren County have been paying monthly construction loans to build the Police Station to give the Town Council time to secure its own loan. That will no longer continue. The Town Council needs to find its own funding on its Police Station.
We urge the Town Council to take immediate action to secure a loan to cover the costs it has incurred on the Police Station and other projects it has run through EDA. While litigation appears to be the only recourse for the EDA, litigation will only hurt Town taxpayers who must fund those costs.
EDA authorizes litigation against Town of Front Royal
The EDA Board of Directors met today for a Special board meeting. Following a 1-hour Closed meeting, the Directors passed a resolution approving a settlement with Crystel Smith and Sheri Yoder of Optimum Impact, LLC for a delinquent Rural Business Enterprise Loan (RBEL). The resolution also approved payment of fees to Daniel Pond of Pond Law Group, PC for assistance in negotiations and collection of funds.
The board also passed a resolution engaging Rosalie Pemberton Fessier of Timberlake Smith Attorneys at Law, and authorizing her to take legal action to collect monies due the EDA from the Town of Front Royal. The Directors issued a separate statement to address this decision: