WASHINGTON — A Fluvanna County, Va., circuit court judge on Thursday dismissed the lawsuit the county’s Board of Supervisors had filed against their former financial advisor, Davenport & Co., after agreeing with the firm that the court could not decide the case under the state constitution’s separation of powers doctrine.
The board had filed a seven-count suit against Davenport last September, claiming the firm misled it and pushed it to finance a new high school through $67.5 million of bonds issued in December 2008 at high interest rates, instead of participating in a less costly pool deal that had closed three weeks earlier.
But circuit court Judge Benjamin N.A. Kendrick verbally dismissed the case “with prejudice,” meaning it cannot be refiled in the circuit court, after Davenport’s attorneys from McGuireWoods argued that the board was exercising a delegated legislative power when it authorized the conduit bond deal in September 2008. Davenport’s lawyers claimed courts cannot and do not revisit legislative decisions made by county boards of supervisors.
Kendrick is expected to release a written order dismissing the case in the next week or two.
Davenport chairman and chief executive officer Coleman Wortham 3d said: “We are pleased that the lawsuit filed by the Fluvanna Board of Supervisors has been dismissed. We have always been confident that Davenport would prevail on the merits of the case, and we remain so, because throughout our long relationship with Fluvanna County, we always acted in the county’s best interest. We are gratified that all parties will be spared the time and expense of a trial on this meritless claim.”
However, Shaun Kenney, the current chairman of the Board of Supervisors, said the board plans to file an appeal.
“We’ll be taking it to the Virginia Supreme Court,” Kenney said. “The Supreme Court may be a better venue to have this case discussed.”
“I don’t think this decision was entirely unexpected and may even be welcome, at least from the perspective from having this case on a fast track,” Kenney said.
The new high school, one of the most expensive in the state, is almost completed and is expected to open in September.
But the debt service for the bond issue totals about $5.2 million per year, almost 15% of the county’s annual $36 million general fund, and has forced the county administrator to recommend increases in the property tax rate, according to Renee Hoover, the county’s finance advisor, and Kenney.
Fluvanna County is located in a rural area between Richmond and Charlottesville and has a population of 27,000, according to the county.
In its complaint, the board claimed Davenport had given them “deceptive, false and misleading advice” on the interest rate for the standalone bonds and other aspects of those bonds and the pool bonds.
But Davenport insisted the board pursued the standalone deal with full knowledge of the volatile market and interest rate risks, only to have second thoughts after the members and politics of the board changed and the financial crisis sent property values plummeting, making it difficult for the county to handle the debt service payments without increasing tax rates.
