At a fairly low-impact Monday, September 14th meeting the Front Royal Town Council held one public hearing without comment on an ordinance amendment facilitating ice cream truck operations on town streets – I thought the former mayor already operated one? I guess now everybody who’s not grandfathered in can; approved a budget amendment facilitating acceptance of a “Washington/Baltimore High-Intensity Drug Trafficking Area” grant to fund 75% (about $39,000 of a $52,000 salary) of an additional Town Police administrative assistant salary, and a Contingency Funds budget transfer of $55,915 to facilitate “an attrition position” apparently lost in FRPD’s patrol division as further losses are anticipated; and passed a four-item consent agenda without discussion, the latter including a $23,000 consulting contract “not to exceed $28,750” with the Tidewater area “Strategic Solutions by Tricia LLC” company hired to assume interim Tourism marketing duties for the Town.
Also approved on the consent agenda following a statistical explanation of the causes of town power outages – from fried squirrels and birds to vehicle-pole collisions to overloads and equipment-protecting shutdowns to unknown – by Electric Department Director David Jenkins in response to a question from Councilwoman Cockrell, were two items related to funding replacement for aging transformers at Town substations – a total of $154,796 for seven backup transformers and $385,230 for Kendrick Lane substation replacements.
And speaking of electricity, public comments offered by council candidate Bruce Rappaport chastising council for not living up to its moral obligation to assume the $10-million-plus debt service on its new, circa 2018, police station being paid thus far by the Front Royal-Warren County Economic Development Authority, did lead to what might be considered a somewhat high-voltage response from Councilman and mayoral candidate Chris Holloway.
Holloway read into the record a press release he said was formulated in the wake of an inquiry by him to the outside contracted law firm of Damiani & Damiani. The Alexandria-based firm brought to council by Interim Town Manager Matt Tederick is handling the Town’s $20-million-plus civil litigation against the EDA.
Reading from a three-page prepared statement – a copy of which was provided to Royal Examiner after the open meeting’s adjournment by Holloway, thanks Chris – Holloway summarized the rationale from council and its contracted legal counsel’s perspective for, not only the Town’s refusal to accept financial responsibility for the $10-million-plus police station debt service including over $400,000 thus far paid by the EDA, but also the Town’s decision to file a $20-million-plus civil suit against the EDA.
The upshot of that statement echoes earlier claims by various councilmen, most prominently Jacob Meza, that former EDA Executive Director Jennifer McDonald verbally promised the Town an extremely low-1.5% interest rate tied to New Market Tax Credit (NMTC) funding with a 9-year interest-free period at the front end of the FRPD construction loan. The fact that rate was not achieved – a 4% rate, now down to 3% was acquired – seems to be the basis for the Town believing as Holloway’s statement said, “The loan actually obtained by the EDA to build the Police Department is very different from the loan that the EDA promised and that the Town Council approved … since this loan was obtained without the authorization or consent of the Town Council, the Town has of course refused to make payments on the fraudulent loan …“The Town has no obligation, legal, moral or otherwise to repay these unlawful debts, but instead has a duty to the taxpayers of the Town to reject them.”
Ignored in the statement was information given to the Town between November 2016 and January 2017 by the administrator of the NMTC program, Brian Phipps of People Inc. That information included January 2, 2017, work session appearance at which Phipps told council and town staff they were “competing for a limited amount of NMTC funds with a number of municipalities”.
Phipps even echoed then-Town Manager Joe Waltz and Finance Director B. J. Wilson in suggesting council accept a bank-offered fixed 2.65% interest rate on the project’s anticipated 30-year debt service.
Phipps’ information and suggestion clearly contradicted McDonald’s alleged earlier verbal guarantees the 1.5% NMTC-based financing had or would be acquired for the police station construction project.
However, clinging to McDonald’s past verbal “promises” of an interest-rate Nirvana that the police headquarters project didn’t even qualify for in that it did not create new jobs as NMTC grant projects are mandated to do to stimulate local economic development in qualifying communities, the council ignored Phipps and its own administrative and financial staff’s advice on alternate financing.
See no evil …
Holloway’s statement also repeats past contentions by councilmen that since the 2014 agreement by which the County took on 100% operational funding of the EDA as part of ongoing negotiations on double taxation of town citizens, as well as appointment authority of all EDA board members, the Town has had no oversight responsibility of the EDA. Thus, Holloway, council, and the town’s contracted attorneys contend any oversight failures leading to the alleged embezzlements, misdirection, or broken promises of the former EDA executive director lie solely with the EDA and the county government.
That the town government didn’t maintain an oversight interest in its own capital improvement projects through the EDA post-2014 seems counter-intuitive and is a notion that not only McDonald during her executive director’s tenure, as well as past council actions seem to contradict. One example would be council’s decision to offer a $10 million “bridge loan” to help the EDA secure a $10-million bank loan to finance the troubled ITFederal project at the Avtex/Royal Phoenix Business Park site in town.
