A lawsuit filed in November of 2018 is coming to a close following the recent settlement accepted by the Cherokee Village Suburban Improvement District (SID), American Land Company and the City of Cherokee Village.
The suit was brought forward by “Mark and Cynthia Kronkosky and all individuals similarly situated” against the Cherokee Village Suburban Improvement District No. 1 (CVSID) alleging that CVSID improperly levied and collected assessment of benefits against owners of property within CVSID.
The lawsuit also stated the SID improperly spent monies collected from levies by giving a portion of the funds to the City of Cherokee Village and American Land company.
In 2018, the SID voted to increase levied taxes following a Reassessment of Benefits conducted by a company contracted to assess the worth of amenities belonging to the CVSID.
The reassessment allowed the SID to override the 10 percent cap for the assessment based on the 1974 assessment. The more recent assessment offered a new cap and a higher value placed on amenities.
The SID hit the 10 percent cap in 1996 and the average valuation paid was $132.50 with a slight variation depending on if a home was located on a lake, a golf course or how much road frontage a lot has.
In 2018 SID then set new the rate at 4.5 percent of the new valuation higher than the former 10 percent cap. In turn, increasing the taxes paid by property owners in Cherokee Village who own property in the district. On average, the taxes on unimproved lots were raised to $153 and improved lots to approximately $333. This increase did not negate state or county taxes.
The increase was placed into effect and impacted the 2019 fees paid by property owners.
Through the suit, the plaintiffs challenged the validity of the 2018 Reassessment of Benefits and pushed for them to be voided.
“The Kronkoskys have alleged that CVSID and the American Land Company have engaged in a scheme designed to avoid paying property taxes and assessed benefits on lands owned by them, thereby denying taxpayers the benefits associated with that lost revenue,” a public meeting notice printed in a publication of Areawide Media in April of this year states. “CVSID, the City of Cherokee Village and The American Land Company disputes these allegations, and contend that the assessments in dispute are valid and legal, that any disbursement of assessment of benefits funds is authorized by law, that they have at all times complied with Arkansas law and are defending themselves against the lawsuit.”
On Aug. 27, the City of Cherokee Village held a second special meeting to discuss the settlement agreement. The council had met the night before and the majority of council members voted not to accept the settlement at that time.
When meeting to revisit the issue, council members who were present agreed that although the settlement would leave the city in a tough position, it was better to settle than to continue to spend taxpayer dollars, especially considering the SID and American Land Company had already signed the same settlement agreement.
During the meeting, each council member was given the opportunity to comment on the issue.
Councilman Rob Smith was the first to speak, expressing his disappointment with the situation.
“Last night, I started my conversation with how disappointed I was with this entire process. I still am and that’s not going to change for me. We’re in a situation now where, as a city, we have got to move forward and start thinking about where were going to go from this point on,” Smith said. “The other individuals scheduled in this lawsuit completed this task and are now out and as a city, if we stay in a lawsuit if we were to win, there would be nothing to win because of the way the other entities have settled their part of this suit and they’re going to take greatly reduced income and it’s going to be our responsibility in the next 120 days to look at what we can accomplish for the city and move on.”
Smith said looking at the options, the city’s efforts would be better spent working to find solutions to future issues.
Councilman Steve Thompson apologized to the council for the length of his comments the night prior and also expressed his disappointment.
“I, along with Mr. Smith, was very disappointed in the position we’ve been placed as a city. It is a deep and narrow corner in which to try and navigate forward. We asked for reasonableness on the part of the plaintiffs, and we received very little of that,” Thompson said. “I spent most of the night last night going over the legal grounds of the plaintiffs and came to the conclusion there is a very strong possibility we would see SID even in a reduced capacity cease to exist.”
Thompson said he spent a great deal of time studying the details and noted the council was given a fairly limited amount of time to consider the final documents of the settlement.
“I agree with Councilman Smith that must pull together and endeavor to do everything possible to replace the significant revenues that will be lost but if we allow the lawsuit to continue and I agree there is a high probability that SID would have very serious repercussions and likely not continue,” Thompson said. “…We have to accept the situation we have, roll up our sleeves. It’s not the first time we’ve done this.”
Councilman Eddie Ishmael said his main concern was property values and how the potential failure of the amenities would impact those values.
“If we allow these amenities to fall apart, it will have a huge impact on property values. For everyone, whether they’re on a lake or not, on the golf course or not, it doesn’t matter. We need to do everything we can to help property values, streets and fire,” Ishmael said.
Councilwoman Pamela Rowland said it was an impossible decision with many uncertainties for the future of the area.
“I have prayed about this, consulted with experts. I have swayed back and forth and been on the fence. I have been involved with Cherokee Village in one way or another even before I got on the council. Anyone who knows me knows at the end of the day, no matter what, my heart belongs to the city and every single person that lives here,” Rowland said. “This is a terrible position to be in. Last night I voted no, and I’ll be very honest about why. I feel like the anchor behind this and the sadness that goes with this is if you’re going to take from Cherokee Village what is at stake, it’s a matter of make a judge take it from us instead of handing it to them.”
Rowland said it was a sleepless night and that she was still struggling with the decision but had ultimately come to the conclusion that fiscal responsibility was a priority.
“I want to do what is best for every citizen for Cherokee Village. That is why we’re voted to be on the council and who we’re here to represent. The biggest thing that makes me want to sway and vote yes is the simple fact that if we do go into court, that is more tax money paid by the citizens of this Village that we are spending that we don’t have to spend,” Rowland said. “…I recall it that was explained to us it was a matter of going underwater, but how deep do we want to go. This council has always shown extreme restraint and responsibility in how we spend tax dollars and now I don’t think is the time to gear away from that. As impossible as this situation is and as much as we will all bear and wear this from this day forward, it is a matter of being responsible with every penny we have.”
Rowland said she hoped the citizens of Cherokee Village understand how the situation came about and how hard the council has worked and will continue to work for the people.
Councilman Jerry Adams said this is not the first time the city has been placed in financial strain.
“I’ve been a member of the city council for 10.5 years. When I first got on, the city was in dire straits financially and we had a lot of decisions to make to get out of that hole. We did it and moved forward and really progressed these past few years since mayor Stokes has been here,” Adams said. “He’s done a great job as well as the budget committee. I agree with the council that this is a tough decision, probably the toughest we’ve ever had to make. We kind of have our backs against the wall. our options are limited.”
Adams said the majority of the citizens of Cherokee Village did not want this to happen.
“So, Mr. Kronkosky and the watchdog group. If you come across these folks. They are the ones who got us in this position. The majority of the people in the village didn’t want this to happen, but they took it upon themselves to pursue legal action to put us where we’re at. It’s going to affect everybody, and the changes aren’t going to be good,” Adams said. “We will come out of this. We will come up with ways to get the revenue to keep the city going. If you do come across any member of the watchdog group, ask them if they’re happy with where we’re at in the Village.”
Councilman Thomas Rupard stated he had intended to say comments similar to Adams, but since it had been stated, he would refrain. He then motioned to accept the settlement agreement.
A roll call vote was taken with each council member who was present voting to accept the agreement.
Once the votes had been cast, members in the audience applauded.
Mayor Stokes provided clarification as to whether or not the city would take on the responsibility of amenities.
“That wouldn’t happen because the property is owned and managed by the SID. If they are in a position without income and have indebtedness, that property would have to be sold off. The lakes and golf courses,” Stokes said. “This is another situation that would not be good…We will get out of this. I’ve asked Mr. Smith to chair a task force to investigate other revenue sources and plan for us to navigate our way through 2021. We have competent people on our staff that will be quite helpful in doing this and we’ll involve some citizens as well.”
The attorney representing the city regarding the lawsuit said the courts would be informed a settlement had been reached. A separate hearing would take place in a week or two, finalizing the issue.
Per the settlement agreement, the Reassessment of Benefits from 2018 is void; to replace it, assessments will be 36 percent of the county assessed land value for 2021; property owners have the right to pay off the Agreed Assessment of Benefits at any time and once paid, the property will not receive another levy unless there are new District improvements justifying an increase; property owners who paid taxes between 2019 and 2021 have 90 days to file a claim for reimbursement and will be reimbursed over the course of the next seven years; the amount of monies given to the city by the SID for streets will be reduced to 17 percent until Jan. 1, 2022, at which time the 2015 contract will come to an end with no further funds due to either party; the city may continue to utilize the fire stations; starting July 1, 2022, the 2002 contract between American Land Company and the SID will be terminated; the SID will transition from a three-member board to a five-member board with elections being held to select commissioners; the SID will pay $200,000 for attorney fees and costs and American Land Company will pay $75,000 for the same; plaintiffs council will receive 20 percent of any amount paid out to claimants and finally, the plaintiffs will not enter into legal action against with regards to the previously mentioned issues again.