Draft of the minutes from the Chattanooga IDB meeting that they re-approved the TIF. Unbelievably weird! INDUSTRIAL DEVELOPMENT BOARD SPECIAL MEETING MINUTES City Council Assembly Room City Council Building Chattanooga, Tennessee for August 15, 2014 11:01 a.m. CALL TO ORDER James Miller (Vice-Chair), Chris Ramsey (Secretary), James Woods, Ray Adkins, and Skip Ireland. Absent was Breege Farrell. Also present: Ben Jones and Megan Pankiw (Black Creek Club); Clifford Ackerson (DLBFP, Inc.); Dr. Wayne Scott; Deborah Scott; Lynn Ashton; Mary Pierce; Helen Burns Sharp; Christina Ball; Janis A. Barker; J.C. Boulin; Daniel Dryer; Candace Chazen; Robert Chazen; Gary Chazen; Doug Stein, Charlotte Humphry, and Barry Valcarcel (Black Creek); Wesley Harris and Jason Kilgore (Ragan-Smith); Roger Dickson, Alfred Smith, Michael Mallen, and Rob Parsley (Miller & Martin); Royce Durder; Esther Clemmons; Andrian Jonist; John Straussberger; Harriett Whitaker; Jennifer Francis (Black Creek Realty); Brian Sewell; John Konvalinka and Tom Gautreaux (Grant Konvalinka); Richard Hadden; R. Larry McGill (Black Creek Mountain Board); Joe Blevin; Robert Wodes (GCAR); John and Lisa Clark (Educational Outfitter); June Stein; J. Taylor Stein; Ben Hegamon Hyamuk; Patty and Jeff Perlaky; Jerry Wallace; Ed Love; Eleanor Cooper; Steve Barker; Perrin Lance (COA); Ric Ebersole; Lloyd Longnion; Krista Stein; Melissa Cartrell; Sandy Lusk; Michael A. McMahan; Wade A. Hinton; and Melissa Smith (Elite Reporting Services). There are 54 signatures on record. A quorum of the Industrial Development Board was had. Mr. Miller established the rules of the meeting and read something that was fitting by Ernest Hemingway. It states, “Before you talk, listen. Before you react, think. Before you spend, earn. Before you criticize, wait. Before you pray, forgive. Before you quit, try.” Mr. Miller called the meeting to order. Mr. Miller stated that this is a special-called meeting and will only deal with those things provided in the notice. For the public hearing, each position will be allowed up to five speakers, each with no more than three minutes each, for a total of fifteen minutes. The speaker can yield their time to one person, two people, whatever. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 15, 2014 Page 2 of 9 An unidentified speaker asked if items three through six are decisions that have been made, or will be made, and will there be any participation. Mr. Miller stated those decisions have not been made and will give further instruction. Mr. Hinton established again the rules and procedures for speakers. Mr. Miller asked who would start. Mr. Konvalinka said usually the proponent goes first, who is seeking the action. SPEAKERS GARY CHAZEN Mr. Chazen thanked the Board and introduced his partner, Doug Stein, engineers, Wes Harris and Jason Kilgore from Ragan-Smith, to give some facts about the project. DOUG STEIN Mr. Stein also thanked the Board. This particular issue has been the subject of multiple open debates. There remains one fundamental point: What must the IDB, as a board, do to comply with Tennessee law? The answer comes from the same statute that creates the IDB. The statute creates a mandatory three-step process for approval with the City Council and Hamilton County Commission, being the ultimate authority. The process was followed to the letter and the loan documents followed all the proper controls required by the law. The City and County have approved the TIF. The IDB is solely responsible for the implementation of the TIF. To the extent that the IDB may properly require an unqualified legal opinion that the Economic Impact Plan describes a project, it may now decide that question. This conclusion has not squelched the people’s right to speak or to petition the government. These rights have been thoroughly exercised now, and in the past, as well. But the Tennessee General Assembly set the guidelines for how the public’s business related to the Black Creek TIF must be considered. The law has been followed. Clarifying statements: (1) Who are the project’s investors? People who invest money in projects that might otherwise not occur. (2) Do they make these investments to make a profit? Of course, and hedge funds were mentioned. (3) Should we encourage these investments? Yes. Ragan-Smith will share the plans and results from the competitive bidding for the construction of the road and its infrastructure. Building the road will cost in excess of $9 million. Construction expenses paid from the TIF are subject to the proper controls built by this Board and to the loan documents. