Wednesday, March 07, 2012

Virginia Resource Authority says Tappahannock has ‘moral obligation’ with airport’s debt

Last week, Tappahannock officials agreed to allow legislation to move forward that would effectively sever the town’s ties with the local airport authority, secure in the knowledge that the town would not be liable for any future financial obligations related to the airport.

However, the decision has one state agency warning that the situation may not be so cut and dry.

“There is a moral obligation pledge on a loan issued in 2007,” said Virginia Resource Authority Program Director Peter D’Alema in a March 1 interview. “It lays out the support for the debt service that [in the event of default] would be split between the county and the town.”

According to D’Alema, new legislation introduced by Senator Charles Cogan, (D-Dist. 29) that went into effect on July 1, 2011 enhanced the VRA capability to collect on any unpaid debts issued through moral obligation bonds.

“If the Tappahannock-Essex Airport Authority defaults on the bonds, that is where the moral obligation that the town and county pledged comes into play,” D’Alema said. “They entered into an agreement, a pledge in support of the local authority. Potentially, state aid that is [earmarked] for Tappahannock could be diverted to the VRA to remedy the loan.”

Initially, town council had voted to request that the bill, which would remove the town from the authority and reduce authority board members from seven to five, be tabled for a year while its potential implications were investigated.

On Feb. 27, council members heard for the first time from town attorney Bill Lewis, who advised members about the ramifications of the legislation that had taken many in Tappahannock by surprise nearly two months after being initiated by Essex Supervisor Bud Smith.

After weeks of speculation, Lewis eased fears that the town would still be liable for financial obligations related to the airport, explaining that the Tappahannock-Essex Airport Authority was a political entity unto itself and solely owned both the airport and the debt it carried.

Under direct questioning from councilman Peter Trible, Lewis said that neither the town nor the county had any direct obligation to finance the airport and that once passed, the town would not be held liable if the airport were to default on any of its state issued bonds.

It is an assertion that officials at the VRA, the bond purchaser, contradict.

D’Alema said that according to the VRA, the backing of the town and county were a crucial aspect in the financing agreement.

“The crux of the credit is the backing of the localities that want to support the authority,” D’Alema said. “The Airport Authority needed that backing because it is a start-up entity.”

He added that any failure to complete payments on the bonds could hurt the county and the town.

“It certainly would make it difficult for them to borrow again, when creditors see that,” D’Alema said.

As of March 1, D’Alema said that he and the VRA were under the impression that the bill had been withdrawn.

However, the town voted to retract their request after the meeting with Lewis, with only council member Marcia Jenkins dissenting.

Trible said that he found the new information to be “disappointing.”

“We went into the meeting with legal counsel giving assurances that we were no longer obligated for anything,” Trible said. “This would have made me change my vote and is something that the council is going to have to take up at a later point. It is troubling.”

Upon learning of D’Alema’s assertions, Jenkins said she was “not surprised.”

“As you know, I voted against it because I didn’t think we had enough verified information to make the decision,” Jenkins said in a recent interview.

Mayor Roy Gladding agreed that the VRA’s stance was not shocking, but added that he still felt that council made the best decision.

“I don’t have the concern that the airport is going to fail,” Gladding said. “The Airport Authority is probably one of the best run groups around and they are doing an excellent job with what they have to work with.”

Following the town’s approval, the bill was pushed through by its sponsors, 99th District Del. Keith Hodges and State Senator Ryan McDougle (R-Hanover). The Senate unanimously passed it on March 2.

Town Attorney Bill Lewis did not return calls from the Northern Neck News as of presstime on Tuesday. However, when an Airport Authority member brought up the VRA issue during last week’s meeting, he said that he disagreed with the bond administrator’s comments.

Other issues stemming from the legislation, including “informal” county meetings that allegedly are in violation of open meeting laws, accusations that Gladding overstepped his authority by acting on behalf of the town without council members’ knowledge or permission and allegations that the initial legislation was drafted without public notice, by one individual and through the use of public funds by way of county attorney Sands Anderson are expected to be addressed at future public meetings.

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