Open letter in regard to first selectman’s wire mill meeting
To the Editor:
In the first paragraph of her April 28 notice to the town, our First Selectman Julia Pemberton writes [in regard to the foreclosure proceedings related to the former Gilbert & Bennett Wire Mill in Georgetown] that “[T]he foreclosure cannot extinguish tens of millions of dollars in bonds and other debt owed by a separate municipal district which had been created for the original project by the state legislature in 2005.”
The municipal district in question, of course, is the Georgetown Special Taxing District (“GSTD”). Enabled by Senate Bill 1331, the GSTD passed the Connecticut Senate on June 4, 2005; passed the House on June 8, 2005; and was signed into law by Gov. Jodi Rell on July 13, 2005.
In September 2005, according to The Pilot, Georgetown Land Development Co. (“GLDC”) and Georgetown Redevelopment Corp. (“GRC”) President Stephen Soler cast the sole vote required to establish the district.
A peculiarity of Connecticut statutes governing special districts is §7-329, “Termination of District,” which ties a district’s indebtedness to “the legislative body of the town in which the district is located.”
Otherwise, one of the chief private sector benefits of standard Special Districts is that the financing is “non-recourse borrowing”; if a developer defaults on the bonds, the only recourse is to foreclose on the property.
In 1989 with House Bill 7580, the Connecticut General Assembly amended the statute to add a town’s ultimate liability in the effort to “strengthen financial accountability of independent taxing districts.”
This amendment presumes that the taxing district had been formed by a two-thirds majority of residents, which also seems fair — a town sets up a special taxing district and is responsible for its debts.
The Georgetown Special Taxing District, however, was set up by a Special Act, and its conditions are appropriately different. According to the 1989 legislative deliberations, “in the case of a Special Act, if it was specific, the Special Act would take precedent.”
In transcripts for the Joint Committee deliberations on SB 1331, Sen. Judith Freedman questions Finance Committee co-chair, the late Sen. Eileen Daily, on legislative intent: “Once the bonds have been let and if something unforeseen happens and the bonds default, will the Town or the State of Connecticut be in any way responsible for those bonds?”
Sen. Daily replies, “Sen. Freedman, I really appreciate the question and the opportunity to respond. It’s important that people do know that neither the municipality nor the State of Connecticut would ever be held liable for these bonds. These are private bonds.”
This corroborates the position of Redding’s bond counsel Marie Phelan, Pullman Comley, quoted by First Selectman Natalie Ketcham in The Pilot, “It is her legal opinion there is no risk to the town with the creation of a special tax district.”
Redding’s Pullman Comley foreclosure attorney Adam J. Cohen published a text in 2005 extolling the benefits of special taxing districts, titled “Do-It-Yourself Government: Creating and Understanding Special Taxing Districts.” (www.pullcom.com/media/publication/70_news.493.pdf)
“Creating them can be good for your clients, and understanding how they work can be important for your practice,” attorney Cohen writes.
He makes no mention of district debt, risk, or town liability.
“Understanding the powers and purposes of taxing districts is essential for Connecticut communities, taxpayers, and their counsel who might benefit from and consider forming or working with these specialized governmental entities,” attorney Cohen writes in closing.
The intention of §7-329 was to “strengthen financial accountability,” not turn public coffers into a private ATM.
Holding real residents of a real town paying real taxes liable to the wanton debt of a paper municipality with out-of-state governance, population zero, is a perversion of law and justice.
More for discussion this Sunday, May 7, at the Redding Community Center from 6 to 8 p.m.