Alexander settles loan lawsuit with $103K payment

The Alexander City Council decided to take the advice of its attorney and settle a legal dispute over bundled loans by making a final payment of $103,000 of the nearly $500,000 owed. The bank has agreed to forfeit the remaining amount. Aldermen also accepted a proposal to pay $27,000 to end a dispute over a fire truck loan.

The saga began around September 2013 when a lawsuit was filed against the City of Alexander by the First State Bank in Oklahoma after the bank bought a loan from First Government Lease Company and its owner Paul Anthony Graver. Graver lives in Chicago. His business is located in Northfield, Illinois.

The lawsuit claimed the bank, "was defrauded into thinking it would acquire a mortgage and lease-purchase agreement for improvements to an Alexander fire station that it says were never started."

The allegations stem from a 2007 lease-purchase agreement between the City and Graver. In 2007 city officials wanted to combine several loans into a single loan to have one payment and a lower interest rate, saving the City money. Shirley Johnson was mayor at the time.

The agreement between First Government Leasing Co. and First State Bank in Oklahoma says, "Proceeds from refinancing a loan for the fire and police departments would be used to improve a fire station."

According to Arkansas Division of Legislative Audit's report for the City's budget year of 2007, in August the City combined six lease-purchase agreements consisting of police and fire vehicles, equipment, "and an addition to the fire station" on South Alexander Road. The "addition" was actually the purchase of property next to the fire station.

The original terms of the agreement between the City and Graver were for a loan of, "$350,000 with an annual interest rate of 9.9% to be repaid by a monthly payment of $4,971 for 168 months (14 years)," the audit report states.

But, according to the amortization schedule the loan was for $435,975 with an interest rate of 9% instead of 9.9%. The payment period was also reduced to 12 years instead of 14. Alexander still owed 100 payments totaling $497,083.00 on the loan in March, 2013.

The second lawsuit involves the now repossessed 1999 Freightliner fire truck. In May, 2008 the City of Alexander entered into a lease-purchase agreement with First Government Lease Company and Graver. The amount of the lease-purchase was $50,000 for the truck and an additional $24,325 in interest. The agreement was for seven years at $884 per month.

In March, 2013 Alexander Mayor Michelle Hobbs, under the advice of then City Attorney Carla Miller and without receiving approval from the city council, stopped making the monthly payments on both the loan and lease-purchase agreement claiming they were illegal under the Arkansas Constitution. Cities are limited to a maximum of five years when taking on interest-paying debt. There’s also a limit on interest rates.

The fire truck was subsequently repossessed later that year. That’s when city council members learned about the stopped payments. There was approximately $7,000 remaining on the loan. Since then a replacement fire truck has been purchased.

In early 2014 Graver was ordered to put up a $54,000.00 bond by Pulaski County Circuit Court Judge Tim Fox when he defied two court orders to return the truck. The truck was sold November 14, 2013 to a company in Raleigh, Mississippi.

The City filed a lawsuit in Mississippi attempting to reclaim the fire truck from the company that bought it. During a hearing held May 18, 2015 a judge there ruled the City cannot have the fire truck returned.

According to Mayor Paul Mitchell, who attended the hearing, “He (judge) said he couldn’t see how the City of Alexander could be harmed in any way because we had the $54,000.00.”

Both lawsuits were handled by John Wilkerson, an attorney with the Arkansas Municipal League. His presentation of the two proposals was added to the January 25 meeting’s agenda by a vote of the city council.

“If we were to lose (lawsuits) we would have to repay the 400 some odd thousand dollars we owe … left on the big loan,” Wilkerson told council members. “Ultimately we decided that if the City would agree pursuant to you all’s [sic] decision that the City pays … $103,000 right now then everything else will be forgiven.”

The offer to end the fire truck dispute was that both sides (Graver and the City) will pay half of the $54,000, which will pay off the lease-purchase agreement.

Of both offers Wilkerson said, “You don’t get your fire truck back, that’s the bad news. You get all your titles back … and you no longer have a $6,200 a month payment for the next seven years.”

According to Wilkerson everyone was at fault. “We made a mistake by entering (into) that loan so many years ago, Paul Graver made a mistake by swindling us … and then the bank made a mistake by accepting the loan that was most likely illegal,” he said.

The 2016 budget does allow for a $103,000 payment on the lawsuit. The vote to accept the proposals was unanimous.

In other actions at the January 25 meeting;

Council members also added to the agenda a report from Stephen Compton, a representative of the health insurance provider QualChoice of Arkansas. According to Mayor Paul Mitchell proposal requests were sent to four health providers and QualChoice was the only one to respond.

Compton proposed offering full time city employees a choice of two plans. One has a deductible maximum of $2,500, the other $500. The City will be responsible for paying half of the premium costs based on the $2,500 plan. Any employee wanting the $500 deductible will pay the additional cost in the premium. The City would still pay based on the $2,500 plan for that employee.

The health insurance policy will only be available to full time employees and, according to Compton, nearly all of them have signed-up. The deadline for enrollment is February 1. Council members want to see a final cost before approving QualChoice as the City of Alexander’s health insurance provider.

After some wrangling over the wording of the 2016 budget resolution it was passed by all eight of the council members. Alderwoman Andrea Bearden questioned why the resolution has the city council conducting “a comprehensive study and review of the proposed budget presented to the Alexander City Council.” It was changed to “The City Administration and City Treasurer Ken Miller has made a comprehensive study and review of the proposed budget … .”

There was also a debate over language changes in the 2016 Organization of City Council manual. One change Alderwoman Bearden wants reversed would allow the same kind of access to city hall as the mayor. The language was inserted after former Mayor Michelle Hobbs locked out all council members from city hall.

Alderman Dan Church said he contacted Arkansas Municipal League Attorney David Schoen who told him the mayor has the authority to decide who has access to city hall. Bearden wants the same amount of access as a city employee so she can make her own copies of city documents. Currently she has to have a city employee make the copies. The issue was tabled until the next meeting.

Council members were advised that former Alexander Police Officer Patrick Thompson has filed a third lawsuit against the City and former Police Chief Horace Walters. Thompson is claiming unlawful dismissal. Mayor Mitchell reported the Arkansas Municipal League is considering this a continuance of the original suit and won’t require another payment to represent Alexander.

Alderwoman Bearden, who is a member of the planning commission, distributed a proposed planning map that was developed by Metro Plan in 2013. She said she can’t find any minutes from 2013 that mentions the map. She also noted Elmo’s Grocery and the landscaping business across from The Boardwalk Restaurant on 3rd Street (Hwy. 111) are not on the map. Bearden asked council members to review the map and note any needed changes.

Mayor Mitchell told council members the street department tractor needs an oil pump. Rather than spend the estimated $1,000 or more to fix it, Mitchell said this is probably a good time to look at buying a tractor with a side-boom mower. He said he will be getting prices on both new and used tractors.

At the beginning of the meeting the city council retroactively approved moving the January 2016 meeting to the fourth Monday due to the Martin Luther King, Jr. Holiday, which should have been done the previous December. Aldermen also voted to hold the next February meeting on the fourth Monday because of Presidents’ Day.

Therefore, the next regular meeting of the Alexander City Council is Monday, February 22. Meetings are at 6 PM in the courtroom in city hall. The public is invited to attend.

Edited 01/28/16 at 11:51 AM and 01/29/16 at 6:09 PM.