The Blount County Public Building Authority (PBA) met on June 15, 2011 to authorize several documents for multiple local governments. The meeting was alarming and raised several serious questions that need to be answered.
Keep in mind that the PBA has overseen roughly $2 billion in local government bond agreements since it’s incorporation in 2000. Thus, we are talking about a serious amount of money that the PBA oversees, which necessitates a critical evaluation of it’s practices.
The 5 board members are John Lambert (the husband of County Commissioner Peggy Lambert), Bob Kidd (the brother of County Commissioner Peggy Lambert), attorney Kirk Andrews, developer Darrell Tipton (who quitclaimed Blount County Mayor Ed Mitchell a piece of property) and a woman named Abby Evans.
The PBA met previously the week before and admitted that they had not read the previous loan agreements that were being amended, and Blount County Finance Director (FD) Steve Jennings told the PBA Board that he could not find the originals anywhere in the County files. This should set off an alarm ipso facto. However, it’s even more alarming that FD Mr. Jennings would encourage the Mayor and PBA Board, and that they would be willing, to sign amendments to agreements in which they have no copies of the originals.
The documents were presented to the PBA and Mayor by Mr. Joseph (Joe) K. Ayres, a man who wears many hats in these “deals”. He owns TN Loans, a company with no public phone number and is involved with Morgan Keegan and Cumberland Securities. He makes commission fees on multiple levels of these transactions.
Public Building Authority Agreements (Documents) are quite complicated (by design?) and include:
1. Loan Agreement
2. Indenture & Supplemental Indenture
3. Purchase Agreement
4. Remarketing Agreement
5. Program Administration Agreement
6. Broker Dealer Agreement
7. Market Agent Agreement
8. Indenture of Trust
The documents are so complicated and numerous, that the FD Steven Jennings could not name them all at the PBA meeting last week and had to be told, by Commissioner Jim Folts, the list of documents involved. This cast serious doubt on his qualifications to serve in the capacity of FD. His skills and knowledge appear to be limited to accounting and if looks could kill those of us in the audience would be dead. Furthermore, Jennings was all too happy at the end of the meeting smiling and shaking hands with Joe Ayers.
During his statements to the PBA Board, Commissioner Folts referred to the compensation plan that Joe Ayers receives in the Program Administration Agreement. In Section 6 Compensation it states, that the Program Administrator shall receive a compensation of “a sum not less than .005 nor more than .05 of the aggregate principle amount on the Bonds outstanding on such date, the determination of such fee to be set at the sole discretion of the Program Administrator.” (bolded for emphasis) Since this fee is paid on the entire $2 billion of outstanding loans, this means the Ayres can decide to pay himself anything between $10 million and $100 million per year. It must be nice to be able to set one’s own fee. If that isn’t alarming enough, the minimum amount of .0005 in the 2001 agreement is increased 10 times in the 2005 agreement. (page 25) Furthermore, if you read below the insane compensation plan, you find Joe Ayers openly disclosing some of the various hats that he wears to empty the wallets of tax payers. Clearly the PBA Board members do not read these documents before signing them.
Commission Folts told they Board that they have the fiduciary responsibility to look into the previous agreements that had been signed. It appears that Folts’ comments caused concern among the Board members because Kirk Andrew tendered her resignation from the Board and John Lambert moved the Board to look into acquiring an insurance policy for the board in the event that the BPA Board is sued. Nearly as much time was spent discussing their potential for personal liability as was spent discussing the documents that they signed.
It was also brought to light by FD Jennings that no one on the PBA Board, including the outgoing Secretary Kirk Andrews, has been keeping minutes of the proceedings. During the meeting, Darrell Tipton made the statement let the record reflect a unanimous vote, but there is no record of proceedings being kept.
At the end of the meeting, Mayor Ed Mitchell signed documents that I believe are renewals of letters of credit (liquidity for the variable rate demand obligations that can blow up at any time like they did in 2008 when the Commission had to refinance $48 million in an emergency), although I am not certain on that. FD Jennings told Truth Radio General Manager Harry Grothjahn that the program administration agreement can’t be changed and runs the life of the bond. That is false. Read the TN Loans agreements that have been redone 4 times (2001, 2003, 2005, and 2008). It wasn’t clear from the meeting if this agreement was being redone a 5th time because none of the citizens present were given a copy of the documents being signed.
Folts reminded FD Jennings that the program administration agreement had been redone 4 times and that his open records request for today’s documents had not be satisfied. Jennings popped off a response that he was going to have to start charging Folts for his time because he was taking 80% of his staff’s time with his request. That would mean that Jennings staff has enormous amount of free time if FD Jennings’ statement is to be taken literally. Why didn’t Jennings extend the same smiles and cordiality to the citizens, who pay his salary and benefits, that he gave Joe Aryes?
After the meeting, some citizens and I decided to pay the Mayor a visit. When we arrived the Mayor’s Secretary told us to have a seat, that the Mayor was in a meeting with FD Jennings and TN Loans/Morgan Keegan Joe Ayers and that the Mayor would be with us in a few minutes. When I said, you mean he’s having a meeting with Ayers now after he signed the documents, she told us that she didn’t know. This was about 10:30. A few minutes later she reappeared and told us that the Mayor’s appointment was scheduled until noon, letting us know that we wouldn’t be able to see the Mayor anytime soon as was originally implied. I went and ate lunch and came back around noon and the Mayor was gone giving a proclamation. I gave the Secretary my card and told her to have the Mayor call me. No call was received on Wednesday, Thursday or Friday.
You can view the 4 videos here. There is a brief period of about 1-2 minutes that I missed of John Lamberts comments regarding the Board purchasing an insurance policy.