Editor's Note: The Rockville City Council voted 3-2 on Monday to issue economic development bonds on behalf of the National Lutheran Home. The vote came the same night the council began discussing guidelines for economic development bonds.

Before the vote, Rockville residents Drew Powell and Joseph Jordan delivered the following testimony   during the Citizens' Forum portion of Monday's council meeting:

Good evening, Mayor Marcuccio, city councilmembers, city staff, ladies and gentlemen. My name is Drew Powell.  I reside at 1035 Carnation Drive, Rockville.

Regarding Agenda Item 11, Bond Financing for National Lutheran Home, I would first like to thank the Mayor and Council as well as city staff for their responsiveness on this matter. I would like to specifically thank Chief Financial Officer Gavin Cohen for his candor regarding the nuances of this particular bond issue.

Should Rockville sanction this bond? In a word, no.

Examining the pros and cons; what are the city’s potential benefits and risks? In the pro column, as a 501c3, the National Lutheran Home is a good corporate citizen and does good works. Should it default on the proposed $25 million bond, the city would not have to repay on their behalf. Rockville also nets approximately $40,000 of property taxes and stormwater management fees from National Lutheran Home, but then again, Rockville would receive these revenues regardless of who owned the land.

In the con column, Rockville is not without risk, the first of which is a “reputational risk." If this bond were to default, future investors might be wary of the city's name and choose not to invest in any Rockville bond, even those issued by the city. In a default or controversy scenario, Rockville may incur legal bills which would surely run into the hundreds of thousands of dollars or more.  Yes, Rockville would be indemnified by the National Lutheran Home, but Rockville would more than likely pay its legal bills up front and subsequently may be paid only a portion of those legal bills by the National Lutheran Home, the indemnifying party.

Also, according to a recent article in The Indianapolis Star, the Carmel, Indiana government is being sued by a 501c3 retirement community asserting that Carmel awarded conduit bonds to its competitor and not to them. What’s to stop this from happening in Rockville? There are many for-profits and nonprofits that would like to enjoy similar financing. What’s to stop these corporations from asking for their share of Rockville conduit bonds? How can we say no without risking litigation?

The reason a financial institution is willing to lend at low triple-A rates, is because municipal conduit bonds are tax exempt. For this bond, that’s a savings of $4 million to $5 million. According to the Los Angeles Times, the amount of lost revenue, due to this tax loophole, costs the federal government at least $10 billion annually. States are also losers regarding this loophole, receiving less revenues, leaving citizens on the hook for ever-higher taxes and a reduction in services. How can Rockville, in all good conscience, ask for our fair share of state and federal funding to build schools for our children and roads to relieve gridlock, when we as a city are enabling corporate tax avoidance?

Also, according to the L.A. Times, although conduits account for 20 percent of all municipal bonds, they are responsible for 70 percent of all defaults in the municipal bond market, which have a negative impact on municipal bond ratings. This in turn causes many cities to pay more in the servicing of their debt, which also raises taxes.

All of the above should be enough to dissuade the authorization of this bond, but to make matters worse, Rockville has no policy in place regarding the issuance of conduit bonds. Who qualifies? What are the criteria for award? How many can be issued? What are the dollar limits?

If this council adopts Montgomery County code concerning conduit bonds, that’s a step in the right direction. However, such an important policy matter cannot be introduced and voted on in one night. Fast-tracking important policy, which has serious implications for Rockville long into the future, would not be in the city’s best interests. Voting on the National Lutheran Home bond or any bond cannot and should not move forward until Rockville’s policy is in place.

And worse yet, for this bond request, the city’s process was broken. The city was made aware of this request in the late August/early September timeframe. Why did it take three months to notify the Mayor and Council? Who authorized city staff’s expenditure of time and resource to work this deal? Why is this request now Rockville’s emergency?

And lastly, who does Rockville’s bond attorney, Mr. James E. Cumbie, work for?  According to an email sent by [acting city manager] Jenny Kimball at 3:27 p.m. today, Mr. Cumbie’s billable hours for his written recommendations and counsel to the City are being directly paid for by the National Lutheran Home at a rate of $575 per hour. According to Ms. Kimball, this is standard operating procedure.  All indications are that it is not.

If indeed Mr. Cumbie is Rockville’s attorney, looking exclusively after Rockville’s interests and not working at the behest of the bond requestor, Mr. Cumbie needs to provide all information about his billable hours regarding this project. When did his billable hours commence? How many hours have accrued thus far? Who initiated this arrangement? If one exists, Mr. Cumbie needs to provide a copy of any retainer agreement between his firm, Venable LLC, and the National Lutheran Home. The withholding of this information would only reinforce citizen concerns of potential impropriety. This cloud of potential conflict of interest must be lifted prior to any vote regarding the awarding of this bond.

The paramount issue here is the restoration of trust by citizens for their elected officials. Will we continue to operate in a vacuum of process and policy and look the other way in the face of obfuscation and potential conflicts of interest or will this council put policies in place first before committing Rockville to a risky venture?

Thank you.