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City could seek damages from Htax lawsuit

Posted: February 21, 2012 4:01 p.m.
Updated: February 22, 2012 5:00 a.m.

The city of Camden could seek damages for any delays caused by a legal action attempting to prevent the use of hospitality taxes to construct a proposed sports complex on the former site of Boylan-Haven-Mather Academy.

In mid-January, Camden resident Herbert Farber, on behalf of himself and as a board member of the Camden Committee for Responsible Government (CCRG), sought an injunction stopping the city from using hospitality tax funds to construct the complex.

Farber and the CCRG claimed that while state code allowed the city to impose its 2-percent hospitality tax, it is illegal to use those funds to construct the sports complex. The city filed an answer Friday at the Kershaw County Courthouse. Near the end of the answer, the city reserves the right to seek compensation for losses Camden might suffer while the project is on hold:

“Further answering, the (city) specifically reserves, and does not waive, its right to amend or supplement its Answer, to assert a claim for damages and/or a request of security by (Farber and the CCRG) for any damages to the (city) including, but not limited to, interest charges incurred or paid, lost funding or lost funding opportunity, and enhanced project costs, resulting from any wrongful delay of the public project caused by (Farber and the CCRG).”

The city announced Jan. 20 that -- based on its establishment of a tax incremental financing, or TIF, district that includes the proposed sports complex property -- it would be eligible to receive a special loan from TD Bank to help fund the complex’s construction. Thanks to New Market Tax Credit (NMTC) eligibility, TD Bank would be able to lend the city the $5 million to $6 million necessary to construct the complex in two parts. The city said it would be able to obtain 22 percent of those funds -- $1 million to $1.5 million -- as part of a special, forgivable loan.

In typical situations, the city would only be required to pay interest on that loan for seven years and then it would be forgiven. The remaining loan funds would also require interest payments for seven years before converting to a regular loan.

Following the Farber/CCRG action, the city announced it was stopping all work on the project while focusing on placing the sports complex’s construction before voters in a November referendum. It claimed it could no longer seek the NMTC loan as long as the Farber/CCRG action is in place. The current NMTC program -- run by the U.S. Department of the Treasury -- ends in September.

The city has also claimed in council meetings that delaying the project could result in higher construction costs.

The bulk of the city’s answer denied Farber and the CCRG’s assertions that using the hospitality tax to fund the complex’s construction is “illegal, invalid and ultra vire,” meaning beyond council’s power. The city denied that any “irreparable harm” would be caused by using hospitality tax funds to construct the complex. The city also asserted that its use of hospitality tax funds to do so is supported by the state’s definition of a “tourist” -- “a person who does not reside in but rather enters temporarily, for reasons of recreation or leisure” the city limits.

With those arguments, the city stated it is seeking a denial of Farber and the CCRG’s request for a declaratory judgment permanently keeping the city from using hospitality tax funds to construct the sports complex.

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