Blytheville City Attorney Michael Bearden informed the Finance and Purchasing Committee Thursday evening that a second lawsuit has been filed in Iowa against the city regarding Water Department business, signed off on by either former Department Director Gary Phillips or Mayor James W. Sanders.
"We got sued by another financial company in connection with the printers that Gary [Phillips purchased/leased]...There are three contracts, two were signed by Gary and one was signed by the Mayor. The contracts, which are those long, lease-finance or I don't even know if it was a lease-purchase kind of thing. I wasn't even involved in it. It's just those standard printing contracts. In that contract, there was a provision that said that any litigation would be filed in Iowa. That was the jurisdictional paragraph that, had I read the contract, I never would have approved. But in any event that's what it was. So this is Great Financial Financial...whatever it is, it's a long name," Bearden said.
Bearden also said that by the time the City was notified of the lawsuit, the deadline had almost passed for filing an answer.
"So, when we got the summons, it was almost time out on it. In any event I had to contact the [Municipal] League, who gave me a number and who I called, that deals with municipal law. He has basically filed a motion to dismiss their complaint alleging that Gary did not have authority to sign that lease, and further that, I'm pretty sure, that [Mayor] James [Sanders] didn't even have authority to sign the lease; quite frankly because the council had not approved it," Bearden said.
Bearden then showed the committee a letter of correspondence from Ahlers & Cooney, a Des Moines, Iowa law firm that has agreed to represent the City of Blytheville in the new lawsuit.
"I got a letter from the attorney, his name is Ivan Weber...what he is trying to do is to get the suit stopped in Iowa so that I can then talk to the attorneys that filed the suit and get this straightened out. Because, we have said all along that anything like that, that what we owe we'd pay. But that we weren't going to pay it during this pending investigation because we didn't know for sure what the outcome was going to be. I don't believe we know that now either do we?" Bearden said.
"The auditor has come in and has just now started on it, but he is in the process. I talked to him. He came up here and did an interview about a week and a half ago. He interviewed me and Kerry, just to get some information about the company. And then he was getting with the accounting firm that had been doing the process previously, getting all the information they had and is going from there," Blytheville Finance Director John Callens answered.
"So, he's working for the state police and not for us, right," Councilman Tommy Abbott asked.
"No, he's working for us and working with state police," Callens answered.
"So, the state police is waiting on his findings before they release their findings," Abbott clarified.
"There was one lawsuit trial that got settled. They just came and picked up the printers I guess. That was another financing company...and I think the problem has been all along was that first of all, we didn't know we had all those printers. Secondly, even if we had known, we only used two or three of them and I guess the rest of them are being stored," Bearden said.
Callens said they were being stored in the Water Department, but no longer in the storage unit [Golden Keys] where they were found. Discussion occurred regarding how many of the copiers have been used; to which Callens replied only two were originally. But that now all printing is being done on a different printer (not purchased from these finance companies).
Court documents from the first lawsuit, brought by De Lage Landen Financial Services, listed seven business machines including three Toshiba color copiers, a reverse automatic document feeder, a saddle stitch finisher, a fax board and a Lexmark laser printer. The second lawsuit, being publically announced for the first time Thursday, was filed in Iowa. Therefore the CN has not yet had an opportunity to obtain those documents.
"So have we returned all of the equipment to everybody or are we waiting on them to sue us before we do," Abbott asked.
"No, they are supposed to, they've been released, so they are supposed to come and pick them up, just like that one group did...The only ones released are the ones that you [Bearden] know about. They called me, after you got approval to let them be released," Callens said.
"I think what Tommy [Abbott] is asking is, are there two other companies that we are not paying that we're going to get sued by," Bearden said. Abbott agreed that was what he wanted to know.
"There are two more companies and they have not contacted us and have not contacted you [Bearden]," Callens answered.
"We stopped paying for all of the copiers when this happened because we weren't sure which ones we ought to be paying. And we said all along that we are going to pay for the ones that we're using. But if we're not using them, we're not going to pay," Bearden said.
