Golf course bonds leave Buena Vista in the rough
Buena Vista and New York-based ACA Financial Guaranty Corp. are locked in a legal battle over $9.2 million in bonds issued 11 years ago to build a municipal golf course.
The course, Vista Links, was envisioned as an economic stimulus for the city of about 6,600 people, but it hasn’t lived up to expectations. The city stopped making payments on the bonds in January 2015.
ACA, which insured the bonds, filed suit in Buena Vista Circuit Court June 13, threatening to take over city hall, the police department and the golf course, all of which are listed as collateral on the bonds. The city has asked for the suit to be dismissed.
Under a forbearance agreement negotiated in 2011, ACA reduced the city’s payments by 50 percent through Jan. 1, 2016, with the deferred amount to be paid back interest free over five years after the bonds’ original maturity date.
“Everybody knew going in that these bonds were subject to annual appropriations every year,” says city attorney Brian Kearney. “The payments are $660,000 a year, and that is a lot for real estate development that didn’t work.”
Kearney says the city is willing to talk with ACA at any time to try to resolve the issue. “The city has done everything it can to negotiate in good faith, but ACA refuses to negotiate. If the only negotiation is to make all of your payments in full, that’s not a negotiation.”
ACA argues that the city unilaterally broke the 2011 agreement by failing to make payments. The company says it is willing to resume negotiations with the city but it would “require guarantees from the city that would prevent it from breaking whatever agreement might be reached going forward,” says ACA director James M. Capruso. “However, if the city continues to fail to meet its financial obligations and properly serve its taxpayers, ACA looks forward to responding to the city through additional court filings.”
Buena Vista, he says, “is trying to have it both ways and is taking great risk by failing to fulfill its financial commitments. The city claimed at the time bonds were issued that it had the authority to present a mortgage. Now the city is conveniently claiming that it doesn’t have to pay its bonds because it didn’t really have the legal authority to grant a mortgage to secure the bonds. This is not the appropriate way to conduct business or represent taxpayers.”
In a news release issued when the company filed suit, it said Buena Vista offered last year to settle its bond obligations by paying the value of city hall, the golf course and the police department building. Together, those assets represent “a value prohibitively less than” what the city owes on the bonds, the company said.