The five-year history of how Apalachicola has handled funding of its downtown Community Redevelopment Agency, and the controversy that now surrounds it, has ignited as a hot issue in the current mayor’s race.

Here’s the background.

In 2014, when funding for the CRA was first approved, the rule was to set the property tax millages that year as the base for that specific area, and each year after that, as the tax base expanded, to allot this additional tax revenue, known as tax increment financing (TIF) directly to the CRA, for the purpose of improving the downtown, the waterfront and sections of the Hill.

And so, in 2015 and each year after that, the county dutifully paid its portion of these TIF funds into CRA coffers, growing each year from about $11,000 to nearly $50,000 for the upcoming fiscal year.

The city was to do the same thing with its TIF monies, as they grew from about $15,000 in 2015, to nearly $28,000 the next year, to $54,000 in 2017, to $64,000 this year, to an expected $76,000 in the upcoming year.

The trouble is, the city never paid it.

Instead, the city collected the full amount of property taxes in its CRA and applied them to the general fund for operating revenue, not allocating any of it to the CRA.

Which means it now owes the CRA more than $161,000, and next year, will need to hand it another $76,000, for a total of more than $237,000. And there's not enough money in the budget to settle up.

“I can’t write a check (to the CRA),” said City Manager Ron Nalley. “It is important; we need to pay it back.”

Nalley said information received by the city last fall underestimated the monies due the CRA, prompting him to go back and recalculate the required city contribution that now must be repaid.

“This puts us in a difficult position,” he said, noting he’s reviewed a range of options with state officials that would enable the city to repay the debt over time.

Nalley said the city could raise the money by boosting its proposed millage rate up from 9.3 mills, which is just slightly above the rollback rate of 9.2813 mills but a drop from the current 9.6043 mills.

Or the city could make cuts to its roughly $4.4 million proposed general fund budget, about a third of which comes from ad valorem taxes.

Or it could suspend the current CRA program for up to five years, freeing the city from having to make future TIF payments while it makes good on its debt.

“It would mean basically putting our financial house in order to allow us to pay back the $160,000 (the city currently owes),” he said.

By suspending the CRA, both the city and the county would not have to make future TIF allocations, he said. In addition, it would call for setting in motion a process to terminate the employment agreement it has with CRA Director Augusta West.

Nalley, who is involved with West in a personal relationship, noted he had a conflict of interest in the matter.

“How did we not know that this was this much?” asked Commissioner Anita Grove.

Nalley said that at an earlier meeting with Carol Westmoreland, director of the Florida Redevelopment Association, a Tallahassee-based not-for-profit specializing in community revitalization efforts, “we had a spread sheet and we took those differences and added them together and that is what we understood at the time that was what we needed to do.”

But those calculations turned out to be seriously off.

“We thought that was it. That was my mistake,” said CRA Chairman Jim Bachrach.

“We need to suspend this,” said Commissioner Mitchell Bartley.

“I feel like we need to stop the bleeding and address it,” said Grove.

Nalley said time was needed to review financial and legal information regarding a possible CRA suspension. He noted West’s agreement calls for 90-days notice for termination, and said a decision could be made to coincide with the Oct. 1 start of the upcoming fiscal year.

“We are working on the legalities. There are several things we still need to do in order to bring you a good response,” he said.

“I want to be fair about this,” said Bartley.

Several members of the audience, including community activist Robin Vroegop, mayoral candidate Kevin Begos and city commission candidate George Mahr, urged the commission go slow with any dismantling of the CRA, noting that it served a good purpose but disagreeing on how the current budget is being spent towards revitalization.

“This is not about Augusta but about the future of the CRA district,” said Mayor Van Johnson. “The CRA is an excellent tool to redevelop a blighted area of the community.”

Grove argued for suspension, noting the CRA hasn’t met much recently. “Now is a good time to pause it,” she said. “I don’t want to keep racking up debt. I feel like let’s stop it.”

After Nalley informed commissioners the city had begun a conversation with officials from the Florida Department of Economic Opportunity, and was gathering more information, Commissioner Brenda Ash secured unanimous support for a motion to have Nalley draw up all the pros and cons of possibly suspending the CRA or alternative options. These are expected to be completed for commission review by next month’s final budget hearing on Sept. 24.

“Once you get rid of something it’s very hard to get it back,” said Commissioner Jimmy Elliott.

“Suspension is important because we don’t want to be de-designated, and we don’t want the debt to keep accruing,” said Nalley.

Following the meeting, Begos and mayoral hopeful Valentina Webb each issued statements on Facebook, and Amy Hersey addressed it in a Facebook live appearance.

Begos reiterated what he said at the meeting, and what has been a key aspect of his campaign message. “The city used county contributions for salaries and overhead – not to benefit blighted areas in the Hill neighborhood, the working waterfront or on affordable housing, which is what a CRA is designed for,” he wrote, noting that Bachrach, who chairs the CRA, is “from the Main Street group” and underscoring his admission that he had made a mistake.

In her release, Webb said the debt to the CRA “was met with an admission by (Bachrach) that it was totally his responsibility and that he failed to meet it.

“This is another example of the financial mess Mr. Nalley inherited and is working diligently towards fixing,” she wrote. Webb said she supported immediately suspending the CRA until the debt was fully paid off.

“At that point we can revaluate it as a tool to reinvigorate the Hill, the Bowery and the waterfronts,” she wrote.

In her Facebook appearance, Hersey said she agreed that the CRA monies have not been properly spent on the issues they are intended to address. She proposed waiting until Nalley presents his findings before deciding whether to suspend the CRA.