Potential litigation forced Gardner City Council members to authorize the sale of $4.04 million in temporary renewal notes on July 18 for a project city officials originally approved as a benefit district.
Jim Hubbard, city attorney, explained the litigious history of the Kill Creek Sanitary Benefit District during a council meeting on Monday night.
The Russell family owned approximately 800 acres of north of town when the city planned a new sewer plant at Kill Creek. City officials needed approximately 40 acres in order to build the sewer, Hubbard said.
The property owners said the sewer construction would interrupt their plans for development.
When the city and landowners couldn’t reach an agreement for the acreage, city officials condemned 40 acres.
The owners sued and eventually the parties settled, Hubbard continued.
As part of the settlement, (the property owners) wanted the city to agree to build a forced main sewer for their eventual development.
Hubbard said when the Russell family requested that the sewer main be built, city officials told the owners the timing was not optimal. The main would be built as a benefit district and eventually the property owners would be assessed special taxes over a period of years to pay for the project.
“The city said now is not a good time,” Hubbard said.
However, the property owners wanted the forced main constructed, and the city put it in.
“Then the economic slow down hit, and they did not want to start paying,” Hubbard told the council. “They filed a lawsuit.”
Hubbard said the suit has been pending for several years, and city officials thought they had worked out a settlement with members of the Russell family. However, the documents were to be signed no later than 5 p.m. on July 18 — the night of the council meeting.
Laura Gourley, city finance director, said once the lawsuit is settled, the city can issue debt on the project and start putting special assessments on the property owners’ tax bills. Gourley warned that the city will be on the hook for interest if they’re forced to issue temporary notes beyond the ones they agreed to sale on Monday night.
But, she said, when the project was drafted, there was a fixed limit of what costs could be recouped through special assessments on the benefit district.
“When a benefit district is created there is a certain amount you expect to be total,” she said. “You can’t go above that. We are rapidly approaching that point. If anything else happens, we will not be able to recover that interest.”
Gourley said city must sell bonds before they are able to start assessing taxes to the property owners.
“We can not sell bonds until we finish that lawsuit,” she said.
In the meantime, she said the council had no choice but to issue a renewal of temporary notes or come up with more than $4 million. As long as the lawsuit is resolved and bonds are sold on the project before the recently-approved temporary notes expire on Oct. 1, 2012, Gourley said the city will be able to recoup all costs related to the Kill Creek Sanitary Benefit District.
Councilman Chris Morrow asked if the Russell family lived within city limits or nearby, but Hubbard and Gourley said they didn’t think so.
“They’re concerned only about themselves and their property and not what they’re doing to the citizens,” Morrow said.
In other business, council members:
• approved the sale of $1.32 million in bonds for the Prairiebrooke benefit district.
• denied a special use permit to keep a mini-horse in a residential subdivision with a recommendation from the planning commission.
• rezoned a building at 205 N. Stone Creek Drive — where Sherman Williams paint store and Anytime Fitness are located — to general commercial.
• approved a contract for $42,000 with Max Rieke & Brothers to remove sludge from the Hillsdale Water Treatment Plant. Officials budgeted $50,000 for the project in the 2011 budget.
• approved a contract with Sports Photo Graphics for professional photography services for all youth sports individual and team pictures.
• met in executive session for 30 minutes to discuss specific personnel matters of non-elected personnel.
Threat of lawsuit prompts sale of $4 million in temporary notes