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Attorney General Jack Conway's office is reviewing a complex land deal in which the city of Versailles plans to issue $56.5 million in bonds to finance the sale of nine Frankfort office buildings between private businessmen.
The review comes after a story in Friday's Herald-Leader about the deal. The assessed value of the properties is $20 million, less than half the purchase price, and Versailles' tax-exempt, low-interest bonds would be used even though the private project will neither create nor preserve jobs.
The nine buildings are leased by state government and owned or co-owned by Rodney Ratliff, a politically active Frankfort landowner. The buyer would be H&W Development LLC, which is based in the office of a suburban Atlanta vending machine company.
"It is an unusual deal, and we are in the process of gathering information to help us determine whether a preliminary investigation is warranted," Allison Martin, a spokeswoman for the attorney general, said Monday.
Investigators are requesting legal documents and plan to interview officials involved in the deal, Martin said.
Versailles City Councilwoman Ann Cox said she was delighted. Cox was the only council member who opposed the deal when the council approved the bonds last month.
In the days since news of the bonds broke, Cox said she has been flooded with questions by angry and baffled Woodford County residents who want to know why they are financing a private land transaction in neighboring Franklin County.
"I appreciate the attorney general's office taking an interest in all the issues that have arisen," Cox said. "The e-mails and the phone calls have not stopped coming. So many people here are upset about this."
Versailles Mayor Fred Siegelman hung up the telephone Monday when the Herald-Leader asked him for comment. City Attorney William Moore said an outside review is welcome.
"We don't want to be involved in anything that isn't aboveboard," Moore said. "If there are any questions about it, now is the time to get it resolved rather than wait until we're in the middle of it."
Also complicating matters, European bank Dexia -- which offered to issue a letter of credit that allegedly would shield Versailles from liability if the deal went sour -- reportedly is having second thoughts. The deal's supporters on Monday said Dexia disliked the news coverage and subsequent public scrutiny.
"That article has given them cold feet, no doubt about it. They were into the deal, but now they're reviewing it," said the city's financial adviser, Stan Kramer Jr., chairman of First Kentucky Securities Corp.
"If they (Dexia) pull out, it's dead," Moore said. "If there's no one to underwrite the deal, then it's through."
Dexia executives in the bank's New York office did not return calls Monday. H&W's partners in Georgia and Tennessee also did not return calls.
Last month, the Versailles City Council rushed through approval for $56.5 million in 30-year bonds from the city's Public Properties Corp. H&W approached the city and made its proposal after getting a chilly reception from the Frankfort City Commission. Frankfort officials had questioned the value of the deal to taxpayers.
To give Versailles an incentive, H&W agreed to hand it $1.5 million from the bond issue, which the city hopes to use toward the cost of a new police station.
Even if the state government pulls some agencies out of the leased buildings and stops paying rent -- which, in fact, the state plans to do in coming years -- the revenue losses could not hurt the city, because H&W will manage the properties and Dexia will assume liability for the bonds, city officials said.
The only other time Versailles' Public Properties Corp. has issued bonds was to renovate the abandoned Texas Instruments factory in the city for new use as the headquarters of the Kentucky Community and Technical College System. That project, four years ago, brought hundreds of jobs to Versailles and cost $6.3 million.
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