A lawsuit seeking to keep the City from building a high school wing has cost Lakeland taxpayers thousands in legal expenses. But the Mayor says the expenditures will not stop Lakeland from implementing new projects this calendar year.
Comparing year-to-year, legal costs for 2016 CY (Calendar Year) were $189,514 to the 2017 expenses of $281,215 CY, according to Jessica Millspaugh, city finance director. That is a 48% increase from 2016, she said.
Of the $281,215 spent on legal fees in 2017, $90,186 was attributable to the lawsuit. Billing has continued into 2018, with $10,539 and $63,127 being paid for general counsel and lawsuit expenses, respectively, she added.
A resolution was presented to the BOC (Board of Commissioners) last night (1.4.17) to amend the budget by $300,000 for unexpected legal fees.
“The budget for legal expenses in FY18 (July 17 – June 18) = $110,000, said Mrs. Millspaugh. “Spent to date = $277,654. With the $300,000 budget amendment, we would have $132,346 left to spend through July 2018 for general counsel, economic development (EDC/IDB) and litigation.”
Background on Lawsuit
A lawsuit was filed Dec. 8 by Cary and Lillian Melton, seeking to block the lease revenue bonds approved Dec. 5 by the Lakeland Board of Commissioners (BOC) and its Industrial Development Board (IDB) and force a referendum on any bond issue. The suit also alleged violation(s) of the Tennessee Open Meetings Act. The high school wing would be adjacent to the newly opened Lakeland Middle Preparatory School.
At a special meeting Dec. 4, the LSB (Lakeland School Board) approved a resolution that would ultimately fund a high school addition to LMPS (Lakeland Middle Preparatory School).
The case was first heard in Chancellor Walter Evans Court Dec. 13, with Lakeland lawyers asking for a case dismissal.
A C Wharton, former Memphis mayor, argued the motion on behalf of Lakeland. Robert L. J. Spence Jr., is representing the Meltons, who have been joined in the lawsuit by James D. Abbott, William T. Mallard, Brian Tipler, Deborah Tipler, Christopher J. Smith, Melissa K. Smith, Heather Long and James L. Murray Jr.
In addition to Mayor Wharton, other lawyers representing Lakeland include Van Turner, Shelby County Commissioner, along with Lakeland City Attorney Chris Patterson and lawyers from his firm, Wiseman Bray PLLC, and Al Bright and Jeff Smith with Waller Lansden, Dortch & Davis LLP who represent the IDB. Also assisting are Karen Neal, bond counsel and Eric Plumley, Lakeland School Board attorney.
Bryan Meredith, a lawyer with the Spence law firm, also represents the Meltons.
Mr. Patterson said Mr. Wharton and Mr. Turner were asked to lead the legal team because of their experience with large bond transactions. “In his role as former Mayor (for both Memphis and Shelby County), we felt he (Mr. Wharton) was a good voice to advocate for the City,” said Mr. Patterson. He also noted that Mr. Turner has done finance work for Memphis. “We feel these are appropriate people to advocate for the City.”
Mr. Wharton asked Judge Evans Dec. 13 to dismiss the lawsuit saying the City’s action had not harmed the Meltons and would result in significant harm to Lakeland and its citizens. However, in his ruling, the Judge explained he had not been able to digest the hundreds pages of documents that are part of the case. Thus the request for dismissal was denied.
An appeal was requested and the case was again in court Dec. 19. Judge Evans denied the motion to dismiss. Lakeland lawyers immediately asked permission to file an interlocutory appeal with the State Appeals Court in Jackson, TN. An order was issued Dec. 27 by the Judge, according to Mr. Patterson and the City is requesting an expedited hearing. If the Appeals Court accepts the case, Lakeland’s attorneys will re-argue the Joint Motion to Dismiss to the Appellate Court.
From the Mayor
“The additional expense was due to bond counsel and the ongoing court battle over the school. The portion going to bond counsel was allocated to set up the bond sale prior to the end of the year. Experts say we would have saved $1.37 million had we closed prior to that time due simply to the changes in tax law. Interest rate increases as well as increases in construction costs remain a concern.
“As we are all aware, the opposition group, Concerned Citizens of Lakeland, filed a suit blocking that sale. Appeals will continue to protect that investment.”
Asked about increased legal fees impacting new projects for the City like a municipal court, bringing fire services into the City and phase one of the Athletic Complex, he said, “Additional expenses will impact some services, but the three mentioned will move forward as planned.”
The Mayor’s comments about the FY17 audit, discussed at last night’s BOC meeting: “The report reaffirmed what we’ve been telling citizens for the last couple of years. Lakeland is in a better financial position than it’s ever been. We will continue to build on this as we Move Lakeland Forward.”
And the FY17 Audit says …
“For a narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2017, you can read the Management’s Discussion and Analysis beginning on page 5 of the FY 17 Audit Report,” said Mrs. Millspaugh. Link to audit: https://lakelandtn.gov/DocumentCenter/View/6838
City financials details
Mrs. Millspaugh provided the following city finances information:
FY17 General Fund Balances:
Nonspendable (prepaid): $ 18
Committed to Parks: $ 430,078
Assigned to Education: $2,617,696
Unassigned: $7,529,530
She further explained, “The City budgeted to spend $1,402,608 of fund balance in FY17; however, only $346,000 was used. This was attributable to conservative spending and deferred grant expenses. At June 30, 2017, the City’s Unassigned Fund Balance was 90% of General Fund Revenues. Our adopted Fund Balance Policy (2016) sets a target of 25% of General Fund Revenues plus $1,100,000.
“The City has budgeted to spend $3,000,000 of fund balance in FY18 – $2,617,696 from Assigned Fund Balance and $382,304 from Unassigned Fund Balance – for the building expansion at Lakeland Elementary School.” She noted the budget amendment was presented last night for $300,000 of Unassigned Fund Balance to be used for unplanned legal expenses.
She said the FY18 budget for all debt service is $2,866,458; CONs (Capital Outlay Notes for LMPS) represent $2,216,150 of total. “All previous assumptions of debt service on the new bonds were based on issuance by 12/31/17. We do not have current estimates on 2018 costs,” she said.
