Town of Redding: Wire Mill site remains a legal quagmire

Monday night’s special Board of Selectmen meeting — scheduled to give residents an update on the town of Redding’s foreclosure on the Gilbert & Bennett wire mill site — included a 30 minute presentation by First Selectman Julia Pemberton, and an question, answer and suggestion session that ran for almost two hours.

The biggest take away from the night was simple: The foreclosure of the wire mill site, undertaken by the town in 2014, remains a complicated legal situation. Depending on the legal tactic ultimately decided upon by voters, Pemberton said, the proceedings could stretch on for years of appeals.

But, in the short term, another round of arbitration discussions between the town’s attorneys and attorneys for bodies who also have a financial stake in the foreclosure — U.S. Bank, JAST, and RJ Tax Liens — is set for June.

Historical background

Even the most responsible taxpayer could not be blamed for losing track of the history surrounding the wire mill site, so here is a short review.

The town’s involvement with the Gilbert & Bennett site can be traced back to the late 1980s, when the original Gilbert & Bennett wire company was heavily fined for improper removal of industrial waste and declared bankruptcy.

After this, the plant was sold to a development company which wound down its industrial operations, planning to open the site for commercial development.

That project never got off the ground, and the company stopped paying real estate taxes to the town, which issued liens against the property.

By the early 2000s, the town sold its tax liens on the property to the Georgetown Land Development Corporation (GLDC), headed by Steve Soler. His intention was to renovate the site, building a large number of homes and space for businesses.

To help facilitate this plan, the Connecticut legislature passed a bill allowing the creation of a Special Taxing District at the site, which allowed it to operate as an autunomous municipal entity — only able to earn revenue by either levying taxes or issuing bonds. The only resident of the Special Taxing District was the GLDC, and four of the five special taxing district’s seats were held by the GLDC.

However, Soler’s GLDC plan also never got off the ground, despite taking in $20 million in revenue after issuing high-risk special taxing district bonds.

Since 2007, the town has not collected the $250,000 in taxes owed on the site annually in real estate taxes, and is required to provide Georgetown’s water treatment plant with $250,000 annually to continue its operation.

Now, three years after the town initiated foreclosure proceedings against GLCD, the corporation still owns the property and the town is owed $3.5 million in unpaid taxes on the wire mill site, and $2.2 million in liens. The town’s fire district is also owed $180,000 in unpaid taxes.

In addition, the GLDC is indebted to U.S. Bank for $18 million, to JAST for $3.4 million, and to RJ Tax Lien for $1.3 million.

In 2016, a Connecticut court ruled that the town of Redding has first priority to collect on its unpaid taxes and debts.

The current situation

Pemberton told residents in the audience on Monday that “all construction and environmental cleanup” is halted at the site, and that the town is not necessarily “responsible for the [Georgetown Special Taxing] District’s debts.”

However, it’s responsibility for the taxing district’s debts is dependent on how the town proceeds in foreclosing on the property.

(The town’s decision in finalizing the foreclosure is dependent on a vote by residents).

If the town’s voters chose to foreclose on the property and becomes its sole owner, the town could ‘sit’ on the debt owed to U.S. Bank, JAST, and RJ Tax Lien in perpetuity, town counsel Adam Cohen says, so long as the property is devoted to non-revenue generating use — like open space, parks, municipal buildings, or parking lots.

If the town’s voters decided to foreclose on the property and convert the wire mill into a revenue producing site, it would become liable for the debts owed to outside companies. Similarly, if the town foreclosed on the site and sold the property as-is, the new owner would be liable for all debts owed to outside creditors — rendering the property effectively valueless.

In looking to find a middle ground, Pemberton suggested another option for the foreclosure proceedings, in which the town and other creditors jointly agree to sell the site to a developer and share in the proceeds from its sale, and future tax revenue from the site for up to 50 years. The percentage of the site’s tax revenue collected by the town and each creditor would be dependent on the amount owed to them initially by the GLDC.

Pemberton said these ideas for foreclosure are just options, and said she welcomed community input on finding other ways to solve a complex legal problem.

Residents’ ideas and comments

Two residents at the meeting, in particular, stood and presented alternative options for the disposal of the wire mill site.

Tobey Welles, Redding’s Planning Commission chairman, suggested the Board of Selectmen and town counsel consider a solution whereby the areas of the property attractive for development are sold off, and those considered too contaminated for development are held as open space.

Such a suggestion would hybridize the idea of buying and holding the property for public use, and striking a deal with creditors to reap tax revenue from a future development project.

Alternatively, resident Lou Bender suggested that, because the site has sat without progression for 27 years, the town should work quickly to remove itself from the site.

“It has been a blight for 27 years, and there is no short term resolution in site. If we can sell our lien holdings to [the other creditors], and allow them to manage options for the site, it would take operational costs away from us. [The money from the sale] would be an immediate tax benefit, it would alleviate litigation litigation costs [by ending litigation.]”

Pemberton said in response to this idea that it had been considered, but that the terms offered by bondholders for the purchase of the town’s liens were “not beneficial” to the town.

Questioning the town’s counsel

Jane Philbrick, a designer who has been leading her own community discussions about the wire mill over the last two months, was also in attendance at Monday’s meeting.

She did not challenge the options for development presented by Pemberton and town counsel directly, but instead questioned why the town has continued to rely on it’s law firm, Pullman & Comley, for advice on the wire mill for the last 16 years.

Philbrick said after the meeting she cannot understand why the town would utilize the same law firm that helped set up the Georgetown Special Taxing District, to try and get out from under the debt load of the now defunct GLCD, which controls the taxing district.

“I don’t think everyone understands the special taxing district is courtesy of our law firm,” Philbrick said during the question and answer session.

“I do not think we are well served by counsel — period,” she added.

Olivia Greenspan, another Redding resident, phrased a similar sentiment a bit differently.

“We’ve been here before, we’ve gotten a lot of information before,” she said during the presentation before noting it’s important to remember “who you’re getting your information from.

“I so appreciate the forum, but Jane’s point and my point is, that the forum is one thing, and the source of the information presented during that forum is another.”