BRADENTON, Fla. – Hillview, Ky., will issue bonds and raise taxes to settle the legal judgment it owes to its largest creditor, Truck America, according to documents filed in bankruptcy court Wednesday.
In a joint filing, the city and the trucking school said after "exhaustive, arms-length negotiations" with three different mediators a deal was struck that would allow Hillview to settle Truck America's $15 million claim at a discount.
Bankruptcy Judge Alan C. Stout scheduled an expedited hearing for 11 a.m. Thursday in Louisville to consider a motion that ultimately will lead Hillview to dismiss its Chapter 9 bankruptcy case.
Mayor Jim Eadens deferred comments on the settlement to city attorney Tammy Baker. She could not immediately be reached.
"The resolution was the product of very hard work on all sides, and entailed several lengthy mediations sessions with three different, highly-qualified mediators," said Truck America attorney Brian Meldrum, of Stites & Harbison PLLC.
Meldrum declined to comment on why his client accepted the settlement terms.
When asked how much Truck America accepted in total, he said that is unknown due to the formula agreed upon in the settlement.
"The city's obligation will be to pay $5 million up front, and additionally raise taxes per the agreement, and remit 8.3% of its eligible revenue to Truck America for 20 years," Meldrum said. "There is not really a final agreed-upon amount to settle the entire dispute, because the direct payments to Truck America vary with fluctuations in annual revenue."
Hillview owes Truck America $15.23 million from a court-ordered judgment it lost over a soured legal dispute involving a contract to purchase city land.
The city lost a lengthy court battle, and has since transferred ownership of the property to the company, but until now has not come to terms over the monetary award.
The settlement calls for Hillview to issue $5 million of general obligation bonds and use the proceeds to pay a portion of its obligation to Truck America.
Starting in July, 2017, the city will pay Truck America 8.3% of its "eligible revenue" each year for 20 years.
Eligible revenue equals gross general fund revenues minus agreed-upon deductions such as amounts necessary to pay debt service, $50,000 for an emergency reserve, and certain restricted grants.
After ten years, the city can opt to take a discounted buyout option under a formula outlined in the settlement.
The city has also agreed to raise its occupational tax to 1.8% from the current rate of 1.5%, and increase its insurance premium tax to 7% from 5%. Any violation of settlement terms constitutes a default, according to court filings.
A resolution to the dispute will actually begin in Bullitt County Circuit Court where Truck America had filed a writ of mandamus to enforce the terms of the judgment.
The lower court case was automatically stayed when Hillview filed for Chapter 9 bankruptcy on Aug. 20. A decision as to whether Hillview is insolvent, and eligible to continue its case, is still pending.
At Thursday's hearing, Hillview and Truck America will ask Stout to lift the stay so they can file the settlement in the circuit court.
After the settlement is filed, Hillview is expected to dismiss the bankruptcy case.
The mediators in the case were retired U.S. Bankruptcy Judge Steven Rhodes, who presided in Detroit's Chapter 9 case; local attorney Walter A. Sholar; and Thomas Fulton, chief judge for the Bankruptcy Court in the Western District of Kentucky.