Forestville served with lawsuit to pay demo debt

FORESTVILLE – In an attempt to guarantee its loan will be repaid, Evans Bank served the village of Forestville with an Article 78 litigation.

In 2009, the village borrowed $250,000 in order to demolish a crumbling building. In 2010 the village told the bank it was receiving a $175,000 grant to pay off some of the loan and converted it into a revenue anticipation note. The bank never received any money from this RAN. Under state law a municipality only has five years from issuing a RAN to either pay it off or find approved long-term financing.

Village Attorney Michael Sullivan explained that an Article 78 is a legal procedure to force a municipality to do something with discretionary expenses in its budget – in this case pay off the remainder of the RAN.

Sullivan previously predicted the bank would take action against the village, even though the entities had come to an agreement.

He said the village has been asked to appear in court to respond to the Article 78 on April 7.

“This will not be hard to answer because I thought we had agreed to what they asked for in negotiations before the litigation and that is a tax anticipation note. We had already promised that, so I guess they are just doing this as a hammer to make sure the village does what it said,” he said.

Sullivan explained the difference between a RAN and a tax anticipation note is that a TAN is funded through taxes and a RAN can come from funding like grants. He said TANs are not very common but provide a guarantee that the money will be paid in that budget period.

After an executive session, the board authorized Sullivan to answer the Article 78 with relief of the unpaid RAN to come from taxes.

Deputy Mayor Kevin Johnson said the budget subcommittee met and was sorting out expenses into line items. He said it will meet one more time before presenting the budget to the clerk and board members by March 20. The board will set a public hearing for the budget at its next meeting on March 25.