Town Council-Town EDA Board discussion of future operational dynamics recalls recent past experience – but what can be learned?

During a joint meeting of the Front Royal Town Council and the recently created unilateral Front Royal Economic Development Authority (FREDA) Board of Directors on Wednesday, June 22, the two bodies reviewed the draft Bylaws developed for FREDA operations and any necessary adjustments to Town Code Chapter 16 regarding operations of a municipally created Industrial Development Authority (aka Economic Development Authority).

Dominating the conversation were issues of:

1 – Operational autonomy of FREDA in conducting its economic development initiatives based on guidelines provided by the town’s elected officials. Given its “marching orders” by council, would the FREDA board have to first bring every step toward economic development or retention to council for an “Okay” prior to moving forward, FREDA Board Chairman Rick Novak asked.

FREDA Board Chairman Rick Novak, far left of table, asks for clarity on degree of autonomy his board has to move forward on economic development initiatives without OK from town council. Also present from FREDA board were Vice-Chairman Mark Tapsak and Directors Nick Bass, Jim Crowell and Isaac Rushing. Absent due to scheduling conflicts were Directors Frank Stankiewicz and David Gedney. Absent on the Town side of the table were Mayor Holloway and Councilman McFadden.

2 – Potential conflicts of interest of town staff in serving in roles under the auspices of both the town council and FREDA Board of Directors. Town Manager Steven Hicks also is serving as executive director of FREDA. Councilwoman Amber Morris asked of potential problems in that regard, what if in his EDA role Hicks participated in a closed meeting with a prospective FREDA client in which there was a non-disclosure agreement. Would that prevent the town manager from reporting to council relevant information on the FREDA initiative. Morris, who spearheaded the conflict of interest discussion, also questioned the advisability of having the same legal counsel represent both the Town and FREDA.

3 – Possible Town financial liability for its EDA’s actions, investments, and contractual arrangements.

4 – And an Operational Budget for FREDA to be determined by the town’s elected officials. Created as an economic development agent for the Town of Front Royal, FREDA is starting out with no financial or real estate assets of its own.

Town taxpayers might recall that well over a decade ago after council voluntarily withdrew its previous level of direct oversight of FR-WC EDA operations, the County took over full operational funding of the half-century old joint Town-County EDA. At that point the Town’s financial obligation revolved around its debt service on projects the FR-WC EDA oversaw and financed on behalf of the Town, like construction of the new police station.

As recently noted at a Warren County Board of Supervisors meeting by County Administrator Ed Daley, the FR-WC EDA still exists legally, just without any participation on the town government side. FREDA’s creation as an alternative to continued Town involvement in a post-scandal, restructured joint Town-County EDA, came in the wake of a council majority’s decision during the approximate year-and-a-half interim mayoral and town manager tenure of Matt Tederick to refuse offered good-faith negotiations to determine who was owed what in the wake of the FR-WC EDA financial scandal uncovered in 2018.

Rather, over the objection of then-Mayor Eugene Tewalt, a Town leadership majority decided to initiate hostile litigation against the newly restructured FR-WC EDA seeking self-determined losses and claiming a lack of liability for any financial scandal losses. Anyone recalling a town council majority’s approval of then-EDA Executive Director Jennifer McDonald’s request for what ended up being a four-month $10-million “bridge loan” (the last 3 months without interest compensation) to enable the ITFederal bank loan might wonder how that lack of liability argument might go in the courtroom.

Talk about potential legal advice conflicts of interest – THERE might be a glaring example of one that might have been. The now-dueling civil litigations between the Town and FR-WC EDA remain unresolved at the Circuit Court level. The $10 million ITFederal loan is the largest single claim in the FR-WC EDAs’ civil litigation attempt to recover about $21-million in believed embezzled or fraudulently attained assets.

But it wasn’t past actions leading to the creation of FREDA on the table at Wednesday’s joint meeting, as noted above, it was FREDA’s operational, structural, and financial future. And with decisions unresolved on several fronts, the two boards scheduled another joint meeting for Wednesday, July 13, tentatively from 4 p.m. to 8 p.m. Council present, Mayor Holloway and Joe McFadden were absent, agreed that most, if not all, major decisions should be made by the end of July.

At far head of table, Vice-Mayor Cockrell, chairing joint meeting for absent Mayor Holloway, makes a point as two boards head for operational and funding decisions by the end of July.

“I agree, I don’t want to take two years to set this up,” Councilwoman Morris said in support of Letasha Thompson’s suggested July deadline on budget and staffing decisions.

Hooked into the meeting remotely was Interim Town Attorney James “Jim” Cornwell Jr. Cornwell referenced experience with 14 jurisdictions and their EDAs, only one of which had separate legal council than its founding municipality – “But it’s up to you,” Cornwell told council of potential conflict of interest issues.

The Town’s experience with the still unresolved $21 million joint Town-County EDA financial scandal and resultant civil and criminal litigations was also discussed. Cornwell suggested not overreacting. “I know that the Warren County-Town of Front Royal EDA, to use the vernacular, went to hell in a hand-basket. There are probably (here his remote transmission went garbled, but seemed to say – ‘a hundred or more’) EDAs, IDAs across Virginia that function very well as independent entities … and in the public good. They stay in contact with their appointing entities, I think I told you once before, the only way you can control the entity is by putting people on there you trust to do the job; and second by financially controlling them.

“I know there is some concern, and I recognize that,” Cornwell continued of the joint EDA financial scandal experience, adding, “But by putting good people on the EDA you won’t have those problems … You don’t want to be too gun-shy because of what happened before.”

The not quite roundtable of council and its town EDA listen and watch remote video input from Interim Town Attorney Jim Cornwell Jr. who cited experience with 14 municipalities and their EDAs as background for his observations.

“Thank you, Jim, I agree,” Thompson replied, followed by Vice-Mayor Lori Cockrell, chairing the meeting for the absent mayor, to add her thanks to Cornwell for his input. However, the vice-mayor added this observation: “Even though we don’t anticipate the same thing, obviously is going to happen here, we do answer to our citizens, and they are gun-shy, for the right reasons I might add.”

See all these discussions and other issues raised in the Town video, cited on the Town website as a June 22 “Work Session” despite its advertisement and convening as a “meeting”.