City Solictor John DeRosa explains the legalities surrounding a settlement made with the Freight Yard Pub.
NORTH ADAMS, Mass. — The City Council on Tuesday rejected borrowing $160,000 to settle a lawsuit taken out against the Redevelopment Authority.
The failure leaves the underfunded authority on the hook for the full $290,000 and the outcome of the settlement with the Freight Yard Pub unclear.
Mayor Richard Alcombright and the city's attorneys, John DeRosa and Richard Dohoney, of Donovan & O'Connor LLP, left immediately after the vote.
"I will be going back to the Redevelopment Authority to evaluate any and all next steps," the mayor responded later.
The eight councilors present split down the middle, falling short of the two-thirds vote required to pass the order. Councilors Keith Bona, Eric Buddington, Wayne Wilkinson and Benjamin Lamb voted nay; Councilors Nancy Bullett, Lisa Blackmer, Joshua Moran and Kate Merrigan voted in the affirmative. (Councilor Jennifer Breen has been out on maternity.)
The settlement comes from a lawsuit filed in 2011 by the restaurant, a tenant of Western Gateway Heritage State Park that the Redevelopment Authority oversees. Sean and Colleen Taylor, operating as Bay State Hospitality Group, sued over the loss of parking during the construction of the Hadley Overpass, a situation it said significantly cut into its revenue and forced it to take out loans to survive.
A jury found the authority responsible for a breach of covenant, dismissing five other complaints; the state Department of Transportation was initially named in the suit but later dropped. The city was not named as a party in the suit.
The Redevelopment Authority on July 8 had agreed to a settlement of $287,574.89; the restaurant agreed to place a sum of $42,416.62 in escrow to cover the next year's rent. The funds represent the 12 percent interest accrued against the authority since the suit was filed minus rent not paid by the restaurant over the past few years the case was in court.
In July, the mayor stated his intention to ask the city to borrow $160,000 toward the judgement, with the authority paying $130,000 from its $167,000 account.
Alcombright argued that the debt was an obligation of the city, based on the advice of the city's attorney and the recommendation of both bond counsel and the state Department of Revenue. The Redevelopment Authority does not take in enough revenue to borrow on its own, he said.
"I think that for all of you, this is extremely uncomfortable. I don't disagree," he said. "But I think the city has an obligation ... we exhausted virtually every plausible appeal process.
"I just hope you guys can see through the muck of this to keep it off our backs ... It will continue to muck up any talks with investors about the park."
Councilors, however, were concerned that taxpayers could be on the hook for a lawsuit lost by the Redevelopment Authority.
"I don't like the idea of how we're going to pay for it afterwards," said Councilor Keith Bona. "Those discussions could affect my decision about how to approve it.
"If we say no, what will happen? ... I'm not comfortable saying yes to this."
DeRosa said he could not predict exactly what would happen but postulated that the pub's attorney could file against the city and the authority.
"It makes good sense to put it to bed," he said. "I would anticipate they would not let it lie. ... The costs and expense would entail and that would not be covered by insurance."
Both Bona and Councilor Eric Buddington pointed out the city was not named in the suit and that the Redevelopment Authority was a separate entity. Councilor Wayne Wilkinson called it a "hidden tax" on the taxpayers and questioned the Redevelopment Authority's accepting of a settlement it could not pay.
If we say no, what will happen? ... I'm not comfortable saying yes to this."
— Keith Bona
Councilor Joshua Moran, however, said rejecting a court settlement would raise concerns about the city's good faith relations with its commercial sector and future investors.
"We can dispute what the Redevelopment Authority can do but that's another discussion ... end of the day is us," he said. "The city that has to make good on a wrong. This isn't up to interpretation."
With the low occupancy of paying tenants in the park, Freight Yard Pub is the park, Moran said.
"I don't disagree with the court's decision but I can say I'm not happy with the fact the city's being asked to foot the bill," said Councilor Nancy Bullett. "I see it as nothing more than loaning [the authority] until they can pay it back."
Councilors Benjamin Lamb and Kate Merrigan said they were uncomfortable approving a borrowing without having a written agreement in place setting out how the authority would recompense the city.
Alcombright said his intention was to bring the mechanics of the borrowing to the Finance Committee for review and recommendation. Any repayments on the borrowing would not occur until the next fiscal year, he said.
Council President Lisa Blackmer offered a compromise in that the mayor could bring forward a separate order on how the repayment would be structured, after consultation with the Redevelopment Authority, at the next meeting when the borrowing order would have a second and final vote.
"Would that ease your concerns?" she asked.
Former Mayor John Barrett III, who figured heavily in the case, read a Christmas card he'd gotten from the Taylors shortly before they filed and claimed the authority and Alcombright were at fault for not having enough money by buying the Sons of Italy in 2011 and allowing a proposed investor to force out Northern Berkshire Community Television; Alcombright retorted he'd inherited the lawsuit issue from Barrett.
Several residents called for the council to deny the borrowing, saying the authority could sell off land to pay the debt.
The mayor rejected that idea because it would negatively impact the "integrity of the parcel" that runs from West Main Street to Apkin's scrap yard. That area is slated for a bike path, the Hoosic River Revival pilot, the Berkshire Scenic Railway and a pedestrian underpass linking the park and the railway. It would also affect any marketing of the park to a private investor, he said.
Dohoney, who litigated the case warned that this was "the most advantageous settlement the city is going to get."
"The consequences would be more severe than the offer on the table right now," he said. "At the end of the day, that's a city obligation."
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City Solictor John DeRosa explains the legalities surrounding a settlement made with the Freight Yard Pub.
