The city of Fairhope is preparing to incur another $5.75 million in debt to meet the terms of a legal settlement to purchase the Dyas Triangle, a 108-acre property at the city’s front door that has been the subject of periodic litigation for more than 40 years.
In October, Mayor Tim Kant and the Dyas family reached an agreement on a purchase price of $8.75 million, $3 million of which was to be paid from the city’s utilities funds with the balance planned to be covered by the Virginia-based Conservation Fund.
At the time, the plan was for the Conservation Fund to hold the deed to the property while it also helped the city secure grant money for a complete purchase. On Dec. 9, the city council reached a preliminary agreement with the fund whereby the city would pay a $150,000 management fee plus 4 percent interest on the $5.75 million. The Conservation Fund was also asking for a consulting fee of $25,000 per quarter.
Today, City Council President Jack Burrell said the council ultimately decided the Conservation Fund’s fees were unacceptable and the city also had indications the fund was uncomfortable with terms related to the settlement. Instead, the council will decide tonight whether to finance the balance from the Dyas family or take on a $5.75 million general obligation loan from Compass Bank.
“There were a couple of things, we are going to be able to get a much better rate by going to local bank rather than to the Conservation Fund or by financing from the Dyas family and we’re also eliminating $350,000 in fees,” Burrell said. “For consulting, they were going to help us secure grant money for reimbursement, but since that time we thought that over and the mayor and I have had very lengthy conversation with the Governor and he said he’ll help us look at other avenues of funding.”
The new debt would essentially wipe out $4 million the council recently budgeted to erase from its larger $40 million total debt obligation in 2014, while also adding $1.75 million more. The city has $7 million in a rainy-day fund, Burrell said, but decided against dipping into reserves to settle the lawsuit.
“Politically it’s a better maneuver,” he said. “It’s hard to ask for grant money if they knew you already wrote a check for it. If we pay for the land, we reduce our chances of getting grant money and we would rather be indebted than to wipe out our savings.”
Kant said the bank is offering an interest rate of 1.3 percent of closing costs of just $2,500. If the council decides against the loan, the terms of the settlement stipulates that the city finance the remainder of the purchase from the Dyas family with monthly installments and an interest rate of 4 percent. Essentially, dealing with the bank will save the city around $200,000 over the life of the loan.
Burrell said Kant’s original plan to secure RESTORE Act money for the property is still an option, but the process is moving slower than anticipated.
“The fallback plan was always to get RESTORE Act money, but as the federal government settled some BP suits, it looks like the RESTORE Act money is going to be much longer in coming than we originally thought,” Burrell said, adding that Gov. Bentley suggested the city may be eligible for reimbursement through National Fish and Wildlife Foundation grants or the state’s Forever Wild program.
“All of that is in its infancy right now but part of the terms of the settlement agreement was we had to close (with the Dyas family) by Dec. 31,” Burrell said. “There was talk of delaying but you can’t delay the inevitable and I don’t know what will change with regard to securing grant money.”
Meanwhile Burrell said regardless of the new debt, the settlement was a positive for city.
“For the long-term good of the city it was an excellent choice. We’re going to have this land and it’s going to provide enjoyment to infinity.”
Updated to include information about the interest rate of the bank loan and settlement agreement.