On Sunday, in anticipation of writing Exit 1 LLC developers a check for $1 million, the City Council passed a resolution lowering the minimum balance it must keep as unassigned money in its General Fund.
Resolution 2482 lowered the effective amount of money in the general fund from three months operating capital to two months. Mayor Brent Lambert said a three month balance would be about $3.2 million dollars. By the city taking $1 million out of the fund it would drop to about $2.6 million, below the threshold allowed by current policy.
Mayor Lambert said that Municipal Technical Advisory Service recommends that a city maintain at least a two month balance in its reserve funds. By revising city policy to match MTAS recommendations we would be able to take $1 million out of the general fund to pay developers, still leaving more than enough money in the general fund to surpass the MTAS standard.
The city had intended to take $1 million from the proceeds of a General Obligation Bond it intends to take to market next week, but was told late last week by Industrial Development Board attorney Mark Mamantov that practice was prohibited.
A provision in the city’s contract with Exit 1 LLC states that as a contingency the city could get a “bridge note” from the developers for the last million dollars. Vice Mayor Marc Gravitt discussed that option.
John Healy of Exit 1 LLC said his outfit had made no provision in its financing for that eventuality, and that it wouldn’t be in the best interests of the city, as the interest rate charged would be prime rate, plus four percent. That would make the interest rate on the “bridge note” 7.25 percent.
Gravitt said that he had “a fiduciary responsibility” to the citizens of East Ridge and was opposed to rewriting city policy and adopting a resolution that would allow it to lower the money kept “unassigned” in the city’s general fund, more commonly referred to as surplus or “rainy day fund.”
Mamantov cautioned the city about writing a check from the city’s “unassigned” general fund as it prepares to go to the bond market. He said the lower amount in the general fund could have an adverse impact on the bond market.
He also cautioned the city, saying that it had no access to legal agreements between Bass Pro Shops and the developers. He said that if for some unknown reason the deal fell through, the city would be out the $3 million in incentives it has already provided them, plus the additional $1 million it is preparing to take from the “unassigned” general fund.
Gravitt asked Healy if there was any type of communication from Bass Pro which indicated they were rethinking coming to East Ridge?
“Absolutely not,” Healy replied.
With that response, Gravitt called for a vote on adopting the new resolution. It passed unanimously.
At the conclusion of the meeting, Mayor Lambert said that the City Charter allows citizens comments at called meetings as well as regular meetings. He asked if anyone wanted to speak.
Former Councilman Jim Bethune initially questioned the Mayor, saying he thought citizens were to speak at the beginning of the meeting. Nevertheless, Mayor Lambert said, he was giving anyone who wanted to the opportunity to speak.
Bethune said he was Vice Mayor when the deal with the developers was struck, and that we should make good on the promise of the $1 million check to the developers.
He asked if the city knew about problems with the deed restrictions in July. Lambert said that he did and that he passed that information on to City Manager Andrew Hyatt. Bethune then asked if the council was aware of the issue.
Gravitt said that he first learned about the deed restriction some three weeks ago.
Then Bethune said that he would address a question to City Treasurer Thad Jablonski, since City Manager Hyatt refused to answer a question that Bethune posed some months ago during citizen comment period of a regular council meeting.
“Why didn’t you bring it forward,” Bethune asked Jablonski of the deed restriction issue.
Hyatt jumped in and said he would answer. Hyatt said the state’s Excess Land Committee meets quarterly, and that he had reached out to them. He said he believed the appraisal in summer or early fall would have not been different from the current appraisal received by the city of more than $800,000.
Hyatt said the state knew that a Bass Pro Shops was proposed for the site last summer, which would have affected the appraisal at that time as well.
Bethune said “we dropped the ball” on the deed restriction, but noted that he believed the actions taken today in reducing the amount to be held in the “unassigned” general fund was the correct move.
“We are a strong city,” Bethune said. “With Bass Pro coming it’s just going to make us stronger.”
Mayor Lambert assured all in attendance that the city could start replenishing the money in its “unassigned” general fund.
“This is the first time we’ve embarked on anything like this,” Lambert said. “We’ve been able to do a lot of things that people outside the city didn’t think we were capable of doing.
“I’ve said it before, this (Bass Pro Shops) is going to be a transformative process,” he concluded.