SORRENTO — A major new subdivision in this town of 1,500 is a month and a half overdue on a payment for town police and fire services, a situation that has put a strain on budget negotiations between the mayor, police chief and Town Council.
The developers of Orange Grove were to have paid the town $100,000 on June 2, town officials said.
The money is the final part of a $150,000 payment Renaissance Orange Grove LLC promised in its deal to be annexed into Sorrento.
A new elementary school scheduled to open in early August in the Ascension Parish subdivision, located off La. 22 southwest of Interstate 10, has been expected to help draw hundreds of new residents to the area.
So far, only 35 lots have been sold in Orange Grove, conceived in 2006 as a 349-home, 134-acre subdivision, records show.
Meanwhile, town officials are trying to make do.
In June, Police Chief Earl Theriot Jr. rejected Mayor Wilson Longanecker Jr.’s request to move $10,000 in police funds to the Fire Department under the new fiscal year budget.
Theriot said he had already given the department $10,000 and could not afford more and also had to hire a new officer to expand coverage for the school and Orange Grove.
“He (Longanecker) wanted to take another $10,000 of out my budget, which would have been $20,000 out of my budget, and that’s what I objected to,” Theriot said.
The council ended up backing Theriot.
Renaissance also has 30 days from the day the new Sorrento Primary School opens to pay the School Board $550,000, a school attorney said.
Renaissance donated land for the school. School attorney Jeff Diez said the board paid to put in water lines because Renaissance’s timeline did not match the school system’s.
“The time for them to pay has not matured, and, like most folks, they are going to pay us when it’s due,” he said.
With backing from real estate investors in New Mexico, Orange Grove was organized as a community development district in 2006, land records show.
The districts are public entities that can sell tax-free bonds for infrastructure and use assessments on lot sales to pay off the debt, Orange Grove audits show.
The market, however, slowed before home construction started at Orange Grove.
Audits and land records show financial troubles have mounted for the district since then, though the first phase’s infrastructure is built and paid for and an unrelated homebuilder has started house construction.
In a 2009-10 audit released Feb. 16, the district auditor reported negative assets of $1 million and questioned the district’s future: “The District’s dependence on lot sales raises substantial doubt about its ability to continue as a going concern.”
A picture of Renaissance’s finances was not available. Renaissance and the Orange Grove community district are separate entities.
But district board chairman Tony Bull, who worked for Renaissance until last fall, said his district’s ability to pay its debts depends entirely on the developer, Renaissance.
In late May, a Baton Rouge investor bought a 34.8-acre tract inside Orange Grove for $3,934 in overdue taxes, land records show. Bull said Renaissance did not pay the taxes, though it has three years to redeem the property.
The audit said negotiations were under way with bondholders, but the current troubles came after bondholders agreed to scale back an original $8.5 million tax-free bond issue in October 2008 by $2.7 million.
That deal also slowed development timelines, shrunk the first phase and drew funding to pay two years in interest, records say.
On Nov. 1, the district still had to use $141,249 in one-time reserve funds to pay bond interest, the audit says.
District chairman Bull said Monday the reserve funds have not been paid back yet.
That puts the district in default on a bond agreement, which requires the funds to be paid back in 30 days, the audit says.
Renaissance sold the first filing, a 35-home tract, for $800,000 in October to a Denham Springs company owned by homebuilder Saun Sullivan, records show.
Bull said those proceeds went to make an initial $50,000 payment to Sorrento and to cover other debts.
Sullivan’s company is not connected to Renaissance or part of its deals with Sorrento, the School Board or bondholders, records show.
Sullivan said people are already living in five or six homes and another six are under construction. He said he expects a 12-month build-out at Orange Grove.
Longanecker has been critical of the Renaissance deal and Bull for several years but said town officials are waiting to see what happens with the Ascension Parish School Board.
Theriot, the police chief, said the town needs to enforce its contract.
“That’s a lot, a lot of money that could be used for real good stuff,” he said.
Bull referred calls to Rosemont Realty in Santa Fe, N.M., which owns an original Renaissance investor. Messages left with Rosemont for the past several weeks were not returned, but a call was referred to attorney Rebecca R. Urland, of Peragine and Lorio LLC in Covington, who did not, by Monday, return messages left on Thursday and Friday.