McDonald came to the Town explaining that the involved bank was reluctant to finance the project without an indication that “the community” was behind it. That led to council’s authorization that $10 million be withdrawn from an interest-bearing Town bank account and deposited through the EDA on behalf of the ITFederal project brought here by former 6th District-R, U.S. Congressman Bob Goodlatte. The one-month loan was twice extended for additional months in late 2016, the last two without the Town collecting lost-interest covering payments before the EDA acquired the bank financing and the Town’s bridge loan was returned with one month replaced interest.
While McDonald didn’t publicly say why the bank was reluctant to make the ITFederal loan, as Royal Examiner has previously reported Freedom of Information Act (FOIA) material indicated that other than the $2-million value of the 30-acre Royal Phoenix parcel gifted to ITFederal by the EDA for one dollar, ostensibly “to get the Royal Phoenix development ball rolling”, the company’s financial disclosure statement indicated total assets of only about another $20,000. That was a far cry from the promised $40-million investment creating 600 high-paying tech jobs at the town site.
The $10 million, $30-year ITFederal loan with peripheral expenses added on is the largest single lost asset listed in the EDA’s civil litigation against its former executive director and 24 civil case co-defendants. So, did the Front Royal Town Council authorize that $10-million loan to prop up a project the media – thank you, Norma Jean Shaw and yours truly – and eventually one of its own members, Bebhinn Egger, were raising red flags about in late 2016 and early 2017, simply on the word of the EDA executive director, without any due diligence of its own?
And if so, whose fault is that – the EDA’s, Warren County’s, the Front Royal governmental apparatus, or perhaps some combination thereof?
I guess we’ll eventually find out what a judge thinks as the Town tries to move toward a jury trial to make its civil case of no liability for its financial decisions related to the EDA since 2014.
But for now, watch Rappaport’s raising of the issue during public comments, and Holloway’s explanation of the Town legal and philosophical stance on its relationship with the half-century-old, joint Town-County EDA, as well as other business conducted Monday night in this Royal Examiner video:
Town ponders its CARES Act reimbursement dilemma at end of brief Monday work session
After discussion of a change to Town policy on the vacating of streets and alleyways to accommodate past adjustments and high costs associated with assessments by real estate assessors for the government-owned property; and a review of evolving Fiscal Year 2021 revenue streams from taxes and utility/enterprise and general funds, the Front Royal Town Council focused on a lingering sore point.
That point is the County’s reluctance to take the town governmental apparatus at its word on assuming financial liability for any distribution of Coronavirus Aid, Relief, and Economic Security (CARES) Act approved funding found to not meet federal and state standards for that distribution. As previously reported, as the recipient of that federal, state-distributed money received in two $3.5 million dollar phases, about $1.2 million of which was allotted to the Town for in-Town distribution, the County is liable to reimburse the state and federal sources of that money for any portions found to not have met the federally implemented standards for qualifying business, non-profits or individual recipients.
“I don’t know what their issue is – we justified it under the CARES Act; we laid it out very specifically where in the CARES Act it’s been spent,” Interim Town Manager Matt Tederick told council citing two specific areas the County is apparently concerned about qualifying. “So, we’ll just continue to play the game and see what happens.”
“I’m concerned about getting the $970,000,” Vice-Mayor Bill Sealock told his colleagues of the money the Town has fronted out of its own General Fund budget toward what it believes to be qualifying businesses in town. That thus-far Town-absorbed expenditure is what the Town is hoping for in first-round CARES distribution reimbursement from the County.
“I can certainly appreciate that they want some checks and balances … but if we’re completely liable which we’ve signed agreements on, saying that if any of the CARES Act is spent inappropriately the Town will fund or refund,” Councilman Jacob Meza said when Tederick interrupted him.
“Let me correct you on that, Mr. Meza, we never, we haven’t signed that,” Tederick interjected, leading several councilmen including Meza to add, “But we’ve offered to do it.” Meza added, “I’d like to reoffer that and move on.”
“We’ve offered that, and they want us to take the liability, and they want to approve the spending plan, and they want us to spend the money out of our reserves, and they want us to submit the reports, and they’ll tell us whether they’re going to reimburse us. So, it’s just very convoluted. I’ve done everything I can do to get this through,” Tederick told council.
Absent from the discussion was the likely lack of County trust of Town financial “promises” in the wake of a year-and-a-half impasse on the Town accepting financial liability to pay for its $9-million dollar police station financed through what is now a solely-County supported Town-County Economic Development Authority.
However, further discussion indicated that several involved county officials had indicated a first reimbursement check from the County was anticipated early this week that had not yet been received as of Monday night.
“Well, it is Monday,” Councilwoman Lori Cockrell observed, acknowledging that Tuesday was also “early in the week”.
See Council’s full discussion on its CARES Act reimbursement concerns, as well as the street and alley vacating adjustments and FY-21 revenue numbers in this Royal Examiner video of council’s 20-minute open session work session.
Council then adjourned to closed session to discuss its permanent town manager search, the now dueling civil litigations with the EDA, and the disposition of undisclosed public property. And the following day the Town announced a full town council press conference to address the EDA litigation to be held Wednesday at 7 p.m. at the Warren County Government Center.
That announcement stated that the press conference “will cover major developments regarding the Town of Front Royal\EDA lawsuit. Statements will be given by each Council member”.
Stay tuned for that exciting development as it unfolds Wednesday …
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.”
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: