Light agenda or groundwork for a community legal-economic EXPLOSION?

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.

Prior to a vote on funding requests for new transformers, Electric Department Director David Jenkins explains the variety of issues, besides old age, that may cause power failures in the Town’s electrical system. Royal Examiner Photos by Roger Bianchini – Royal Examiner Video by Mark Williams

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.

Sparks fly

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.

Bruce Rappaport asks council why it can’t have the same sense of ‘moral obligation’ to pay a debt on its police station, as his mother Eleanor’s customers at downtown’s Boston Store did over its 31 years in business.

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.”

Chris Holloway replies in detail to Rappaport’s question with a contract attorney-prepared explanation of council’s stance on the FRPD debt service and its choice of litigation against the EDA over all the alleged financial improprieties, allegedly orchestrated by the former EDA executive director since 2014.

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.

On Jan. 2, 2017, NMTC Program Administrator Brian Phipps advises council to take other financing options than the one he oversaw. Despite the agreement of its then-town manager and finance director, council did not listen, choosing unverified ‘promises’ of a ‘better deal’ from Jennifer McDonald.

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.

Above, between council’s open meeting and a closed session, Bruce Rappaport and Chris Holloway discuss their varying perspectives on the Town-EDA-FRPD headquarters situation. Below, notice the Royal Examiner camera pointed his way, Holloway may be suggesting we wait to snap that shot until he’s convinced council candidate Rappaport to see things from the incumbent council’s perspective.

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: