County attorney’s office advises mayor’s office and Council president: Financial and legal consequences ‘may be significant’
Louisville, KY., – Following a vote Thursday by Metro Council, Louisville Metro Government (LMG) has suspended all work on the current budget’s debt-funded capital projects, effective immediately.
The Council voted 18-8 to suspend the bond ordinance that would fund the projects, which the Council has twice approved – first when approving the FY19 budget in June, and then again the next month, when approving the bond reimbursement ordinance.
These are bonds that were authorized to pay for projects ranging from paving and sidewalks throughout the city, to funding for the Northeast Regional Library and seed funding for the Louisville Urban League’s Sports and Learning Complex in Russell. A portion of the $83 million bond issue, $19.3 million, has already been spent, and another $19 million is obligated to our contractors for work in progress.
“We executed the projects that the Council publicly appropriated last June,” said Daniel Frockt, the city’s Chief Financial Officer. “The bond ordinance that was tabled on Thursday is simply the mechanism to pay for projects already approved.”
Now, given the uncertainty over how much of the bond issue will be approved and when it will be approved, Frockt said in a letter to LMG directors, suspending work is the “prudent” action while working with contractors to minimize the impact of a suspension, in terms of financial penalties, project delays and equipment purchases.
In a letter to the Mayor’s office and Council President David James, Assistant Jefferson County Attorney Matt Golden advised of the legal risks of the bond ordinance being tabled, writing that “the consequences for the tabling the bond ordinance on Thursday night could be significant.”
“With these funding uncertainties, Metro may need to consider terminating or suspending the contracts for these projects,” he wrote, though that “may potentially result in claims against Metro. … Similarly, asking a contractor to stop work temporarily may put Metro at risk for additional claims of contract delay,” including the costs of demobilizing and remobilizing its workforce, or any increased costs in materials which occur during the delay.
Golden added that given that the scope of the contracts is in the millions, “the damages that flow from these breaches may be significant.”
Mayor Greg Fischer described the Council vote – made unexpectedly and without consultation with the city’s Office for Management and Budget – as deeply troubling, as it creates the possibility of damages and/or losing vendors who cannot wait for a decision and puts worthy projects in jeopardy.
Responding to Council members who said the vote was meant to slow spending, the Mayor added: “We have worked very hard over the years to get the city’s financial condition rated in the top quartile of America’s municipalities. There is a responsible way to approach disagreements on spending – but putting the fiscal credibility of Louisville Metro government on the line is not the way to do it.”
“New council members may not have known the implications of their action, but all who voted to table the ordinance have unnecessarily thrown our hard-earned recognition for fiscal dependability into question,” he said. “I urge them to get their questions answered quickly so we can minimize the legal and financial complications their action has caused.”