"This is crazy," Abbott said.
"Lets get clarification. In all, there are three separate contracts total," Snow asked.
"Four," Abbott asked.
"I'm not sure, because I wasn't in on it," Bearden said.
"Well, the one company we sent it back and then we've got this new lawsuit. And you said, I believe, we have two more companies. So that's four," Abbott said.
"And what basis was it that the Mayor couldn't sign? Was the amount of dollars involved with the lease," Snow asked.
"Well that, and the fact that ya'll pretty much decided that if it is above . . . well pretty much he has to get your approval on everything. You know the bottom line is you all appropriate the money and for a contract like that, which would be a significant amount over years...it would be more than he could sign off on anyway. Now that's the problem we've got here is that those that Gary ordered, he certainly didn't have the authority to order. He had the apparent authority, as far as these vendors go, but they should have known if they deal with municipalities," Bearden said.
"But the red flag is not as bright when you have four different companies," Abbott said.
"It was one company that sold them, but four different leasing companies. So the people that was selling them knew...the salesman is not there anymore because I talked to the President of the company [Memphis Communications]," Callens said.
"So they purchased them from one company, but financed them through four companies...they just scattered it out," Parks asked. Callens said he was correct.
"So are we getting some kind of accounting of what we will owe on the ones we are using?" Snow asked.
"The most we were ever using were two, and they were the original ones and one of those quit working. And once again, basically without knowing what all was going on there; I have quit using any of them. Because I don't know what is going on, so we put them all on the side...until the smoke has cleared we aren't using any of them," Callens said.
"This is pretty much what I've said we ought to do anyway. I mean at least we can always pay them, but we might have a lot of trouble getting our money back. I'm a firm believer since I've been out of law school. If you've got the hammer, hold on to it. Make them take it. Don't give it to them. And money is a hammer," Bearden said.
"If you can get by with it," Snow said.
"Well we're going to get sued a few times, but they have all been knocked off in the beginning and that gave us a way to give them back the stuff and end it," Bearden said.
Bearden then asked the committee to approve an "engagement letter" dated September 16, 2015 from Ahlers & Cooney, P.C. in Des Moines, Iowa for agreeing to represent the City of Blytheville in connection with the lawsuit "Greatamerica Financial Services Corporation v. City of Blytheville, filed in Linn County, Iowa. The letter states that the City will pay the firm $300 as a retainer. Additionally expenses, beyond the retainer fee, will be included separately and the city will be billed monthly.
"This whole thing sticks ...this whole thing has been a huge mess and I just hope that the State Police follows though on this and holds accountable whoever is responsible, whoever it may be," Snow said.
Snow moved that the "engagement letter" be approved, Parks seconded it, thereby sending the matter to the full council.
In another matter before the committee, John Kazyak, Finance Administrator for Nucor Yamato, told the committee about the company's request to enter into a contract agreement, under Title IX, to avoid paying property taxes to the city. This is Nucor's third such request over the last several years, with the last time being when the mill was upgrading their caststrip facility.
"I have come to the finance committee, pursuant to a meeting with the Mayor, to make a request of the committee to allow Nucor to enter into a contract agreement under Title IX for the purposes of in lieu of property taxes made to the city, similar to the one we entered into with the city back in 2013 or 2012. The reason we are making the request is that the mill is undergoing another expansion in the Mill Two. Mill One was the mill involved in the 2012-2013 time frame. This expansion in Mill Two will involve a $75.2 million expansion in the mill to allow it to quench and self-temper product as it goes through the line. This will provide a harder type of steel that allows us to penetrate different markets and allows customers to purchase this steel that is lighter in weight, therefore can be used in more applications," John Kazyak, Finance Administrator at Nucor Yamato said.
"And I think you will be the only mill in the U.S. that has this process...and this makes you more competitive in the world market," Committee Chairman Stan Parks asked.
