One month after the City of Powell agreed to a $1.8 million settlement with CV Real Property, developer of the Center at Powell Crossing, city officials contend they acted with the taxpayers’ best interests at heart.
The settlement — which cost the city $950,000 and its insurer, Great American Insurance Group, $850,000 — was the result of a lawsuit brought against the city by CV Real Property after U.S. District Court Judge James L. Graham ruled last year that a voter-approved charter amendment banning high-density housing in downtown Powell, like the Center at Powell Crossing (a proposed retail complex with 64 apartment units), was unconstitutional.
Mayor Brian Lorenz told The Gazette that under the advice of the city’s legal team, council decided the “best course of action” in order to prevent any further loss of taxpayer dollars was to agree to the settlement.
“Despite the challenges this lawsuit has presented to our city, we will continue to work together and move forward representing the interests of our residents,” Lorenz said.
For residents questioning the city’s decision to settle the lawsuit, council member Daniel Swartwout said during Tuesday’s council meeting, “Every single member of Powell City Council voted in favor of the $950,000 appropriation (city’s share),” and the decision wasn’t made overnight.
“Council arrived at the settlement after 18 months of work and deliberation,” he said. “With the city already being found liable, it was incumbent upon us to stop the bleeding. This city faced a dangerous, risky scenario if we litigated to the bitter end the grand total of damages.
“As we learned, Powell Crossing was seeking much, much more than $1.8 million,” Swartwout added.
Impact on city
Finance Director Debra Miller confirmed the city’s share of the settlement has been paid, and council member Tom Counts, who chairs the city’s finance committee, added that the $950,000 payout equates to 17 percent of the city’s savings in its unencumbered general fund balance. Prior to the lawsuit, the fund had a balance of roughly $5.6 million.
Both Lorenz and Counts addressed the loss of nearly $1 million.
“Council has scrimped and saved to grow this account over several years and has the authority to designate these dollars for any project deemed in need. However, council had to freeze these funds for needed expenditures under the threat of this litigation,” Lorenz said. “Unfortunately, now these dollars will no longer be available for projects and capital expenditures our city desperately needs.”
Counts added losing nearly a fifth of the city’s savings will greatly affect how it allocates funds over the next few years.
“While I don’t anticipate a big hit to city services, we will be cautious in our operating budget, especially if there is a downturn in the economy,” he said. “We simply won’t have the cushion to weather the storm.
“For infrastructure, the focus will have to be on repairing/maintaining existing infrastructure rather than any new initiatives. The question will be whether our repair dollars can keep up with all of city’s repair and maintenance,” Counts added.
In addition to the $950,000 hit to the city’s unencumbered general fund balance, the settlement resulted in a $37,367 increase in the city’s insurance premium and with the funds no longer available to generate interest, the city is losing an additional $400 to $500 a month, Miller said.
Moving forward, she added, “The city will be making a conscious effort to reduce nonessential spending or postpone specific expenditures to begin recouping the spent fund balance.”
