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HomeMy WebLinkAboutOrdinances Book 14, Page 165, No Resolution NumberM A RESOLUTION AUTHORIZING THE MAYOR OR MAYOR PRO TEM OF THE CITY OF PADUCAH, KENTUCKY, TO EXECUTE, ON BEHALF OF SAID CITY, A PETITION OF THE CITY OF PADUCAH, KENTUCKY AND THE ELECTRIC PLANT BOARD OF THE CITY OF PADUCAH, KENTUCKY TO BE FILED BEFORE HONORABLE ROY M. SHELBOURNE, PRESIDING JUDGE, UNITED STATES DISTRICT COURT, WESTERN DISTRICT OF KENTUCKY, FOR THE APPOINTMENT BY HIM OF A THIRD MEMBER TO.A BOARD OF APPRAISERS ESTABLISHED UNDER A FRANCHISE SOLD BY THE CITY OF PADUCAH, KENTUCKY TO KENTUCKY UTILITIES COMPANY ON SEPTEMBER 17, 1940, AND SETTING FORTH SUCH PETITION IN WORDS AND FIGURES WHEREAS on September 16, 1940 the City of Paducah, Kentucky offered for sale at public auction a franchise to conduct an electric business in said city for a period of twenty (20) years, and WHEREAS Kentucky Utilities Company was the only bidder and became the purchaser of such franchise for the sum of One Thousand Dollars (tiP1,000.00), and WHEREAS such sale was approved and the bid was accepted by a resolution adopted by the Board of Commissioners of the City of Paducah, Kentucky on September 17, 1940, and WHEREAS under the provisions of said franchise proceedings for acquisition of the electric properties of Kentucky Utilities Company within the City of Paducah could be initiated by said City at any time by notifying said Company in writing of the City's desire to enter into an agreement as to the value of such properties, and WHEREAS on March 11, 1959 such notice was given to said Company by said City and by the Electric Plant Board of the City of Paducah, and WHEREAS subsequent thereto negotiations were entered into be Kentucky Utilities Company and the City of Paducah, Kentucky by and through its Electric Plant Board, and WHEREAS said City and said Company were unable to agree upon a fair and reasonable price for the acquisition of the electric properties of said Company in the City of Paducah, and WHEREAS as provided by said franchise an appraiser has been appointed by the City of Paducah, Kentucky and an appraiser has been appointed by Kentucky Utilities Company, and WHEREAS the appraiser appointed by Kentucky Utilities Company has not made sufficient progress in his appraisal to permit the completion thereof within the foreseeable future, or within a time sufficiently early to permit the two appraisers to arrive at an agreement respecting value within the period allowed by the franchise ordinance, and WHEREAS the appraiser of the Kentucky Utilities Company, though requested to do so, has not joined with the City's appraiser in the 165 166 appointment of a third member and umpire, but on the other hand has indicated disinterest in such appointment, and WHEREAS under the provisions of said franchise in the event the said two appraisers cannot agree upon the third appraiser, then, upon application of either the City of Paducah or -Kentucky Utilities Company, the presiding Judge of the United States District Court for the Western District of Kentucky shall name said third appraiser, and WHEREAS due to the shortness of time remaining for the fixing of a value of the aforesaid properties of Kentucky Utilities Company by two of such three members of the Board of Appraisers, it is now deemed desirable and necessary that application shall be made as soon as possible to the presiding Judge of said Court for the appointment of a third appraiser to act as provided by said franchise. NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF COMMISSIONERS OF THE CITY OF PADUCAH, KENTUCKY: SECTION 1. That George G. Jacobs, Mayor of the City of I Paducah, or Haley L. Hook, Mayor Pro Tem of the City of Paducah, be, and either is hereby authorized and directed to execute on behalf of said City, a petition in words and figures as follows, to -wit: (Being the petition to Judge Shelbourner,. pages 1 through 8, to which this document is attached) "BEFORE JUDGE ROY M. SHOLBOURTIE, PRESIDING JUDGE, UNITED STATES DISTRICT COURT, WESTERN DISTRICT OF KENTUCKY PETITION OF THE CITY OF PADUCAH. KENTUCKY AND THE ELECTRIC PLANT -BOARD OF THE CITY OF PADUCAH, KENTUCKY,FOR E APP -UM A THIRD VNUERS ESTABLISHED UNDERIP OF KENTUCKY KENTUCKYPADUCAH, TO UUMPANX UN SEPTERBER 17,__1940 I Come now the City of Paducah, Kentucky (here- inafter referred to as "the City"), and the Electric Plant Board of the City of Paducah, Kentucky (hereinafter re- ferred to as "the Board"), and respectfully petition Your Honor to appoint a person to serve as the third member and umpire of the Board of Appraisers heretofore established under a franchise contract embodied in an ordinance dated August 20, 1940 and sold by the City to Kerituoky Utilities Company (herein° after referred to as "the Company"), on September 17, 1940, which said contract is hereinafter referred to as "the franchise ordinance'?. 