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 15, 2014 Page 3 of 9 CapitalMark Bank is the escrow agent that receives the Tax Increment funds. The escrow agreement appoints Barge, Waggoner, Sumner, and Cannon Engineers to examine the work, certify its completion and compliance with approved plans and specifications, and authorize all payments. The claim that the contractor and the developer are the same person is wrong. Stein Construction did not submit a bid for the general contract for the road, although did submit a bid for the paving to all four bidders, who also received pricing for the paving work from other subcontractors. Aetna Mountain Road, as exists now, is a public road with no public entity to maintain it. If the City built this road to the top of the mountain, all the taxpayers would have borne the total cost on the front end. Black Creek private investors are taking all of the risk, not the City and County. If the development fails, the developers and investors lose, not the taxpayers. They have to build that road, no matter how much it costs or they lose the money. Mr. Stein asked the Board to cure the alleged procedural deficiencies and reaffirm the earlier action. Send a clear message: Chattanooga welcomes investments that expand tax base without having to raise taxes, support public schools, and encourage economic development in our community. WES HARRIS (RAGAN-SMITH) Mr. Harris explained the construction, design, and techniques of this project. ROGER DICKSON (MILLER & MARTIN) Mr. Dickson explained that the only matter today is whether or not there is an appropriate legal opinion, and they believe there is. Mr. Dickson asked the Board to ratify and reaffirm the Black Creek TIF transaction. BEN JONES (GENERAL MANAGER OF BLACK CREEK CLUB) Mr. Jones gave some background of the Club, and the club’s purpose is to ultimately attract people who want to settle in the Black Creek community. $3.5 million was invested in the new clubhouse facility, which created construction jobs. The club has had a 41% increase in members, with an increase in food and beverage revenues, and expectations. The area has had positive changes. BEN HAGAMAN (HAGAMAN CONSTRUCTION COMPANY) (BUILDER OF BLACK CREEK) Mr. Hagaman thinks, economically, it would be a good impact, provide a lot of jobs, and provide them quickly. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 15, 2014 Page 4 of 9 DOUG STEIN In summary, they are looking to put another 95 lots online. The impact of this decision made by the Board a couple of years ago is already happening. The tax increment is already being collected. The jobs are already being created. This concluded all of their representation. JOHN KONVALINKA Mr. Konvalinka stated that the speakers would be Mr. Ebersole, Ms. Sharp, JC Barker, and Lynn Ashton. RIC EBERSOLE Mr. Ebersole discussed the procedures and concerns about the process that the project has undergone. Mr. Ebersole explained that the project has never been approved by the Board. What the Board did in 2012 was set up a requirement that had to be met in order for the project to gain approval: an unqualified opinion or the Attorney General’s ruling. The requirement was not met in 2012. Mr. Hinton was not the City Attorney in 2012. The purpose of the meeting is to decide whether to ratify the action of the Board to approve this TIF as a project in a previous meeting. Mr. Ebersole asked Mr. Hinton was previous meeting approved this project? Mr. Hinton stated it was a conditional approval in October of 2012 and there is still the condition of having an unqualified opinion. Mr. Ebersole stated that the issue is the Board’s been totally ignored in this process. The Board established a clear and unequivocal requirement: an unqualified opinion of counsel has never happened. Mr. Dickson referred to an appropriate opinion, not an unqualified opinion. When the developer failed to meet the requirement for the unqualified opinion and the project was not approved, they simply went ahead and funded this transaction, in spite of the failure to meet the Board’s requirement. This is an enormous problem in the process, the Board needs to address this, regardless of the final disposition of the project. The Board certainly does not have a responsibility to clean up the mess that was created. The Board did not receive an unqualified opinion required for approval and now the limited opinion by Chancellor Brown has been thrown out because of a conflict of interest. There is no opinion supporting this project. There is no necessity for the Board to take any action. Unless or until the Chancellor’s ruling is vacated, it makes no sense for the Board to act, unless the purpose is to remedy the problems created by funding the project with approval or authority of the Board. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 15, 2014 Page 5 of 9 The Board can take any number of actions: (1) Table this motion; (2) Cannot act at all; (3) Insist its requirements be met; (4) Approve the project; (5) Reject the project; or (6) Wait for guidance from the City Council, if it chooses. Mr. Ebersole understands that if the Board needs statutory authority for this action, that is not true. The Board has full authority to take any of those actions on their own. There are serious procedural questions that have been created by the developer’s failure to meet the requirement imposed by the Board, thus failing to obtain approval for the project, and by the actions of the various attorneys in allowing the project to be funded on the taxpayer’s dime. JAMES C. BARKER Mr. Barker is opposed to the TIF. Let the contractors pay for it, and don’t ask the taxpayer to pay for it. LYNN ASHTON Ms. Ashton is confused about the time limit for five speakers. Every other developer has been responsible for building their own roads. An example was given of John Thornton. Ms. Ashton stated that if she was a developer and saw a chance to get a free road, why not give it a shot and see if the attorneys could push it through while the public was sleeping? It is a win for her as well as the attorneys. It takes advantage of the taxpayers. It is not the fault of the Board. The fault lies