"Yes, we will be the only mill in the United States of America that has this process and uses it to manufacture steel. There is a mill in Europe that does it as well. The technology has been around for quite some time; it's just that no one has brought it over here to employ it in the manufacturing process. So we would be the only mill in the United Stats that will be able to manufacture this kind of steel. It allows us to bid on projects or accept projects where 'built in America' is the requirement for the project to be bid on and sourced," Kazyak added.
Kazyak said that there would probably be two or three employees hired as a result of the new process, but that those jobs will be highly specialized engineering or maintenance type positions.
"We had the packet last year that had all the numbers and all the fees, being the administrative fees. Do we have all of that yet," Councilman Kevin Snow asked.
"We had discussed getting it ahead of time and possibly having another meeting next week to review it to see if there are any necessary changes," Parks said.
"I'll just have him get it together and send it to you guys individually by Monday," Kazyak said.
"That is what we discussed when I was in the Mayor's office, that we could may be have a brief meeting to make any changes we deem necessary. It's a win-win situation for everybody," Parks said.
Parks announced monthly financial figures for the city. He said that Blytheville's Sales and Use Tax income was up $22,681 from 2014, leaving the city down $87,736 for the year. He said there was another $1,000 adjustment this month made by the Arkansas Department of Finance Administration. The city's portion of the Mississippi County Sales and Use Tax revenue is up $26,814 for September when compared to last year, but it is still down $50,143 for the year. He also told the committee that Mr. Ashmore at the incinerator has retired and that Public Works has hired another full time employee mechanic to cover vacation time for the first mechanic and to augment the work being done at the Golf Course, Public Works and Parks and Recreation.
The committee voted to move $10,000 from the incinerator's budget to the Public Works shop to cover the increase, especially since the incinerator had salary funds budgeted while Mr. Ashmore was there.
Callens also told the committee that the city is currently in non-compliance with the IRS pertaining to a standard arbitrage rebate form that is required to be submitted every five years.
"I have a form here dealing with our bond issue from the current bond issue from 2005 with the sewer. There is a requirement by the IRS to do...It is supposed to be done every five years. Ours have not been done since its been initiated...We are going to get in compliance...I don't know if its being done with the Water Company bonds, but if not we'll have to do the same thing. I'll find out," Callens said.
Callens also gave a department by department report on spending to date for the year, and all departments were at 75 percent of their yearly budget or less except for one [Public Works Shop at 77.21 percent], which would be expected after nine months (75 percent) of the year completed.
"Did Mr. [Councilman R.L.] Jones send you that we approved in our committee meeting to send the roof to the Finance Committee?" Abbott asked. Parks said that he had not.
The Park and Recreation Committee, Chaired by Jones, also failed to send word to the Finance Committee regarding Williams Park work authorization details needed before a matching grant application deadline. Other members of the council brought it to the finance committee's attention and the deadline was met in August.
The committee voted to approve $12,900 for a new, shingled roof with a ten-year warranty for the Thunder Bayou Golf Links clubhouse.
Callens said that Thunder Bayou was definitely under budget for the year and Dr. Tracy Duncan added that they had $20,000 in their budget for building maintenance and have only spent $2,000 thus far. Callens and Duncan discussed the matter for a few minutes regarding what the budget actually says, but eventually Callens said that they would clear up the confusion, but nevertheless, he would surely be able to move golf course funds around within an amended department budget, if necessary, to cover the cost.
Snow made a motion to send to the full council the Finance Committee's recommendation to keep the city's millage at 4 mills for the upcoming year (three for general fund, one-half for fire, and one-half for police). The motion "failed for want of a second" because Councilman John Musgraves was absent and Parks preferred to wait until the special meeting, called for 5 p.m. on Thursday, October 15.
Parks hesitancy was due to not knowing if the new propose City Sales Tax would be passed or not.
"I don't feel comfortable asking to go higher than that after putting a one cent tax out there to decide upon," Snow said.
"We'll do this on Thursday," Parks said. Since the sales tax issue will not be decided until October 20, the only reasons to wait until October 15 to vote on this issue would be to do more research or to get input on how to vote.
thenry@blythevillecourier.com