Leonardtown officials have decided to issue $3.5 million in bonds to help pay for Tudor Hall Village, the large Breton Bay waterfront development, after failing to reach an agreement to borrow the money from St. Mary's County.
After six months of negotiations, Leonardtown officials said they faced severe time constraints in putting together their portion of the financing for the $61 million project that includes a waterfront hotel-conference center and a golf course as part of an upscale residential development on a 393-acre farm on Breton Bay.
"Basically, we were under a deadline and couldn't come to terms that were suitable," said Dan Burris, chairman and president of Leonard Recreation Inc., the nonprofit group formed to oversee operation of the golf course and hotel.
The town and the county were split over how to divide revenue from the operation and seats on the governing board. The St. Mary's County commissioners had offered a $2 million low-interest loan and a $1 million grant. In exchange, the county wanted two seats on the seven-member board that Burris chairs and 25 percent of all surplus revenue.
Last week the Town Council of Leonardtown voted unanimously to reject the county's offer and came up with its own financing. The town will issue $3.5 million in bonds, which will be sold to private investors, said Robin Guyther, town administrator. The bonds would be the first issued by the town in 30 years, Guyther said. In addition to the bonds, the town will seek a bank loan.
"That was their choice. But you've got to understand that even though they chose not to accept our proposal, we still support this project," said County Commissioner Daniel H. Raley (D-Great Mills).
"It's going to help the county with regards to jobs and tourism. We want it to succeed. We wish them well," Raley said.
County and town officials said discussions of a county loan and grant stalled when the county asked for a share of the so-called surplus revenue--terminology used because the nonprofit entity overseeing the project cannot post traditional "profits." The county had asked for a 25 percent share of the surplus, estimated to be at least $200,000 a year.
"That's pretty good payback, don't you think?" said Leonardtown Councilman Walter Wise.
Leonardtown's mayor pointed to market pressures. "We weren't at a firm point with the county [in negotiations], and in order to get bonds to the market, we had to move," Mayor J. Harry Norris III said.
The developers and town officials are hoping for a Jan. 1 construction start, and to meet that time line the town had to be ready to go to the bond market by Nov. 1, Norris said.
Privately, town officials said that they "didn't want to alienate the county commissioners" by terminating the negotiations last week, but that what the county sought was more than the town was prepared to give up.
Leonardtown already must share surpluses equally with the state, which is investing $6 million in the project. Gov. Parris N. Glendening (D) pledged the funds from his discretionary budget last month.
County Board of Commissioners President Julie B. Randall (D-At Large) held out hope for a future collaboration with the town.
"We did go ahead and leave the $3 million in our budget as a safety net," Randall said. "It's still earmarked for Tudor Hall, and if something changes and the town decides it needs the county to participate, we can certainly discuss it again."
Leonardtown is projecting yearly revenues of more than $700,000 from the hotel-golf course. About $350,000 in revenue is projected from the hotel accommodations tax, a new tax signed into law this year in St. Mary's; $160,000 in golf fees; and $200,000 in surplus or profits.
"What the Town Council determined is that we can back these loans ourselves" with the revenue, Guyther said.
Burris and Guyther said managing the transaction would be less complicated with two parties--the state and the town--instead of three.
The $3.5 million in bonds the town plans to issue are in addition to $52 million in tax-free bonds that will be issued by Leonardtown Recreation Inc. to finance the overall project, which would include nearly 600 units of single-family housing and apartment-style condominiums, in addition to the public portions of the development.