We’ll Be Watching You

We’ll Be Watching You

Plaintiffs exact promises from city in exchange for settling anti-bond lawsuit

The plaintiffs in a lawsuit over the legality of $74 million worth of general obligation bonds have settled their dispute with the City of Asheville out of court.

The case had been under appeal since last October but had not yet been calendared for a hearing.

Retired attorney Sidney Bach and former Vice Mayor Chris Peterson proposed the settlement in exchange for a contractual promise by the city not to spend the bond funds for any purpose except those specifically listed on the November, 2016 ballot by which the three-bond package was approved.

“The city administration, this council and future city councils are now legally bound by these stipulations made by the city and filed into the court record,” Bach told Council at its April 10 meeting.

“Any violation of these stipulations will result in immediate legal action to enforce the terms of the agreement,” Bach said.  “This is not meant to be a threat; it’s a promise.”

Jammed at the Hinge

The bonds — $32 million for transportation infrastructure improvements, $25 million for affordable housing, and $17 million for parks and recreation — were approved by 70 percent of those who voted, after a sudden and intense public relations blitz.  But they were fiercely opposed by citizens who were deeply suspicious of the city’s motives in light of a growing municipal debt and what Bach called “a champagne appetite on a beer budget.”

In a city council meeting last year, Bach warned that the city would use the bond proceeds as “a gigantic slush fund” to fill gaps in its budget and to fund pet projects.  Peterson was removed from another council meeting after referring to the bonds as “a Ponzi scheme.”

Bach and Peterson initiated the suit in January, 2017, charging that the wording of the bond questions on the ballots had been misleading.  They later added the charge that a city tax imposed to pay for the bond issue was illegal since the issue of the bonds themselves had not been resolved.  The court dismissed the wording allegation in October, 2017, but Bach and Peterson appealed.  The door to issuing the bonds was jammed at the hinge until the city, on April 3, took the plaintiffs up on their offer to settle — in exchange for the city’s enforceable promise not to attempt to use the proceeds for any purposes other than those explicitly described in the bond questions.

Sidney Bach at council
Sidney Bach, one of the plaintiffs in the anti-bond lawsuit, addresses Asheville City Council after he and co-plaintiff Chris Peterson settled with the city out of court. In exchange for withdrawing the suit, the plaintiffs exacted a pledge from the city not to use bond proceeds for anything other than specifically enumerated projects.

Spelling It Out

That promise is spelled out as Item 4 of the “mutual promises, undertakings, and considerations” spelled out in the settlement agreement, as follows:

The Defendant [the city] stipulates that it is required to use the proceeds derived from the sale of the general obligation bonds issued pursuant to the City of Asheville’s November 8, 2016 Referendum to pay capital costs (as determined by N.C. Gen. Stat. 159-48(h) of projects consistent with the transportation, parks and recreation, and housing purposes set forth in the bond ballots and authorized by the voters, and as otherwise required by law.  The City further stipulates that it will likewise comply with the applicable provisions of The Local Government Budget and Fiscal Control Act codified at N.C. Gen. Stat. 159-7, et seq.

Under those provisions, all proceeds from sale of the bonds must go into a separate and dedicated capital project fund that will enumerate each bond-related expenditure and show exactly how and for what purpose the money is used.

A sentence in Item 6 of the agreement underlines the plaintiffs’ intent.  “The terms of this agreement are contractual, and not mere recitals,” it says. (In civilian English, that would be “These conditions are enforceable and not just window dressing.”)

The document is signed by Peterson, Bach, and their attorney, Albert Sneed.  City Attorney Robin Currin and Acting Interim City Manager Peggy Rowe signed for the city.

Spin?

Reporting on the settlement agreement, the City of Asheville’s blogsite uses the headline, “Bond lawsuit against City of Asheville dismissed.”  The item goes on to say:

On Oct. 20, 2017, the Honorable Superior Court Judge William H. Coward ruled in favor of the City of Asheville in a lawsuit regarding the Nov. 8, 2016, voter-approved bond election. The plaintiffs, Sidney M Bach and Chris Peterson, had filed an appeal that has now been dismissed.

Two paragraphs later the city says, “The win confirmed that the City acted lawfully in the bond election.”  Citizens who have actually read the agreement have complained that the blog post’s layout and language lead readers to conclude that the appellate court, which had not even heard the case, had made a ruling in favor of the city.

Others pointed out that the city’s use of the word “win” seems to refer to the pre-appeal ruling by the lower court, thus technically absolving the city of telling an outright falsehood while preserving the post’s desired spin.  The post contains links to both the agreement and the dismissal notice, but it makes no mention of the feet-to-the-fire provisions of Item 4.

Similarly, an article by Dillon Davis in the Asheville Citizen-Times was titled, “Appeal challenging city of Asheville on $74 million in bonds has been dropped.”  That report also made no mention of the demands agreed to by the city.  Davis’ article contained a link to a Scribd copy of the dismissal notice, but no reference to the agreement itself.

The dismissal notice is a one-paragraph document, signed by the attorneys for all parties, notifying the court that the parties have reached an agreement among themselves.  Neither the agreement itself nor the notice is signed by a judge or court officer because the court has taken no action; it has only received information.

“We’ll Be Watching You”

So on April 10 Bach came to City Hall to read what had actually happened into the record.

By coincidence, Council was just wrapping up discussion of two applications for loans from the city’s housing trust fund, which is designated to receive $10 million in bond proceeds when they become available.  The loan applications totaled $2.4 million and Vice Mayor Gwen Wisler asked, “How much of that is coming out of the bond money versus, you know, our capital?”

At the words “bond money,” Bach, in the audience, ceased paging through his notes and became quite still.  Affordable housing or not, using the new bond money to plug budget holes for non-enumerated projects is one of the things the settlement agreement specifically excludes. But up on the dais Council was passing a resolution to fund the two housing projects through a combination of existing monies and future bond revenue.

“I did not get up to speak to the issue about affordable housing,” Bach said when his turn came to speak, “but the [PowerPoint presentation] diagram suggested there may be an attempt to take bond proceeds and commingle them with other funds for the project.  That may be something for you to discuss with your counsel because it may not be appropriate,” he said.

Bach said both the city and “certain news media” have misled the public in their reporting of the settlement agreement.  “Contrary to these insinuations, the bond suit was not ‘dismissed’ by the court.  It was settled by joint agreement and then jointly dismissed by the parties themselves.

“And thanks to this agreement just signed by the city in order to settle the bond litigation, city hall operatives and this council can no longer expect that any bond issues will save it from having to deal with the city’s budget crisis,” he said.

In conclusion, Bach offered a parody on an old Sting lyric:

“Oh can’t you see/That cutting expenses is the key?  How our poor hearts ache/from all the waste you can make.  Every project you undertake/Every payment you make/Every vote you take/We’ll be watching you.”

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