Thursday, May 13, 2021

Libby City Council deems golf club debt deal subpar

Editor | April 9, 2021 7:00 AM

Libby City Council rejected the Cabinet View Golf Club’s debt forgiveness proposal April 5, moving to negotiate better terms of repayment of an outstanding $1.54 million loan.

The club received the no-interest loan in 2004 to construct the course’s back nine. At the time, officials agreed that the development and sale of nearby land would cover eventual repayment.

But the envisioned residential development never emerged. Club officials have struggled to even offload the land in the years since.

That changed last month. Club member George Mercer, speaking on behalf of the organization, told city councilors that a potential buyer had materialized. The outstanding loan — and the lien City Hall had placed on the property — remained a major sticking point in a land deal. Mercer petitioned city council to forgive $662,125 of the loan, with $878,875 going back into Libby’s coffers. Club officials expected to net $1.75 million from the sale of the land, which is listed at $3 million, prior to repayment.

In a subsequent appearance before city council last week, Mercer said that the impending sale hinged on partial loan forgiveness. He and other golf club members laid out a multipronged argument to bolster their request.

The money, which came from an $8 million pot bestowed upon Libby by the federal government, came without spending guidance. Doled out in a combination of grants and loans to local groups, much of the money never returned to city coffers.

And the development of the golf course-adjacent property represented economic development, which is what the money was intended for, Mercer said. He also pointed out the club’s status as a nonprofit and argued that it had boosted the local economy for years, by property taxes, tourist activity and fundraising opportunities for area groups.

But City Councilor Hugh Taylor and colleague Rob Dufficy questioned forgiveness. The golf club stood to make about $200,000 even if the loan were repaid in full, Taylor noted. He made the same argument on April 5.

“If the golf course was losing money in this venture, it would be a whole different discussion than what we’re having,” Taylor said. “They’re making a profit. I believe it needs to be repaid in full.”

Dufficy took issue with the way the club approached City Hall.

“I look at this more like an ultimatum from the golf course, ‘It’s our way or the deal’s off,’ and it shouldn’t be that way,” Dufficy said.

The club’s proposal received support from city councilors Kristin Smith and Brian Zimmerman. But Smith acknowledged that most residents she spoke with opposed the deal as is.

A motion made by Zimmerman to agree to the deal as presented by the golf club failed. In response, the city councilor made a second motion, this time offering forgiveness of $500,000, which he described as a grant to the golf club.

Mercer had previously cautioned city councilors against making any adjustments against the deal. It had been more than a decade since a developer had expressed interest in the property and if the deal fell through there was no saying when another would come along, he argued.

In response to Zimmerman’s proposal, Mercer said he appreciated city council’s willingness to consider the request. But he rejected it on philosophical grounds. He noted that a previous city council had forgiven a loan City Hall took out of the original $8 million pot.

“You guys have spoken very highly of setting a precedence for the future,” Mercer said of forgiveness. “You have already done that.”

Mayor Brent Teske pushed back on Mercer’s assessment.

“It’s kind of a moot point. That was a previous council,” Teske said. “I’m not going to defend their actions. We definitely learned from their actions. We don’t want to make the same mistakes.”

“Government’s always got the upper hand on everybody,” Mercer replied.

Residents unaligned with the golf club in attendance spoke out against debt forgiveness. Local attorney Ann German described the club’s approach “unprofessional.”

“The city has a lien on this property and it’s in a position to renegotiate the agreement made back in 2004,” she said, arguing that the two parties could find a mutually acceptable solution if they cooperated.

If the golf club preferred obstinance, the city could move to foreclose on the land, German said. She also questioned the club’s timeline, specifically the small window it had given city council to act.

“I guess what I’m getting at is I’ve been practicing law in Libby for 45 years and this kind of approach — [the golf club] wants to see an answer in two weeks — is unacceptable,” she said.

Zimmerman’s counteroffer ultimately failed as well. Fellow City Councilor Gary Beach floated the concept of asking for repayment in full, but following up with a grant to help the club with planned improvements at the course. Taylor made a motion in that vein, prompting a discussion of what, exactly, the club was looking to improve.

Mercer said the group hoped to build a new clubhouse. He agreed to bring the city’s counteroffer to the club board in the hopes of returning to council chambers with more concrete plans. But if May 14 passed without an arrangement, the land deal would die, he warned.

“We cannot extend the buy sell agreement,” he said. “It’s impossible. It won’t happen.”

City councilors voted to make the counteroffer of full repayment with the possibility of a future grant. The details of any grant would be worked out in subsequent meetings, officials indicated. Smith cast the lone dissenting vote.

“I want to do what’s best and I’m not sure that this is it,” Smith said, describing the proposal as creating bureaucracy for bureaucracy’s sake.

Teske thanked all parties for participating. He said he decided to hold the debate in public in the interest of transparency and the hopes of garnering resident involvement.

“I very well could have done this behind closed doors. I didn’t want that. I wanted this to be transparent,” Teske said. “We wanted to get it out there, we wanted to get people talking and we wanted to get city council talking to their constituents about it.”