Country club dispute with city escalates

Dann Rohrer spent five years working behind the scenes to cut a deal that would allow the Cabinet View Country Club to repay a $1.5 million loan from the city. But on Monday night, Rohrer decided to make the dispute public.

Rohrer and other members of the country club’s board of directors showed up en masse at the Libby City Council meeting to urge the city to restart negotiations that would allow the country club to develop residential lots around the 18-hole golf course. Proceeds from the sale of land would be used to pay back the city’s loan.

The city has delayed approval of the subdivision due to a dispute over development impact fees associated with the project estimated between $333,817 and $750,000. The fees were not part of the loan agreement between the city and the country club, but were added by the city in 2007 after grant funding fell through.

Rohrer, president of the country club board, delivered an ultimatum to the council: eliminate the development impact fees or face a lawsuit.

“Tonight we are asking for a vote from the City Council of Libby,” Rohrer said. “We have been at every meeting, both on and off the record. We were promised if we dropped the lawsuit, the $750,000 would be gone. Now, your new attorney has the figures at $333,817.

“If you vote no, then we will enter into potential litigation. If you choose not to vote, we will also enter into potential litigation.”

The City Council declined to vote on the matter. Council member Peggy Williams said she needed more time to consider the request. A follow-up request from Rohrer to be placed on a future meeting agenda was dismissed by Roll.

DEEP HISTORY

The history of the Cabinet View County Club is a story of a community coming together to build a legacy. A group of volunteers, with the support of the J. Neils Lumber Company, began construction on the course in 1956 and completed it in 1958. The entire course was designed and built by local volunteers with a desire to play golf in their hometown. The course opened for play on July 24, 1958.

The course flourished for the next two decades and the idea to expand into a full 18-hole course started circulating. In 1982, the Cabinet View Country Club, which had since converted into a non-profit corporation, acquired the first piece of land that would eventually become the Wilderness Nine. Through a land exchange with the United States Forest Service, brokered by local businessman Dan Larson, the rest of the land needed to expand the course was acquired; but the funding to actually build the expansion was still missing.

The 1990s was a decade of tremendous change for Libby, as news of asbestos contamination rocked the community and the nation. That tragedy, however, brought with it opportunity. Then-Senator Conrad Burns secured a federal grant to the City of Libby in the amount of $8 million for the purpose of economic development, made possible by the adverse economic impact of the asbestos contamination discovery.

In 2004, the City of Libby agreed to loan the Cabinet View Country Club $1.54 million dollars from that economic development grant to build the Wilderness Nine, construction of which began in 2005 and was completed in 2007. With the expansion, the country club planned a new subdivision on the surrounding land. The sale of building lots in that development would provide the money to repay the loan to the city.

That is where the wheels fell off.

PROBLEMS ARISE

The City of Libby expanded the city’s sewer service, ostensibly for the purpose of providing service to the proposed subdivision, but also to provide service for the existing homes near the golf course, which were plagued by sewer and drainage problems.

The financing for that project was a package of loans and grants, which was anticipated to pose only a minimal impact upon the city’s ratepayers. The actual cost of the project was well below the estimate, however, which resulted in the loss of the grant portion of the funding.

In response, the city decided to assess an impact fee to the subdivision, the final plat of which had not yet been approved by the City Council. The city’s administrator at the time, Dan Thede, made a recommendation at the council’s meeting of Sept. 10, 2007 that a fee of a “minimum of $500,000 and up to a maximum of $750,000” be added to the plans for the subdivision for “getting sewer service to the subdivision,” according to the meeting minutes. The council approved the amendment, which was then submitted to the Lincoln County Planning Department, but notice was not sent to the Cabinet View Country Club. The reason for the omission is not known.

Rohrer said the country club stopped pushing for the subdivision approval while awaiting the completion of the sewer extension. That project was completed in 2010, but there had not previously been any mention of impact fees associated with the extension.

“We never would have become involved in this had the city told us we were going to have to pay for the sewer extension.” Rohrer said. There is no documentation between the city and the country club regarding an agreement to help pay for the sewer extension.