with the lack of clear guidelines from the City. Ms. Ashton spoke about the interest rate and that this must be a super deal because the developers bought all the bonds. This is supposed to be a public project but feels more like profit off the public. On Monday, members were urged not to pass this through. Not one citizen spoke in support. There have been a multitude of issues raised against the TIF as to why this is a very bad thing for the taxpayers. It would be irresponsible of this Board to proceed with the TIF in its present form. JOHN KONVALINKA Mr. Konvalinka stated that he has practiced bond law and continues to practice bond law. The Board has been told this a.m. about what the legal authority of this Board is. The Board mandated to receive an unqualified legal opinion in order to receive assurance of compliance with state law. That still has not happened. What is the current status, and what should be done? There is no question that the Chancellor has invalidated this project as it currently stands. Mr. Konvalinka read the paragraph in the Chancellor’s Order about sue sponte. The Board’s options are to vote Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 15, 2014 Page 6 of 9 no on whether to appeal, do nothing or vote yes. A notice to appeal has been filed by the developer. There is no liability as to the IDB or County. (Sections in the documents). The litigation will continue on appeal. If you vote yes, are you going to continue to spend money on this appeal or should you defer to the developer, who is undertaking to do that? They are asking the Board to ratify the opinion as being unqualified that the Judge has thrown out because of a conflict of interest. They are asking the Board to supersede that legal decision because the Board does not have an unqualified opinion. The Judge said you do not even have an opinion that you can consider. Mr. Hinton and Chairman Miller confer. Mr. Konvalinka has four minutes. The Board is being told to ratify something. The Board does not have a legal opinion that is unqualified. The Board needs to consider all statements with a certain amount of a grain of salt. Mr. McMahan is the person identified by Miller & Martin who made the decision for the closing and actually gave a legal opinion saying there was no litigation pending. That is not true. Litigation was filed in January before the transaction closed in February. The Board was also told in that legal opinion by Mr. McMahan that all consents and approvals had been obtained, that is not true according to the former chairman of this Board and the person who testified under oath that he conveyed to both Mr. McMahan and Mr. Masterson that the opinion they had, in his opinion, was not an acceptable opinion, but was a qualified opinion. It is not unqualified. Bluntly, Mr. Konvalinka would suggest to the Board that Mr. McMahan has an interest in trying to have the Board fix the Band-Aid so his legal opinion, which is obviously incorrect, stands corrected. MICHAEL A. McMAHAN Mr. McMahan stated that before this matter ever went anyplace, before it went before the City Council, before it went before the IDB, before it went before the County Commission, that he determined in his own mind and to his satisfaction that this was a project which met the qualifications of state law. If he had not come to that conclusion before any official action was taken, he would have warned this body, the City Council, and would have rendered the opinion that was not satisfied that it met the definition of state law. Having carefully reviewed the matter before any action by any body, any government body took place, he would have come to that conclusion. In 2012, before the closing of this matter, the Board did receive, in his opinion, an unqualified opinion from George Masterson that this project met state law. According to Mr. Masterson’s opinion, Mr. McMahan does not see any qualifications in there about it fitting the statute. Mr. McMahan privately advised the Board, rather than publicly, that he independently had come to the conclusion that this project met the requirements of state law. Mr. McMahan is going to publicly state, handed an opinion, which Mr. McMahan has already sent to the Board, but for purposes of the record, he is handing out copies for each member of the Board and give one to the clerk, so it can be made an official part of the record of this proceeding. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 15, 2014 Page 7 of 9 JOHN KONVALINKA Mr. Konvalinka stated that this does not appear to be legal advice given to the Board as independent legal advice. Mr. Konvalinka has alerted both Mr. Hinton and Mr. McMahan of that concern. MICHAEL A. McMAHAN Mr. McMahan has highlighted the issues in Chancellor Brown’s opinion. Mr. McMahan started off with chapter definitions of 7-53-101. Definitions such as pollution control facilities, any office building or building for tenants in the industrial, commercial, financial or service enterprise, multi-family housing facilities. The TIF expenditures only involve the public road and the sewer project, not service roads or side roads or subdivision roads. They only include the spine road and the sewers that are associated with the spine road and the other infrastructure associated with the spine road. The term “project” will include the items in the Economic Impact Plan. Mr. McMahan stated that