Photos by SAM DEAN The Roanoke Times

Buena Vista issued $9.2 million in bonds in 2005 to finance the building of the Vista Links golf course. Now the city can't make the payment due in July, and so far, attempts to renegotiate the debt have been unsuccessful.

The Roanoke Times | File 2006

The eighth hole on the Vista Links golf course in Buena Vista is dotted with the signature sand traps of the designer.

BUENA VISTA -- Gamblers who bet the house and lose end up with their furniture on the lawn and no place to live. The city of Buena Vista has bet the house -- its city hall, actually -- and is now in danger of losing it as payment for a multimillion-dollar debt.

Residents looking to fight city hall could suddenly have nowhere to fight.

If the city doesn't make a debt payment of more than $660,000 by July 15, a Maryland-based insurer could seize the city's municipal building, its golf course and its police station, all of which were put up as collateral when the city borrowed $9.2 million to build the golf course, said city officials.

The loss of a city hall to pay off debt -- possibly unprecedented in recent state history -- would force the city manager, zoning officials, tax collectors, building inspectors, registrar of voters and several judges, among others, to look for someplace else to conduct city business.

Buena Vista City Council -- which last week decided the city can't afford to make the July payment -- has tried to renegotiate the city's debt payments, but has had no luck getting insurer ACA Financial Guaranty Corp. to go along.

"I guess they want their money," summed up Vice Mayor Samuel Mays.

The root cause of Buena Vista's financial woes is the Vista Links municipal golf course. The city council agreed to build it in 2003, opened it in 2004 and issued $9.2 million in "lease revenue" bonds to finance it in 2005. The bonds were insured with ACA Financial, leaving the company on the hook to pay off bond buyers if the city defaulted.

Confident that the golf course could fatten the city's purse by more than $500,000 per year, the city put up the golf course as collateral, along with the police station at 306 Park Ave. and the city municipal building at 2039 Sycamore Ave.

But since it opened, the golf course has lost money. In fiscal year 2009, for instance, expenses exceeded revenues by almost $250,000. The losses are significant for a small city like Buena Vista (population about 6,500), which has an annual budget of between $11 million and $12 million. Meanwhile, the city has bled jobs in the weak economy and seen large cuts in the money it receives from the state, Mays said. "When things were going good, it was a good idea," he said of the golf course. "But when they went bad, they went bad in a hurry."

Unwilling to make dramatic cuts in services or raise taxes to continue paying for the golf course, the city council decided to renege on the debt. City Attorney Brian Kearney said he has had lengthy discussions with the lawyer representing ACA Financial to try to restructure the financing, but to no avail.

"There's been no willingness to negotiate," Kearney said.

The lawyer for ACA Financial, Bonnie France of the McGuire Woods law firm in Richmond, said "it's a little too early to speculate on what's going to happen" if the city doesn't keep up with its payments. But if it doesn't, she added, the city will be operating in terra incognita.

"I've never seen, in Virginia, where there was a failure to pay a debt service," said France, noting that she has been in the business 30 years. "It's a relatively unique set of circumstances."

Kearney said the city believes it may be difficult for ACA Financial to take possession of city hall because the city's courts are in the building. Under Virginia law, judges have complete control of the portions of buildings where they hold court. However, according to the agreement with ACA Financial, the city must "use its best efforts" to find a new place "acceptable to the judges."

The golf course's estimated value is $950,000, while the police station is worth $1 million, said Mays. City hall is worth more than $900,000, a sum low enough to make it not worth selling for ACA Financial, he said. "They could foreclose on it like you would a house and lease it back to us. We wouldn't have any problem with that."