Peachtree City bears no liability for the nearly $1 million in debt owed

to Peachtree National Bank by the Peachtree City Development Authority, Mayor

Steve Brown insisted Wednesday, suggesting that the authority should declare

bankruptcy to settle the matter.

The city, the Development Authority and the Peachtree City Tourism Association

were all named in a lawsuit filed late last week by attorneys for Peachtree

National. The bank is seeking payment on hundreds of thousands of dollars

in loans now in default that it made to the Development Authority over a

period of time ending in 2003.

The authority hasn't made any interest payments on the loans since

last fall, when it gave up management of the city's amphitheater and

tennis center and the hotel-motel tax revenue that came with that responsibility.

Brown has alleged the Development Authority used the borrowed money to expand

facilities at the tennis center, but also to meet operational expenses,�which

is a violation of state law.

The city's Tourism Association now operates both venues. In transferring

the management to the Tourism Association, the suit alleges the city handicapped

the Development Authority so it couldn't make good on its debt.

"They're talking about how we created a situation where the Development

Authority couldn't pay the debt, but they didn't have the means

to pay it even when they were getting the hotel-motel tax," Brown argued. "Don't

tell me we cut off your method of paying the debt when you weren't paying

the debt in the first place."

Even in the best of times, according to Brown, the authority was making

interest payments only on the loans, and was still having to borrow to make

ends meet.

"What is going to come out of all this is we're going to see the authority

did not manage its affairs properly and was running in conflict with state

law," Brown said. "The bank was lending money without collateral;

these were non-collateralized loans."

Brown said the bank shares some of the blame because it readily made loans

available to a known credit risk.

"Why would a bank lend a million dollars with absolutely no collateral

required to an entity that could have had its funding cut off with just 30

days notice?" Brown asked, referring to an intergovernmental agreement

between the city and the authority which gave the authority a "30-day

out" clause to surrender management of the venues, along with its biggest

source of income -�the guest tax revenue.

The Tourism Association has been operating both the amphitheater and tennis

center since mid-January solely on income generated by each venue. In a tentative

2005 fiscal year budget released last week, the Tourism Association proposes

using its portion of the hotel-motel tax revenue to cover expenses related

to tourism-related events in the city, such as the Great Georgia Airshow

and the city's Fourth of July celebration.

The city has 30 days to respond to Peachtree National's suit.

"We the city are very comfortable in our position," Brown said

Wednesday. "I'm definitely stating for the record that the Development

Authority and the city are two separate legal entities under state law and

the city had absolutely no control over the actions of the Development Authority."

Brown suggested that the authority's only recourse at this point is

to declare bankruptcy.

"What other option do they have? I don't think there is a legitimate

option," he said. "This is just 10 years of bad management come

to a head here."