AKRON (TDB) -- A suburban community in Ohio has defaulted on a payment for its town hall, a $5.4 million structure financed by port authority bonds. That's certainly chilly news in a state still seeking some economic footing even as the national economy slides into recession. The report about Twinsburg Township's delinquency turned up today in this Fitch rating service analysis of a Summit County port authority bond fund. Fitch said the fund -- which is used for economic development projects -- remains stable. But it flagged the missed payment, which occurred in a NE Ohio community, a region of the state that has been increasingly troubled by manufacturing job losses. Here's what the bond rating firm noted:
"The (port) authority recently informed Fitch that Twinsburg Township, which makes up 12.3% of the bond fund's portfolio ($5.4 million), failed to make its Feb 1, 2008 lease payment. The associated bonds are secured by an annual appropriation leases, which is backed by a first mortgage lien and security interest on a 70,000 square foot town hall building. The building houses township offices and a county's sheriff's office.
"Although Twinsburg's payment remains delinquent, the (port) authority used its own funds from a supplemental reserve account to make up for the missed payment. The authority reports that it plans to use additional moneys from its supplemental reserves totaling $1 million, if necessary. The supplement reserve account is not pledged to bondholders; however, it is a restricted account set aside by the authority's board to supplement the bond fund. The bond fund's reserves remain adequate to absorb any permanent losses that may be incurred as a result of Twinsburg's lease payment default."
Twinsburg Township apparently is not explaining or sharing much information about the default with its estimated 2,100 residents, according to the community's Web site. It says there is no news to date in 2008.
[UPDATE: 9:16 AM 4/12/08 -- Today's Plain Dealer reports the port authority served notice it will evict the township. The government offices are now supposed to vacate the administrative building, which costs the township about $39,000 a month to lease from the port authority. Inquiring minds are left to ponder: Who -- or what -- moves in to the bond-financed building after the township gets booted out? Is the new building going to sit vacant without a tenant? Was more than $5 million spent without purpose by public agencies?]
Hey Bill!
ReplyDeleteThought I remember reading that T-burg Twp eventually made good on the late payment, but don't recall the Port making the payment angle. Perhaps that was reporting poorly in the ABJ.
Regardless, this is as much political football as monetary pressures - at least one trustee thought the building was a poor idea and now has an ally. Together, they voted to stop payment iirc.
Redhorse --
ReplyDeleteGood to hear from you, and thanks so very much for the additional information. But, as you know, petty politics can sure turn out to be not so petty when bonds and financial instruments are involved. This stuff resonates all over the world today because the rating services advise the markets, and the markets are truly global. And our Ohio economy is not exactly sterling. Have a great Saturday . . .
Bill --
ReplyDeleteYou should add this:
"The township's delinquency required the port authority to dip into a reserve fund. The port authority's pool of money is a tool created and set aside for economic development throughout the region. The township's behavior is not beneficial to the region. Ohio cannot afford to be seen as a place where rogue financial conduct is acceptable or explained away."
Wow. 70,000 square feet for $39k/month!?! That's about half the going rate for commercial office space in Twinsburg. No wonder the Port Authority started eviction.
ReplyDeleteI believe this latest "default" notice is just a snap shot of a three year story of
ReplyDeletedeceit and corruption involving the past township board of trustees, the county
port authority, and the contractor involved in the project. My hope is that
one day someone will be brave enough to unwind the tangled web and reveal what
really has been going on. So far, that hasn't happened and the Board exercised
its legal right, as clarified by the county prosecutor, to cancel the lease.
The lease with the Port Authority is a series of one year agreements that is
cancelable each year. The Board, through majority vote on Jan 2nd voted to
cancel the lease. Since then we've been working with the Port on an exit plan.
Last meeting we appropriated approx. $104,000 for our occupany during Feb,
March, and April. That money was received by US Bank, the trustee handling the
funds, on April 9th. I believe that we've given the Port what they asked for
in making these payments.
Carol Gasper, Twinsburg Township Trustee
Carol --
ReplyDeleteThanks for your comment and explanation. You seem to be saying there is a lot more to this than a payment default on a bond-financed project. "Deceit and corruption" are pretty strong words. Good luck as you all work to straighten things out up there in T-Burg Twp. I know the area, which I used to cover during my days at the Akron Beacon Journal in the early 1980s.
From the little bit I've read, it sounds like the previous group of trustees got the township into a bit of a mess. The Plain Dealer said the new building is 27 times larger than necessary to house their 7 employees.
ReplyDeleteFortunately the knuckleheads secured a great lease rate (see my comment above). Now that the deed is done, it seems to me that the township should make the best of it.
Anywhere they move to is likely to cost them more per square foot. Rather than abandon the building, the trustees would be wise to sublet the portion they aren't using at market rates and pocket the difference.
The Township had a LEGAL right to exercise the option to not renew the lease. Why is this so hard for folks to grasp?!? LEGALLY, the Township HAD THE RIGHT to not renew the lease. If the Port Authority had done it's due diligence and not allegedly taken advantage of the former trustees lack of business insight, monetary management skills, and some would say plain old common sense then the Port Authority wouldn't be in the mess they are in right now. Had the Port Authority exercised some forethought and realized that elections continue and elected officials are replaced based on the will of the people, not select politicians, then they should have been more mindful of the consequences of the foolish decision to enter into such a shady deal, especially considering the FACT that the Township had the option EVERY YEAR to cancel the lease.
ReplyDeleteSo if you all want to place blame on someone for contributing to Ohio's economic woes then look first at YOUR elected officials who exercised the right to enter into such a ridiculous deal and ask yourselves the question "Why didn't I do as the citizens of Twinsburg Township did by exercising their right to judge and hold politicians responsible for their actions through their vote” - which for those who don't know was almost 2 to 1 in favor of the new board. One major reason for the shake up in Township government was the waste the citizens’ saw and rightly attributed to the former leadership in Township government. WE had had enough!
Stop blaming a small community for Summit County's mess and Ohio's larger economic issues and get the facts so that you can make informed comments instead of relying on the ABJ misrepresentation of the facts - some would call negligent.