167 II The City is a municipal corporation of the Commonwealth of Kentucky of the second class. The Board is a board of public utilities created by appointment of the Mayor of the City, and approved by the legislative body of the City, pursuant to an ordinance adopted by the Board of Commissioners of the City on January 20, 1945. Said ordinance (a copy of which is attached hereto as Exhibit "A") was adopted under and pursuant to the provisions of Chapter 1$ of the 1942 Acts of the General Assembly of the Commonwealth of Kentucky being Sections 96.550 to 96.900 of the Kentucky Revised Statutes and known as the TVA Act, and particularly Section 15 of said Act, K. R. S. 96.740. The legislative body of the City is a Board of Commissioners consisting of George Jacobs, Idayor, and Commissioners A. B. Fendley, Richard E. Fairhurst, C. Winston Gholson, and Haley L. Hook. The Board consists of Robert L. Nolan, Chairman, Tommy Whittemore, Ernest Mitchell, Leon T. Searles and Lloyd C. Emery. The Company is an electric utility company doing business in many areas of Kentucky, including Paducah and McCracken County, with principal offices at 120 South Limestone Street in Lexington, Kentucky. The principal officers are Robert M. Glatt, Chairman of the Board, and F. I. Fairman, President, both of Lexington, Kentucky. III Pursuant to preliminary negotiations and agree- ment between representatives of the City and the Company, the City offered for sale at public auction on September 16, 1940, in accordance with the statutes then in effect, a franchise to conduct an electric business in the City of Paducah for a period of twenty (20) years. The Company was the only bidder and became the purchaser for the sum of One Thousand Dollars ($1,000.00). The sale was approved and the Company's bid was accepted by the Board of Commissioners of the City of Paducah at a regular meeting held on September 17, 1940. (A certified copy of the franchise ordinance is attached hereto, marked Exhibit "B"). An essential part of the ordinance was an option on the part of the City to purchase the electric properties of the Company within the City on a basis set forth in Section 7 of said ordinance. (See pages 4 and 5 of Exhibit 'tB") . 168 IV Under -the provisions of said Section 7 of the franchise ordinance, proceedings to acquire the electric distribution properties of the Company may be initiated by the City at any time by notifying the Company in writing of the City's desire to enter into an agreement as to the value of the electric system owned by the Company within the City. Such notice has been duly given by the City and accepted by the Company. Subsection (c) of Section 7 provides further that if the parties shall be unable to agree upon a purchase price within sixty (60) days after the aforesaid notice a Board of Appraisers consisting of two members shall be appointed, one by the Mayor of the City with the approval of the Board of Commissioners and the other by the Company. The City and the Company *fere unable to agree upon a fair and reason- able price and each of the parties has appointed a kember to said board of appraisers. George G. Jacobs, Mayor of the City, on June j i 8, 1959, duly appointed Andrew E. Bodner, an engineer of the firm of Burns & McDonnell Engineering Company of Kansas City, Missouri as the Qity's member of the Board of Appraisers. Said appointment j was made at the request of and was duly ratified and approved by the Board. By agreement dated May 27, 1959 between the City and the Board on the one hand and the Company on the other, the parties were allowed an additional ninety (90) days in which to I, make their appointments, in view of the fact that negotiations for a voluntary sale by the Company were still continuing at the expiration of the sixty (60) day negotiation period. On August j 24' 1959, within the time specified by the franchise, as extended by said agreement of May 27, 1959, the Company appointed Mr. J. Samuel Hartt, 20 North Wacker Drive, Chicago, Illinois, as the � appraiser to represent the Company on the Board o£ Appraisers under the provisions of Section 7, paragraph (c) of the franchise ordinance. V In the three months which have elapsed since the Company's appraiser was appointed he has failed to act with diligence in making an appraisal of the electric properties of the Company within the City of Paducah and, in fact, so far as representatives j of the City are aware, has made no substantial progress in dis- charging his responsibilities under the franchise ordinance. The City's appraiser on the other hand has diligently and effectively worked at the duties imposed upon him by subsection 7 of the franchise ordinance, and has completed an inventory and valuation of the Company's electric properties within the City. He has sought 169 unsuccessfully on several occasions to meet with the Company's appraiser in order to coordinate their work and to dischange the responsibilities of their offices, resorting in that respect to letters, telegrams and long distance telephone conversations. Also in an effort to expedite the appraisal work Mr. Bodner has addressed correspondence directly to Mr. F. I. Fairman, President of the Company, requesting cooperation and access to certain company prop- erties and records. While Mr. Fairman has granted gualified access to properties, he has asked that Mfr. Bodner look to Mr. Hartt for access to records except in one particular. While Mr. Hartt has verbally agreed to supply certain information, he has been generally non-cooperative on the matter of setting meeting dates and on the matter of the appointment of a third appraiser, and to date he has not replied in writing to any of Mr. Bodner's communications. In illustration of the efforts of Mr. Bodner, and his failure to obtain the needed cooperation of the company's representative, as discussed above, the petitioners are attaching hereto copies of irritten communications addressed by him to Messrs. Hartt and Fairman, copies of communications received from Mr. Fairman, and copies of memoranda prepared by Mr. Bodner concerning his tele- phone conversations and personal contacts with Company representatives, which are marked for purpose of identification Exhibits 1 through 22. VI Subsection (d) of Section 7 of the franchise ordinance provides that if the first two members of the Board of Appraisers are unable to agree upon a fair and reasonable price for the elrctric properties within the City a third member of said Board, to act as