Lakeland bond lawsuit heads to appeals court
Lakeland’s plans to issue a bond and build a new high school remain on hold, pending an appeal that’s the latest part of an ongoing lawsuit. The city missed its end-of-2017 goal for issuing the bond before tax changes go into effect, and city manager Jim Atkinson said it’s estimated this will cost the city $1.37 million.
The lawsuit by 10 Lakeland citizens has put the brakes on the bond issuance, at least temporarily.
Lakeland residents Carry and Lillian (Lou) Melton were the first two plaintiffs, and they filed Dec. 8 to stop the city from issuing bonds that violate state law and/or to compel a referendum. The suit further alleges violation of the Tennessee Open Meetings Act.
The Meltons have been joined in the suit by eight other plaintiffs: James D. Abbott, William T. Mallard, Brian Tipler, Deborah Tipler, Christopher J. Smith, Melissa K. Smith, Heather Long and James L. Murry Jr.
There also is an anti-bond issuance petition that has garnered more than 1,000 signatures so far in Lakeland, a city of 12,430 residents (2010 U.S. Census).
The lack of a public vote on the bond drew criticism from some of the city’s most vocal citizens. They point to a 2015 referendum in which Lakeland citizens refused to approve a proposed $50 million bond to pay for building a high school and middle school. Building only the middle school was a compromise.
But supporters of building a high school immediately have argued that the election of city and school officials who are determined to proceed with a high school made it clear that voters want the school now.
Lakeland Middle Preparatory School just concluded its first semester of operations, and critics are questioning why the city and school district are already pushing for a high school when Arlington High School has already agreed to continue educating Lakeland’s high school students.
The lawsuit challenges the city’s plans to have the Lakeland Industrial Development Board finance a high school by issuing a public improvement bond, which city officials say does not require a referendum.
The bond would be for up to $60 million to refinance the existing middle school and also build a high school wing for Lakeland School System on that same campus. The high school portion of that debt is currently estimated at $36.5 million.
City officials estimate that waiting until 2018 to issue the bond now will add to the city’s costs by about $1.37 million. (President Donald Trump’s new tax law has ended a practice previously used by most issuers to refinance bonds on a tax-exempt basis beyond 90 days from their call date for interest rate savings.)
Atkinson said there are three major factors that will affect the bond’s costs. “Trump’s tax bill, that was the big one. That was the reason the commissioners wanted to close that by the end of the year.”
He added, “Bonds are not marketable with a pending lawsuit hanging out there.”
The second big factor is interest rates, Atkinson said. But for the lawsuit, Lakeland would have locked in an interest rate two weeks ago that was substantially lower than the city’s lowest estimates. Interest rates are variable, so the full impact of that is not yet known.
The third big factor is construction costs, which tend to trend upward, Atkinson said.
When asked if the city plans to revert to the more common general obligation bond instead of a public improvement bond now that the city can’t save that estimated $1.37 million, Atkinson said there has been no discussion about changing course and no reason to do so.
To the best of his knowledge, Lakeland’s leaders plan to continue pursuing use of the public improvement bond.
The latest court development was on Dec. 19, when Chancellor (Judge) Walter L. Evans denied the city’s initial motion to dismiss the lawsuit. The city is now asking the Court of Appeals to reverse this ruling.
The Court of Appeals has not yet agreed to hear this appeal, and that could take weeks or months. Atkinson said he’s heard one estimated that it might take until March or April for the Court of Appeals to hear the city’s appeal.
The Meltons’ attorney, Robert Spence Jr., and Lakeland city attorney Chris Patterson were not immediately available for comment at press time.
CAROLYN BAHM is the editor of The Bartlett Express. Contact her at (901) 433-9138 or via email to email@example.com.