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Georgetown eyes bankruptcy


July 08, 2009
A special meeting, called by the Georgetown Town Council on June 29, set the course for the town to use bankruptcy to relieve it of financial burdens that officials say could cripple the town's ability to move ahead with much-needed plans for growth.

The meeting was called to vote on an ordinance that was labeled "Authorizing Debtor Status Ordinance," which actually gave the town council the authority to begin bankruptcy proceedings if needed to clear up certain debts that it considers to be exorbitant.

The ordinance was approved with a 4-0 vote (Councilman Aaron Striegel was absent).

Billy Stewart, president of the town council, said the town only can file bankruptcy on unsecured debts. One of those is a $450,000 penalty that could be imposed by the New Albany Sewer Board in response to a delay in building a wastewater treatment plant.

Georgetown officials signed an agreement with New Albany in 2006 that would have the town off of New Albany's sewers by this past February, but delays in building their own wastewater treatment plant have caused Georgetown to ask for extensions of the agreement, which have been granted at least twice. The last extension, for 60 days, was given by the New Albany City Council on June 10 to allow attorneys on both sides to work toward an agreement.

The other debt that town officials are concerned about is a claim for more than $600,000 by Capitol Engineering, a construction company in Jeffersonville that is part of the Hughes Group that was hired to build the wastewater treatment plant on the O'Brien property, a 23-acre site the town bought for that purpose. But resistance from neighboring Edwardsville residents stopped progress on construction of the plant, and Capitol Engineering now says Georgetown owes it for losses incurred while it was put on hold, waiting for Georgetown to settle the land disputes.

"The contract the town had with Capitol Engineering don't allow for those kinds of damages," Stewart said. "They claim that while waiting for Georgetown, they could have started other jobs. The prior town council ordered equipment for the plant, but it was never delivered. That was over $400,000 just for that equipment. But we never received it, and Capitol Engineering never received it. They do a lot of talking but never listen. We don't believe they are entitled to the money."

Stewart said the town council looked at bankruptcy laws and determined that they could protect the town.

"You have to have something in place to grant the right to do it, to file bankruptcy," Stewart said. "That's why we passed this ordinance. We're not saying we're going to file, but now we can, if we see the need."

Stewart said the town has been seeking expert counsel from a law firm that specializes in bankruptcy.

"We found one," he added. "They said they would take it, and I don't believe they would if they thought we were going to lose. And I believe they will only take it if we've done everything legally possible to resolve the issues with New Albany and the contractor. We have to do something. We can't raise taxes, yet the law says we have to provide services. There's a limit on what we can charge for utilities; we can't just arbitrarily increase rates on people. So, if we can't raise taxes, which are our only available funds, we're really limited on what we can do. The last thing we want to do is file bankruptcy, but if we can't come to a reasonable conclusion, we'll have no choice."

Stewart said the town has already paid engineering costs of $250,000 for the plant but can't pay construction costs when nothing was constructed.

"We've already paid for the design of the plant," Stewart said. "We've paid for engineering. We've paid another company $90,000 to build a bridge on the property. We just want a reasonable agreement.

"The only unsecured debts we have are New Albany and Capitol Engineering. New Albany has bent over backwards for Georgetown; they have been reasonable. But if we're forced into bankruptcy, we won't be able to build our own plant, and we'll be forced to stay with New Albany sewers. That will stop all growth here. Not just in Georgetown, but in the whole township. And we need smart growth, but not unplanned growth.

"Our books are open. We have never meant this to be any kind of threat. But do the math. It's impossible for us to pay the $600,000 and the $450,000. We're frugal with our money. We pinch pennies. And we have to be responsible and do what's best for Georgetown."

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