Mr. Konvalinka has been before the City Council for reconsideration, and the City Council and County have not seen fit to do so. Neither the City nor the County want to consider this matter over again. The Court did not rule that Mr. Masterson’s opinion was invalid. All the Court ruled was that the Sunshine Law had been violated because Mr. McMahan had communicated with the Board privately with respect to Mr. McMahan’s opinion on this matter and that Mr. McMahan had closed the deal without having another Board meeting to specifically vote on whether or not the Board received an opinion, as required by the resolution. Mr. McMahan stated that as of the day of the closing, the Board had an unqualified legal opinion, not only from Mr. Masterson, but from him, and the closing was proper. Because the Judge ruled that the action was improper as a violation of the Sunshine Law, the law allows you to go back and reconsider the matter and to take appropriate action, if the Board so desires to ratify. The appeal basically depends on whether the Board decides to ratify the prior action of closing the deal. This matter is not over. No matter how the Board votes today, this matter is going to continue in court and ultimately, the Board is going to receive a decision from some court – not just from lawyers – that either says this is or is not a project that is authorized by state law. It is Mr. McMahan’s firm opinion that it is a project. Mr. McMahan prepared a resolution for the Board’s consideration that has not been disseminated publicly. This resolution is based upon the recommendation and belief is in the best interest of the Board and public, notwithstanding Mr. Konvalinka’s statement it may serve some interest of Mr. McMahan. Mr. McMahan began reading the resolution. POINT OF ORDER BY MR. MILLER, CONFLICT DISCUSSION BETWEEN PARTIES. Mr. Hinton interjected. The question is if Mr. McMahan is a witness in the matter in a litigation setting; then there would be a conflict. As we are in a board setting and Mr. McMahan is acting Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 15, 2014 Page 8 of 9 as counsel, the conflict, Mr. Hinton does not think exists in this particular setting. Mr. Hinton explained the process and gave his opinion. Mr. Konvalinka discussed Mr. McMahan’s position and suggested to the Board that the resolution was improper. Mr. McMahan continued reading the resolution. (Resolution attached as part of these minutes). Mr. McMahan concluded this was his recommendation to the Board and stated that he believes that the matter is going to proceed with litigation, and will handle this litigation. However, he believes also that the Board’s original resolution of October 15, 2012, has been fully and was fully confirmed, was fully completed, properly, when it was closed February 14, 2013. DECISIONS Mr. Miller stated that the appeal is probably not necessary if the IDB approves this as a project. The motion to adjust the agenda to move Item 4 to the end of the agenda might be appropriate. Upon further discussion, Mr. Adkins moved that the Board not appeal Chancellor Brown’s order. The motion was not seconded. The next item on the agenda is the decision whether to reconsider the TIF as a project as referenced under TCA 7-53-101. Mr. Hinton and Chairman Miller confer, and Chairman Miller asked Mr. Hinton to explain this particular item. Mr. Hinton stated that one of the issues that was at debate and still is under debate, is whether this item is considered a project. And that is something that the Board will need to make a determination on, based on Mr. McMahan’s opinion. After further discussion and conflict, Mr. Ireland moved that the Board accept this project as eligible for TIF, seconded by Mr. Ramsey, with Mr. Miller confirming the vote as four/one. The Board ruled that this is considered as a TIF. Let the record reflect that as of this day, August 15, 2014, that the project on Black Creek Mountain/Aetna Mountain is considered as a TIF. The next item on the agenda is the decision as to whether to ratify the action of the Board to approve this TIF as a project in a previous meeting. Mr. Ramsey moved that the Board ratify the actions of the Board to approve this TIF as a project, as in the previous meeting, seconded by Mr. Ireland. At this point Mr. Woods asked for discussion on this. Mr. Woods was confused by the procedure and has attempted to make an independent decision, has done independent research, and does agree that this falls under the laws that have been legislated in the Tennessee Code. But procedurally, Mr. Woods does not understand if they are applicable or not in this decision, from both parties that have been making comments. Mr. Woods asked if procedurally, is the Board moving in the right direction? Mr. Hinton explained the procedures. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 15, 2014 Page 9 of 9 Mr. Ramsey amended his motion to include the resolution, seconded by Mr. Ireland, Mr. Hinton read the resolution into the record, with Mr. Miller confirming the vote as four/one. The meeting was adjourned at 12:04 p.m. ________________________________________ Chris Ramsey, Secretary Industrial Development Board APPROVED: _____________________________________ James Miller, Vice-Chairman Industrial Development Board
Posted on: Tue, 02 Sep 2014 12:56:37 +0000
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