Monday, January 30, 2012

Legal Services Agreement with Law Director’s Firm Violates City Charter

Prepared Comments Made to
January 30, 2012

On tonight’s agenda is legislation proposed as Ordinance No. 12-12, and titled as “An ordinance authorizing the Mayor of the City of North Canton, through the Board of Control, to enter into a Professional Services Agreement, by and between the City of North Canton and Morrow and Meyer, LLC (“M & M”) for the purpose of providing legal services….” As is the usual course for North Canton legislation, it is to be passed as an emergency.

Unfortunately, as is the normal course of legislation before City Council, there was little or no discussion or debate at last week’s Council of the Whole meeting. Before this council affirms passage of this legislation in the unanimous fashion that it does, I would urge more deliberation before voting and suggest all city council members consult Section 3.04 of the North Canton City Charter, titled Director of Law, which states:

"A Director of Law shall be appointed by Council as legal counsel for all divisions of the municipality in connection with municipal affairs and may be removed at any time by an affirmative vote of four (4) Council members.

The Director of Law shall be an attorney-at-law admitted to practice by the Supreme Court of the State of Ohio, and shall have engaged in active practice in excess of five (5) years prior to appointment."

Clearly, the City Charter specifies that the Law Director shall be an attorney. There is nothing in the Charter that says a Law Firm can fill that role and that is exactly what is being proposed in the Legal Services Agreement before you tonight.

Paragraph 1 of the proposed Agreement states, “The Law Firm shall perform those duties as are customarily performed by a Director of Law of a municipality….”

The North Canton Law Director is a person who is appointed to handle the legal affairs of the City. At this moment that person is Hans Nilges. The City Charter does not allow the Director of Law to delegate his duties and responsibilities and that is what is being proposed in this Agreement with the law firm of Morrow and Meyer.

Furthermore, the Law Director is a member of the Law Firm of Morrow and Meyer and thus Mr. Nilges has a financial interest in this Agreement. This is a conflict of interest and raises the appearance of impropriety for all parties.

Law Director Nilges, in the last paragraph of a letter to Council President Jon Snyder dated January 19, 2012, you state, “…as a technical matter, please note that the Charter requires that a Director of Law is a person licensed to practice law for at least five years, rather than a firm. Accordingly, I would continue to serve as the Director of Law, but would receive no compensation for doing so.”

There is compensation being paid. Paragraph 4 of the Agreement, states “The City shall pay the Law Firm Four Thousand One Hundred Sixty-Six Dollars and Sixty Seven Cents ($4,166.67) each month as compensation….” This equates to $50,000 per year.

Is this how we circumnavigate the City Charter?

Telling the public that the Law Director will receive no compensation and then sending the salary the Law Director now receives to the Law Firm of Morrow and Meyer where he is a law partner does not undo the violation of the City Charter as Mr. Nilges suggests in his letter to Council President Snyder.

As for the Law Director’s presentation last week that the legal affairs of the City can be handled by attorneys with various specialties, I am not swayed.

Mr. Nilges, you are the individual appointed to the position of Director of Law. I would expect you to be the attorney handling the legal affairs of the City of North Canton. You and no one else have been given that responsibility and title.

I think the City of North Canton deserves better than to see any one of six attorneys on staff at Morrow and Meyer show up to handle law director duties on a particular day at City Hall.

I do not imagine you handle the legal affairs of other clients in this manner. If you were my attorney, I would speak only to you and you alone. Not to whatever attorney happens to be available at your firm.

Mr. Nilges, is it also your intention to use attorneys outside your law firm to handle the duties of Law Director in addition to attorneys affiliated with your firm?

I ask this because the attorney’s name you proffered last week to handle some of the law director duties is not listed as a staff attorney on the Website of Morrow and Meyer.

A revolving door of attorneys handling City affairs is no way to run a municipal law department.

In spite of the Law Director’s recognition that there is a “technical matter” regarding the City Charter, if City Council is still inclined to affirm this Agreement, I would ask that this Agreement and a copy of the City Charter be reviewed, either by the State Auditor or the State Attorney General as was done before the creation of the North Canton Community Disaster Relief Fund.

Ordinance 12-12 comes from thinking outside the box as they say. Unfortunately it is thinking that violates North Canton City Charter, creates conflicts of interest, and has the appearance of impropriety for all parties. It also creates revolving door legal representation for the City of North Canton.

This Agreement should not be enacted.

Thank you,
Chuck Osborne
City of North Canton

Wednesday, January 18, 2012

Amended Lease of Arrowhead Golf Course Proposes Taxpayers Finance Unadvertised Sale of Property to Current Operators

Prepared Comments Made to
January 17, 2012

A little over a month ago on December 12, 2011, Finance and Property Committee Chairman and City Council President Jon Snyder held a committee meeting prior to that night’s council meeting to discuss authorizing legislation to amend the lease agreement between the City and R & S Golf Properties, Inc.

Chairman Snyder’s public explanation for amending the Arrowhead Golf Course lease was that without amending the lease, the City was precluded from selling the property if it chose to do so.

