City Hall and APS lawyers trade jabs, threaten legal action in Beltline funding dispute
The fight continues!
The ongoing dispute between the city and Atlanta Public Schools over roughly $160 million in funding to the Atlanta Beltline appears to have worsened in recent weeks.
For the past several months, Mayor Kasim Reed and recently-retired APS Superintendent Erroll Davis, who agreed to advise the board to finish negotiations, have remained locked in a standoff over the long-standing agreement. Efforts to resolve the issue were expected to make progress this summer.
But in a recent series of letters, which the AJC obtained through an open records request, the ongoing talks between lawyers for both sides over the funding have led to threats about potential legal action that could delay the construction of the 22-mile loop of parks, trails, and greenspace.
On August 12, Troutman Sanders partner Daniel S. Reinhardt wrote a letter on behalf of the school system demanding that the city pays its outstanding debts. Here’s an excerpt:
The City’s and Invest Atlanta’s actions to date have demonstrated your clients· intention to circumvent and manipulate both the letter and the spirit of the Agreement. Indeed, as discussed in detail below, your clients’ wrongful conduct in connection with the Agreement constitutes breaches not only of their express contractual duties and obligations to APS, but also of their duty of good faith and fair dealing under Georgia law.
First, as evidenced by your clients’ own financial statements, the City and Invest Atlanta have unilaterally decided to place BeltLine development expenses ahead of their contractually required annual payments to APS. This decision is in direct violation of Section 1 of the Agreement, which provides that “in all events.” the PILOTs ·shall be senior to any other redevelopment costs incurred by the City or ADA for the BeltLine TAD.” Or to state this provision another way, after making the annual bond payments, the City and Invest Atlanta are obligated to make the PILOTs to APS and Fulton County before paying for any redevelopment costs. regardless of the amount of the increment. Instead of honoring this provision, your clients made the Year 3 PILOT over eleven months late and lacking $117,534.25 in contractually mandated interest. This pattern of disregard for the terms of the Agreement has continued in 2014.
APS has an obligation to provide a quality world-class public education to Atlanta’s children. This mission is essential to the future of our community and our city. Thus, in making this demand for payment, it is not APS’s intention to hinder or disrupt the development of the BeltLine project. Rather, APS desires merely to enforce the terms of the Agreement — terms which the City and Invest Atlanta are demonstrably able to live up to but, out of a calculated intransigence, have chosen to disregard. In order to rectify this situation and spare all parties the trouble and expense of what would inevitably be a protracted legal action, please confirm that your clients will be remitting payment to APS of the amounts described above.
Cathy Hampton, the city’s lead attorney, one week later said the city remains open to “productive” discussions about the funding dispute, but that Reinhardt’s claims would not hold up in a courtroom. In her response, Hampton accuses him of “falsely portraying” the Beltline funding agreement and outlines efforts that the city and the mayor have taken to help support the city’s public school system. Here’s a part of her response:
The agreement dates back to 2005, prior to the collapse of the real estate market, and includes terms that are not viable in today’s economy. The City, Invest Atlanta and Atlanta BeltLine have attempted to work with APS on necessary amendments to no avail since 2009. While this context may have little import in a contract between parties in the private sector, it is essential to a financial matter between governmental partners where the outcome directly affects the public. The City, APS, Invest Atlanta and Atlanta BeltLine are all fiscally committed to enhancing the quality and availability of public school and extramural educational opportunities for Atlanta’s children.
It is with this backdrop that you characterize the City, Invest Atlanta and Atlanta BeltLine as lacking “good faith and fair dealing” in its conduct with APS. Nothing is further from the truth. Your combative approach encourages expensive and time-consuming litigation, which diverts APS money, employee time and energy from pressing educational needs. As the new superintendent begins her transition, she faces daunting challenges that will require laser focus to address. Students would benefit from renewed concentration on a more effective use of a budget that exceeds $600 million, funded in part by 49 cents of every property tax dollar within the City. Despite boasting the highest per pupil spending rate in the metropolitan area, APS only produces a 59 percent graduation rate. APS is attempting to resolve the worst school cheating scandal in the history of Georgia and perhaps the United States. The APS pension has been critically underfunded for decades and currently cannot cover 82 percent of its obligation to its pension participants. It will take many years of hard work and proven success for APS to gain the public’s trust and erase the stigma of institutionalized deception. Threatening our clients with litigation does nothing to advance these goals. Please note though that the City always stands ready and willing to litigate.
Lastly, your decision to issue a threatening demand letter without so much as a courtesy call to Ms. Newell, Ms. Perkins-Hooker or me is unfortunate, especially on matters as consequential to the public as the Atlanta Public Schools and the Atlanta BeltLine. While we appreciate zealous advocacy as much as anyone, we expect the same professional courtesy due any fellow attorney, Jet alone the chief legal officer of the largest city in Georgia, of Atlanta’s redevelopment authority and of its agent Atlanta BeltLine. This omission is particularly noteworthy given your courtesy call to a member of the Atlanta BeltLine Board of Directors. It is our hope that we and our respect ive clients can work toward resolution of our dispute in a product ive and professional manner.
You can read the full exchange between lawyers from the city and public school system over at local education blog Financial Deconstruction.