FRONT ROYAL - As renovations have halted on the Afton Inn in the midst of confusion regarding the project’s financing, Town Council will discuss funding options for the project during a closed session at its 7 p.m. Monday meeting.
County and Front Royal-Warren County Economic Development Authority Attorney Dan Whitten explained over the phone that the original lease with 2 East Main LLC, the developer overseeing the renovations, stated that the EDA would obtain an interest-only construction loan for the project. In turn, he said 2 East Main would pay the interest until exercising its option to purchase the property from the EDA. Instead, he said it was discovered in December that the EDA had been using a line of credit to pay invoices submitted by 2 East Main. Whitten said 2 East Main is still responsible for debt service on the draws from the credit line.
Whitten said he, the EDA board and 2 East Main were all under the impression that a construction loan was obtained, and "I'm not sure why that did not happen." He said the developer and EDA are now working on obtaining a construction loan, which hopefully will be used to pay off the line of credit.
The Afton Inn is the center of one of the many alleged embezzlement schemes carried out by former EDA director Jennifer McDonald that is detailed in the EDA's $17.6 civil lawsuit. The EDA is alleging that McDonald doctored invoices from 2 East Main to make $50,000-plus in personal credit card payments. Whitten noted that he does not think any members of 2 East Main have done anything wrong.
It was previously reported that 2 East Main Street would completely fund the project and ownership of the building would be turned over from the EDA to the developer when work is completed. Whitten said that is still technically true because 2 East Main is responsible for the credit line's debt service and interest on the loan, meaning the EDA will not spend any money on the project.
Town Attorney Doug Napier said over the phone the fact that the EDA had been funding the project caught town officials by surprise. He said details of the issues regarding the funding are a “little hazy in everybody’s mind," adding that apparently there were "some contractual issues" that were "not ironed out." He noted that a lot of items Town Council thought were taking place regarding the EDA were in fact not taking place.
The Afton Inn was also discussed by Town Council during closed sessions on Feb. 25 and April 22. The agenda for Monday’s meeting states the matter is going into closed session because any public discussions would adversely affect the town’s “bargaining position or negotiating strategy.”
John Anzivino, interim EDA director, stated in an email that “the developer has been actively engaged in obtaining permits” from the town while having already completed two phases of work that included the demolition of an annex and stabilization of the structure.
For the remaining work, Anzivino said: “we are discussing more permanent financing” with the developer and a lending institution. That remaining work, he said, will include window and roof replacements, construction of a new floor and additional reinforcement of interior framework. He previously said the developer does intend to finish the project.
According to previous reports, plans for the Afton Inn include a cafe, apartments and office space.
Also slated for closed session discussions is the potential need to appoint a new councilman, as former Mayor Hollis Tharpe’s resignation became effective Friday.
Tharpe cited the reason for his resignation being a pending misdemeanor prostitution hearing - charges of which he has denied. Still, he said the resignation was in the town’s best interest because unnecessary negative attention is not needed.
Napier said there are a lot of scenarios that could take place regarding the appointment of an interim mayor. For example, if a sitting councilman becomes interim mayor pending a special election, the town may appoint an interim councilman. He added that is “highly unlikely” that a special election will not be held for the mayoral seat.
The council has through mid-June to decide whether the special election will take place.