This explanation rang hollow with me as Law Director Nilges had previously notified the Lessees five-months earlier in a July 13, 2011, letter that as a result of the Lessees’ default in its Lease obligations, the City was exercising its right to terminate the Lease, effective December 31, 2011, pursuant to Article XII, Section 12.1.1 of the Lease.

With termination of the lease just a little more than a handful of days away from the December 12 council meeting, the City would have had no limitations on selling the golf course property. Thus the reason provided by Chairman Snyder for amending the Lease on the Golf Course was little more than political misdirection.

The agenda for the December 12 council meeting was amended after the published agenda items were addressed and Ordinance No. 114-11, proposing to amend the Lease, was added. The added agenda item was titled: “An ordinance authorizing the Mayor to enter into an Addendum to the Lease by and between the City of North Canton and R & S Golf Properties, Inc., an Ohio Corporation and Robert C. Purcell and David Scott DeMuesy as individuals (“Lessee”) executed on December 22, 2008, for the premises known as The Fairways fna Arrowhead Country Club, and declaring the same as to be an emergency.”

I would like to know who would like to take credit for drafting the less than two full pages of the Addendum to the Arrowhead Golf Course Lease and if council members read the amended lease before voting!

My concern is that each of the two sentences comprising paragraph 3.1.7 of the amended lease clearly violate Ohio state law and the Ohio Constitution.

The first sentence in Section 3.1.7 states, “Lessee shall have the option to purchase the Golf Course Premises for a mutually agreed upon amount not less than the appraised value of the Golf Course Premises provided Lessee exercises such option by the earlier of thirty days following any termination of the Lease pursuant to this Article III or December 31, 2014.”

I am stunned that anyone would propose to sell Arrowhead Golf Course property in this manner and codify this into law since the method of sale described in the amended lease clearly violates state law.

Ohio General Code Section 3699 specifies that the sale of real estate by a municipality must be advertised once a week for five weeks in a newspaper of general circulation within the corporation and bids secured before municipal real estate is sold.

The provisions as to advertising for bids are designed for the protection of the taxpayer. This procedure insures that the most advantageous terms possible are secured for the city, its residents, and its taxpayers.

The second sentence in Section 3.1.7 of the amended lease states, “The Parties agree to meet and discuss in good faith the possibility of the City holding a note for purchase in the event that Lessee exercises its option to purchase the Golf Course Premises.”

I am again stunned that members of this council and the Held Administration would propose the possibility that the taxpayers of North Canton finance the purchase of Arrowhead Golf Course to benefit private interests.

This is in direct violation of the Ohio Constitution, Section 8.06, which states in part, “No laws shall be passed authorizing any county, city, town or township, by vote of its citizens, or otherwise, to become a stockholder in any joint stock company, corporation, or association whatever; or to raise money for, or to loan its credit to, or in aid of, any such company, corporation, or association….”

As is typical of all voting of North Canton City Council, Ordinance No. 114-11 passed unanimously with seven votes in favor of amending the Lease that five months earlier the City of North Canton had already exercised its right to terminate following default R & S Golf Properties.

What I failed to note earlier regarding the Finance Committee meeting that preceded the vote to amend the Lease was that Councilmember at-Large Kiesling was absent for the committee meeting and heard none of the discussion and yet she voted on the legislation after arriving at the council meeting that was already in progress.

Equally noted in the vote to amend the Lease was the fact that Councilmember at-Large Cerreta voted on the legislation when Mr. Cerreta, as an abutting property owner to the Golf Course, clearly has a personal interest in the activities and use of the property. Mr. Cerreta, the prudent course of action for you would have been to abstain on the vote to amend the Lease. Furthermore, the praise heaped on you by Finance Chairman Snyder regarding your accorded prominent participation in negotiating the amended lease is equally disturbing as again you have a personal stake in the activities and use of the golf course property abutting your residence.

The amended Arrowhead Lease benefited no one but R & S Golf Properties. North Canton forgave R & S Golf Properties for property tax payments to the City owed by the Lessee in the amount of $16,089. Not addressed in the amended lease is whether the required annual $80,000 in capital improvement obligation has been met over the last three years and if the Lessee would or could continue meeting its infrastructure obligation in the future.

What are the odds that the current Lessee can exercise the option to purchase the golf course property if they are unable to pay the property taxes? Finance Chairman Snyder would have the public believe that is a possibility. If that is the case, advertise the property for sale and let all interested buyers submit a bid for the golf course property as the law requires.

The amended lease is flawed, taxpayers are fed political misdirection, and North Canton taxpayers continue to pick up the tab on this debacle.

At this time I ask that the amended Arrowhead Lease be voided and be replaced with
a new lease that does not violate the Ohio Constitution and Ohio State Law. If the Administration and this Council fail to correct the shortcomings of Ordinance No. 114-11, the violations in the amended lease can be resolved by the courts if that is the course the City desires to take.

Thank you,
Chuck Osborne
City of North Canton