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More Smoke at Pinnacle PointeSubmitted by WhitesCreek on April 28, 2008 - 6:39am.
Harriman and Prestige Development continue to play the Pee Wee Herman game of "I know I am, but what are you?" Prestige is the LLC priarily owned by Steve Kirkham and Jerry Duncan which developed Pinnacle Pointe, using a bunch of money provided by Harriman tax payers. This seemed like a bad deal for the City from the start, but now, a portion of the money appears to have been used to level property owned by the developers to ready it for sale. The City had hired a respected engineering firm, Vaughn and Melton, to study the project, but now they have dropped out. We hear "professional courtesy" as the reason, so we have to read between the lines here, and say that probably means there will be lawsuits involving more than a million bucks, with an engineering firm as the defendant and another engineering firm testifying against them for plaintiff...the City of Harriman. Grab your popcorn and an aisle seat...This is going to be a long one.
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Since the development of Pinnacle Point, the city of Harriman and its budget has went from being in the "red" by a couple of hundred thousand dollars to being in the "black" by about the same amount. Approximately $500,000 or more NEW TAX revenues, so how can you "claim" it as a bad deal?
I would really like to see the real numbers on that. Let's look at new revenue against actual cost to the City of the bond issue, attorney fees, etc. At any rate, I don't make the claim that the development was the bad deal in this case, and I'm sorry if I did not make that clear.
The bad deal is the City and Prestige Development hiring the same engineering firm to oversee both interests. If The engineering firm scoped out the project to use revenue intended for city streets to do site work on the developers lots. Harriman has a legal obligation to recover that portion of the bond issue.
As for the revenue, let's get real numbers and see whether any municipality and its taxpayers ever recover their costs on projects like this. Harriman has to pay yearly interest on the bond and all the other costs of police and fire protection, and administrative burden for the development. I doubt if the city comes out ahead but I'm willing to be educated with real numbers that can be backed up.
What would you have a city to do... Roll up its streets, shutter its windows and fade away into oblivion?
Mayberry is a nice dream but it doesn't really exist!
Moderate growth is inevitable for any town to continue to exist, otherwise services will deteriorate for all.
As far as real numbers, you can find them at the city office in the budget records. Check 'em out.
I am not against development, just dumb projects or badly executed projects with bad contracts which don't preserve and protect the interests of the tax payers and citizens.
And since you threw out the first number, where did you come up with it? Is that a total figure since PP started? I would be more interested in a yearly number since that could be compared to the cost of the bond issue and City budget.
It's a yearly number from the first full year Lowe's opened. With the other businesses there, It's a much higher number now.
Revenues from Lowe's handles the meat (loan and interest payments), the revenue from other businesses there provide the "gravy."
The newspaper has had several articles over the years concerning Harriman's financial state, before and after PP.
You don't have to trust them or me, just look at copies of the last six or seven year's city budget.
I like having Lowes in the area. Kroger was already here so that's not all net new revenue. Even so, this is not the issue at all.
The issue is whether Harriman Tax money was used to prep developer sites beyond what was necessary to build the streets. From the outside it sure looks like it was, and if so, my table top figures say that The engineering firm failed in its fiduciary responsibility to the city for a million plus dollars.
Since that would have benefited Prestige Dev. and not the engineering firm itself, we'll just sit back and see where the buck lands. I'm betting the City of Harriman picks up a chunk of pay back, though who it comes from ultimately, I can't say.
Kroger's tax revenue isn't new in the county's coffers. But it certainly is to the HARRIMAN coffers. If you remember, Kroger's was in Rockwood and Rockwood was receiving the sales tax/property tax revenues. Because of the move, those revenues are NEW revenues to Harriman.
There's also the issue of the building being much larger and therefore generating more property tax revenue. I have done some napkin calculating and come up with Harriman's cost being somewhere between 5 and 6 hundred thousand a year, counting bond issue cost, overhead, and allocated overhead from city operations. I could be way off either way, though.
Even so, All this is beside the point.
Harriman cannot legally invest in a private development without a referendum. By diverting the money from the bond issue there was a de facto investment forced on the Harriman tax payer. I'm not a lawyer but this looks fairly clear to me. Harriman's Bond money was supposed to be for the streets but was also used to prepare Developer land for resale and that part should be paid back.
I think the reason Vaughn and Melton withdrew from the contract with Harriman was because they would be testifying against the firm that actually did the specification and essentially recused themselves as a professional courtesy.
You said: "By diverting the money from the bond issue there was a de facto investment forced on the Harriman tax payer. I'm not a lawyer but this looks fairly clear to me. Harriman's Bond money was supposed to be for the streets but was also used to prepare Developer land for resale and that part should be paid back."
This is the argument that is presently at hand... The state audit thinks the developers owes the city money. The developers thinks it doesn't. Either way, it could be considered a small portion, considering the total cost of the entire project, $3 million vs the app $300,000 in question. And also considering the benefits that the city (taxpayers)has reaped.
Don't get me wrong, if the developers owe it they should pay, and I believe they will if that is the proven case in the end. But wouldn't you argue your case if it was you and you believed that you didn't owe it?
I don't understand why they didn't pay the bill when it was $300k. I don't believe they think they don't owe the money, otherwise they would have cooperated with more fully with the state audit and the City's requests.
Something really strange is going on and us outsiders can't really tell how big the fire is but there's a lot of smoke. At the very least, there was incompetent or inadequate, accounting or book keeping, however you want to phrase it, on the engineering firm's part and the City looks to be owed seven figures in compensation, not the $300,000 or so that would have closed this issue originally.
Let's all pay attention to how this plays out. I think we're going to learn a few things.
The invoices I saw were broken down by percentage... what work the contractor did that was determined to be the "city work" was totaled separately and what percentage was the developer's work was totaled and split off of the entire invoice's total. The city paid their portion and the developers paid theirs.
I don't know what will ultimately come of this, it will take someone with more accounting knowledge than I have to put the jigsaw puzzle together and come to a decision.