Missoula County to issue general obligation bonds to cover subdivision lawsuit

Missoula County will issue $1.26 million in general obligation bonds to cover two lawsuits stemming from a failed Grant Creek subdivision, closing a case dating back to 2013.

The county settled both cases relating to the Gleneagle Subdivision in 2017 and agreed to pay the plaintiffs, Gilbert and Judith Johnston, $2.2 million. It also agreed to pay an additional plaintiff, Mark Denton, $700,000 in the case.

“This is to satisfy an additional levy that was brought against the county by the Johnston plaintiffs and the Denton plaintiffs,” said Andrew Czorny, the county's chief financial officer. “This is the second payment to the Johnson plaintiffs. The first was $1.2 million. We had two years to make the second payment from the date of the first payment.”

The county, under different leadership at the time, settled the case in 2017 and issued its first round of general obligation bonds to cover the initial $1.2 million payment. It will issue the new round of bonds to cover the final settlement.

“We've financed this over 5 years at 2.5% interest on the tax exempt interest and 3% on the taxable portion,” said Czorny. "Given our current mill value, the annual debt service for the judgement levy would place an additional $3.59 on a $250,000 home for a period of 5 years."

Trouble in the Gleneagle Subdivision, located in lower Grant Creek, began in the late 1970s and spiraled downhill from there. The county received the lots through a tax deed in 1989 and proceeded to plan a new project.

In doing so, the county reduced the 67 lots to roughly 25 and re-deeded them in an agreement reached with two developers in 1999. But the subdivision never broke ground and no infrastructure was ever laid, leaving the buyers empty handed.

In Missoula County District Court, the buyers alleged that the county violated the Montana Subdivision and Platting Act by failing to require a plat and infrastructure bond when it reconfigured the lots in 1999.

Retired District Judge Ed McLean issued an order in 2016, awarding partial summary judgment to the plaintiffs. The county agreed to pay the Johnston plaintiffs $2.26 million in exchange for all claims and deeds to certain lots.

The county also agreed to pay Denton $700,000 in exchange for dismissal of the suit.

While the county agreed to issue new bonds to cover the suit, Erica Grinde, director of risk management and benefits for the county, said the county will attempt to recover the $1.26 million from its access carrier.

“Our retention is $1 million, so we'd try to recoup that $1.26 plus attorney's fees,” she said. “The attorney's fees are a little more complicated. For the bulk of that litigation, those claims were being litigated as one, so it's hard to peel apart what’s what, though we'll likely seek the entire bill for that.”

Grinde said the county will submit a final letter to the carrier and could file a suit in 2020 “should they really not believe us.”

“Should we recover from the access carrier, I believe that money will reimburse the taxpayers on the levy they've been paying,” she said.