Council changes course again, approves loan

Ralph B. Davis rdavis@civitasmedia.com

February 12, 2014

PRESTONSBURG — The on-again, off-again plan to use the old Prestonsburg Elementary site for a proposed community center appears to be on again, after the city council voted Monday night to approve a loan necessary to purchase the property.

As expected, the measure came down to Mayor Jerry Fannin casting a vote to break a deadlocked council. And the vote did not come without its share of controversy.

The council voted in December to purchase the property, also with a 4-4 tie broken by the mayor. But in January, when Tim Cooley, one of the “yes” votes, was absent, the council voted down a motion to approve the financing for the purchase.

Terms of the financing called for extending the city’s current debt an additional 10 years, at a rate of 3.25 percent, and adding $1 million to it to reflect the purchase price of the property. Fannin has said that terms would result in the city paying $500 less a month on the loan, although opponents have also pointed out that the monthly savings are only possible through an additional decade of debt.

On Monday, with the full council in attendance, Councilman David Gearheart raised the issue again.

“We voted to buy a piece a property and then we voted down on the financing,” Gearheart said. “Everybody’s here. I guess if someone makes a motion, something has to go down tonight, one way or the other.”

Gearheart then made a motion to approve the financing, which Cooley seconded.

Councilman Les Stapleton, who is running against Fannin for mayor in November, immediately questioned whether the move was proper.

“If we vote it down one week, can we come back the next and vote it up again?” Stapleton asked.

“The answer is, yes, you can,” city attorney Jim Webb responded.

Councilman B.D. Nunnery, referring to a previous meeting, when it was revealed that the loan would be secured by using both the school property and city hall as collateral, then suggested the loan be split, so that only the school property serve as collateral for the school property. He said he wanted to avoid a situation in which the city becomes financially crippled by some unforeseen circumstance and ends up losing city hall in the bargain.

“I’d at least like to separate it out and give the city some protection somehow,” Nunnery said.

All on the council appeared open to following Nunnery’s request, but no vote was taken on it.

Fannin then addressed some criticism of the plan to borrow money to buy the property. He noted that the project to build the Mountain Arts Center initially began with a $3.5 million loan, much of which was later paid off through donations and grants. He also noted that one-third of the purchase price would be recouped by the city’s plan to take advantage of New Markets Tax Credits, and much of the remainder could possibly be repaid by selling some other properties the city owns.

But Nunnery remained unconvinced.

“We could probably sell some other property to pay for some of it, but that doesn’t change the fact that I think we’re paying too much for this property,” Nunnery said.

Nunnery then asked the same question he has asked in other meetings — why the city was willing to pay $1 million for the property now, when it could have been had for $500,000 a few years ago.

Fannin said he was never given authority to pay that much for the property at the time.

“I was authorized to offer $300,000 and they turned it down,” Fannin said.

Fannin also noted that the property has been assessed for $1.2 million, and that the city might have paid much more than that, had they purchased the property, demolished the school and filled in the land.

Nunnery then began asking Fannin whether he had any personal stake in the property, noting the mayor and property owner Roland Gray were partners in some other ventures.

“I don’t have a penny in this, B.D.,” Fannin said.

Nunnery then asked why the mayor was seen on several occasions working at the property before and during the demolition.

Fannin said that at some times, Gray had donated scrap material to the city, and at other times, he was there on his own behalf, after Gray gave him some scrap material.

Nunnery asked Fannin how much he made from the scrap material, to which Fannin responded that he couldn’t remember.

Nunnery then accused Fannin of having a conflict of interest, saying he had personally profited from the property the city is buying.

“That doesn’t give anybody pause here, that we’re paying a lot more for this property, and now we find out that you have a stake in it?” Nunnery said.

Nunnery also accused the mayor of working on city time to extract scrap for his personal benefit.

“Are you not getting paid for being a full-time mayor?” Nunnery asked.

“What we’re doing now is campaigning,” Fannin said, accusing Nunnery of playing politics ahead of the November election.

Nunnery objected to that characterization.

“The fact is, you’ve got a personal investment in that property,” Nunnery said.

“I’m not making any money on the sale of the property …” Fannin replied. “[Councilman] Harry [Adams] has given me some auto parts before. Is it wrong for us to do business with him?”

Adams then joined the questioning, grilling Fannin on whether he had worked for his own benefit on city time.

“Everybody that works at this place has to be here at a certain time and leaves here at a certain time,” Adams said. “This is starting to stink bad.”

“And it will until November,” Fannin replied, saying that all of the criticism was borne out of opposition to his re-election campaign.

Fannin said similar objections are raised every campaign cycle.

“After the election, it quiets down for three years, and then it starts up again,” Fannin said.

In the end, the vote on financing the center came down to Gearheart, Cooley, Don Willis and Freddie Goble voting in favor of the loan, and Nunnery, Adams, Stapleton and Roy Roberts voting against it, with Fannin breaking the tie in the affirmative.