Rohrer also noted that the country club had a group of potential buyers interested in the property, but that group wouldn’t move forward with the purchase until the sewer project was completed and the subdivision was approved. That possibility disappeared with the onset of the economic recession at the end of 2008.

Tensions started rising in 2010, when payments on the loan were expected to begin.

PAPERWORK PROBLEMS

The promissory note between the city and the country club specifies “Payments on the loan shall commence no later than Jan. 1, 2010.” The note, however, fails to specify the amount of each payment beyond “at least fifty percent of the proceeds from the sale of the lots of a subdivision that borrower will create from the real property that is the security for this loan.” The note also establishes the due date of payments as “on closing of the sale of any lot covered by this note.”

In what Rohrer called an “act of good faith,” the country club began making payments to the city on Dec. 21, 2010. The first payment, a check for $100, was returned to the club by Libby mayor Doug Roll on Jan. 7, 2011. In the letter accompanying the check, Roll wrote, “we feel this token payment is far short of what we can accept.” Additional payment checks, all in the same amount, were returned by the city on Dec. 30, 2011, Jan. 10, 2013 and Dec. 2, 2014.

The position of the country club is that it will stick to the terms of the signed agreement with the city. Payment is due upon the sale of a lot and in the amount of 50 percent of the proceeds from said sale. As no lots have been sold, no payment is due, Rohrer and other board members have said.

Rohrer also pointed to an additional clause in the note, “The borrower will have the right to make payments on the amount owed at anytime.”

The city’s position is that the $1.54 million was a loan and payment was due to begin on that loan no later than Jan. 1, 2010, and that “token” payments of $100 per year are not sufficient. The mayor and the council are asking the country club for a structured repayment schedule, even though the original loan agreement and promissory note make no mention of scheduled payments other than those tied to the sale of lots.

“The City received a check for $100 last year and again this year. Both have been promptly returned. A check in the amount of $100 does not seem to be much of an effort to repay over 1.5 million dollar loan,” Roll wrote in a letter dated Dec. 30, 2011. The $100 checks continued to be sent and returned every year since then.

STALEMATE CONTINUES

Rohrer claimed that a number of private meetings were held between members of the county club board and representatives of the city, including former city attorney Jim Reintsma. In one of those meetings, Rohrer said, Reintsma offered to drop the impact fee if the club would agree to a regular payment schedule on the loan and move forward with the development.

Allan Payne, Libby’s new city attorney, said the content of these private meetings has been misunderstood by everyone involved. He referenced a meeting he had with Rohrer in December 2014 on this issue in which he calculated a new figure for the impact fee: $333,817. Payne said he calculated that number by starting at $625,000, the middle of the range set in 2007, and then figuring the actual cost of the sewer extension relative to the estimated cost. Payne said that figure was never intended to be definitive, but only to create a basis from which to begin negotiations to resolve the issue.

Rohrer said the country club refused to discuss Payne’s offer because “we feel we don’t owe them anything other than what we borrowed.”

The impasse seems tied to two sticking points, one from each side. The country club wants the city to remove the impact fee requirement that has been added to the subdivision, and the city wants to modify the loan agreement to create a structured payment structure.

George Mercer, a country club board member, said the terms of the original contract specify that payment is due on the loan upon the sale of lots. Those lots cannot be sold until the subdivision is approved and developed.

“The country club is sticking to the terms of the original contract,” Mercer said.

The one thing upon which both sides seem to agree is that litigation benefits nobody.

“There is one positive outcome for the City of Libby and the Cabinet View Country Club, and is to not end up in litigation,” Mercer said.

Roll expressed a similar sentiment.

“Right now we just want to move forward. We want to get this done.”

Payne was optimistic as well, indicating there are “several ways we can solve this problem.”

Still, a solution may be elusive in the near future as the city has so far refused to set a date for a formal meeting to negotiate a deal.

“We’ll let you know,” Roll said in response to Rohrer’s request to put the issue on the agenda for the next city council meeting.