umpire, shall be selected by them, and in the event said two appraisers cannot agree upon the third member, then upon appli- cation by either the City or the Company, the presiding Judge of the United States District Court for the Western District of Kentucky shall name the third appraiser. Subsection (e) of said.Section 7 required that the Board shall file their written report within six months after their appointment, and in the event that a majority of the members cannot agree within six months after the.appointment of the first two members the "entire first board" shall be discharged and cease to function. It is, therefore, important to the City, if its franchise option is to be meaningful, that the first board shall be in position to arrive at a conclusion within six months from the date of appointment of the second member, August 24, 1959, that is, by February 24, 1960. VII In order to have available the third member with whom he 170 could meet and attempt to reach agreement, Mr. Bodner on October 27, 1959 wired Mr. Hartt (Exhibit 14), and subsequently smote to him (Exhibit 17), seeking his agreement on the appointment of the third member of the board. Mr. Hartt has not as pet found time to consider that matter (Exhibit 22). VIII The franchise ordinance does not prescribe the time when Your Honor is to make an appointment of a third appraiser, but petitioners believe, and urge upon Your Honor, that the appoint- ment should be made as soon as it is apparebt that without such an appointment it will be difficult or impossible for the Board of Appraisers to complete their functions under the franchise ordinance within the six months period allowed therein for the completion of their work. In the opinion of the petitioners, and for the reasons set forth below, the appointment should be made at once, and there is no reasonable likelihood that the Board of Appraisers will be able to carry out their responsibilities under the franchise unless the appointment is so made. (a) The failure of Mr. Hartt to act with diligence thus far makes clear that further time devoted to negotiations with him would be waster unless a third appraiser is appointed to act as umpire. (b) In any appraisal proceeding, except of routine nature, it is almost unprecedented for the representatives of the two contending parties to reach agreement without the aid and participation of a third member serving as a neutral or umpire. In view of the complex and controversial nature of the process of:"appraising public utilities properties, in this case involving a large network serving a city of 50,000 population and having a value of several millions of dollars, which in turn must be severed from a larger system serving much of the Commonwealth of Kentucky, this case is not likely to prove the exception. (c) Fairness to the third appraiser requires allowing him enough time within the six months period to inform himself as 171 to the nature and value of the properties involved and thereafter to serve as the third member and umpire in bringing the other two members together or in reaching agreement with one of them. The Company's appraiser has taken as long to make a bare start as is now left to the third appraiser to carry out his heavy and special re- sponsibilities. IX This is the second purchase effort of the City of Paducah under the provisions of the franchise ordinance. The first was initiated in 1944 in a proceeding in which Mr. L. R. Howson, an electrical engineer of Chicago, Illinois, was the City's appraiser and Pair. Hartt was the Company's appraiser, as in the current proceeding. Litigation initiated by the Company was carried on through the courts of the Commonwealth for years and resulted in two reported decisions of the Court of Appeals of Kentucky. Kentucky Utilities Company vs City of Paducah. Kentucky, 308 Ky. 305, 214 SV12d 25$ (1948) and City of Paducah vs. Kentucky Utilities Company, 264 SW2d 838 (1953). In this litigation the validity of the franchise and the sanctity of the Company's obligation to sell its properties in Paducah to the City under the procedure set our in the franchise were established, but the last decision of the Court of Appeals re- quired a new appraisal to be made and the proceedings had become so tangled in the course of litigation that on February 20, 1959 the City dismissed the initial proceedings and initiated this new action under the franchise. A reading of the cases cited above demonstrates the hopelessness of attempting to proceed further without the appointment of a third appraiser, and empha- sizes the importance of an early appointment if the City's rights under the franchise are to me meaningful. X Certified copies of resolutions by the Board of Commissioners of the City of Paducah, Kentucky and the Electric Plant Board of Paducah, Kentucky, authorizing this petition to be submitted to Your Honor are attached hereto as Exhibits C and D. 172 WHEREFORE, PETITIONERS PRAY: That Your Honor appoint to the Board of Appraisers established under the franchise ordinance a person to serve as third member and umpire. CITY OF PADUCAH, IENTUCKY By Mayor Pro fem ELECTRIC PLANT BOARD OF THE CITY OF PADUCAH, KENTUCKY. By airman' SECTION 2. That the aforesaid Mayor, or the aforesaid bayor•Pro Tem, the Corgohation Counsel, the Assistant Corporation Counsel, and the Special Counsel, or any one of them, are hereby authorized to take such further steps necessary to obtain the objective sought. .SECTION 3. This Resolution shall be in full force and effect from and after its adoption. Haley IT., Hoox, Vlayor -Pro em B. Fendley, ommissioner Passed by the Board of Commissioners November 18, 1959 Recorded by Sarah Thurman,'City Clerk, November 18, 1959.