Attorney Says Black Creek Group To Make Money Off TIF Bonds Interest; Chancellor Won't Let City, County Out Of Sharp Lawsuit

Thursday, July 10, 2014

Attorney John Konvalinka said Thursday that the purchasers of a controversial $9 million Tax Increment Financing (TIF) bond issue were the same group developing the project at Black Creek in Lookout Valley.

He also said that the developers stand to make money on interest on the bonds.

And he said the road project will be constructed by a member of the group. Those involved in the project to develop a large tract on the top of Aetna Mountain include businessman Gary Chazen as well as Doug Stein, who has Stein Construction Company.

Attorney Konvalinka said if the lawsuit brought by citizen Helen Burns Sharp goes to trial next Tuesday he will show that "it won't cost $9 million to build that road." But he said the way the deal is set up the road builder "can charge what he wants."

Chancellor Frank Brown, also expressing concerns about the way the TIF came about through the city's Industrial Development Board (IDB), declined to grant the city and county a summary judgment. He also declined to remand the case to the IDB and he declined to grant the city and county an immediate appeal.

He urged the parties to try to come to some sort of agreement.

But attorney Konvalinka said Ms. Sharp, a former planner who believes the first local TIF did not meet state requirements, wants a trial.

Assistant City Attorney Phil Noblett and County Attorney Rheubin Taylor denied that the city and county had acted illegally, as the plaintiffs charge. 

Attorney Noblett said the project benefited taxpayers who did not have to pay for a road and sewer line up Aetna Mountain to the planned "small city" .

He said the project was discussed and debated at five different public meetings. 

The bonds were issued, and attorney Konvalinka said "the first draw" included covering a $50,000 payment to attorney George Masterson, who issued an opinion that the TIF was valid. Chancellor Brown earlier this week declined to accept the letter, noting that the attorney was in the employ of the developers.

Attorney Konvalinka said over $162,000 went to the law firm of Miller and Martin for its work on the TIF. Attorney Mike Mallen appeared before the IDB in favor of the request. 

An attorney for the development group said it is the customary practice for bond counsel to be paid by the group seeking the bonds.

But Chancellor Brown said, "Something is fundamentally wrong with the appellant's lawyer being the decision maker."

Attorney Konvalinka said several people who approved the project, including Mayor Ron Littlefield and County Commission Chairman Larry Henry, said they believed the project could not go forward without the TIF.

But attorney Konvalinka said it wound up "that the same people doing the project were the ones buying the bonds. They had the money."

Of the major players on the project, he said, "It's just us girls."

He said documents for the TIF are vague in regard to the project and do not commit the developers to carrying out any of the commercial portion.

He said, when interviewed, attorney Masterson "did not know if the commercial would be on top of the mountain or at the bottom."

Former City Attorney Mike McMahan said when the judge threw out the Masterson opinion letter based on conflict of interest "that threw us a curve ball" and put himself "in a very touchy situation" since he handled the matter for the IDB.

He said the IDB has hired attorney Sam Elliott to advise him on what further steps he should take in the case since he may be called as a witness.

Attorney Konvalinka said of the $50,000 retainer for attorney Masterson that his hourly rate is $450 and he spent far less than the time to reach the $50,000 amount.

Pam Fleenor, who will be taking over the post held by Chancellor Brown soon, sat in on the hearing.



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