Birmingham-Southern College sues state treasurer’s office over loan program

Birmingham-Southern College filed a lawsuit against the Alabama state treasurer’s office Wednesday, alleging that State Treasurer Young Boozer “has acted in bad faith, beyond his authority, and/or under a mistaken interpretation of law.”

The lawsuit accuses Boozer using his oversight of a loan program for financially troubled institutions, like BSC, to pursue a personal vendetta against a bank and wrongfully denying the school a $27 million loan. Birmingham-Southern College president Daniel Coleman said in a statement Wednesday that the school had discussions with Boozer for months, but that “our good faith has been betrayed.”

“After several additional  attempts over the last two weeks and up through today to get Treasurer Boozer to execute the will of  the Alabama Legislature, we have no other choice but to seek remedy from the court,” the statement said. 

Glenda Allred, Alabama deputy state treasurer, wrote in an email that the state treasurer’s office would not comment on the filing, but looked forward to “aggressively defending” the lawsuit.

Birmingham Southern College sought $37.5 million from the state this year, due to years of deficits and falling enrollment. The college has nearly 1300 students enrolled and has operated since 1856, per the school’s website.

BSC officials said the school might close its doors without the funding. 

Gov. Kay Ivey this spring signed a bill sponsored by Sen. Jabo Waggoner, R-Vestavia Hills, that created the Distressed Institutions of Higher Education Revolving Loan Program. which would lend money to troubled institutions like Birmingham Southern. The program is funded by about $30 million in state money.

Under the legislation, an “eligible institution” is a private or public institution that has operated for more than 50 years; has a significant impact on the community where it is located; is experiencing a closure-threatening financial situation, has a governing body that has authorized an application for a loan as it receives private gifts and has sufficient assets for collateral.

The program was launched by the state treasurer in August.

But the 33-page lawsuit, filed in Montgomery County Circuit Court, alleges that Boozer used the college to gain leverage over ServisFirst Bank.

“Throughout this process, the Treasurer has been focused on placing ServisFirst Bank at a disadvantage to settle a grudge against that bank, rather than implementing the clear will of the Legislature to save the college through the program,” the lawsuit said. 

The lawsuit said that ServisFirst is the “lead lender among a group of lenders with $16.5 million in existing loans to the College secured by substantially all physical assets of the College” and that the treasurer had focused on “subordinating the first position of ServisFirst Bank in the College’s physical assets.”

Messages were left with ServisFirst and the Attorney General’s office on Wednesday.

The attorneys also accused Boozer of delaying implementation of the program by asking the Attorney General’s opinion on its constitutionality. 

“From then on, the Treasurer acted arbitrarily and in bad faith to try and weaken the College,” they wrote. “In effect, he has exercised a veto of the program he opposed since it was presented to the Legislature — an act far beyond any discretion or investigatory power granted to his office under the plain language of the statute.”

The lawsuit alleges that the treasurer’s office delayed opening and receiving the applications for the program, even as the college president provided his cell phone number to the treasurer to help speed the process along. The attorneys also wrote that the application instructed applicants to not discuss their application with anyone or risk immediate denial.

“This instruction evidences the Treasurer’s intent to keep secret his plan to effectively veto the program by delaying a decision until the College could no longer afford to operate, and to cause as much harm as possible to the College and its constituents,” the attorneys wrote.

The college had requested $27 million of the $30 million available.

According to the lawsuit, the only issue Boozer had notified them about until this month was the college’s collateral. The suit alleges that the treasurer told the president that the “distressed” nature of the institutions meant that they would not be good loans and he would not be distributing them.

“The Treasurer further stated that he did not ‘trust the Legislature to get constitutionality right’ in its legislation,” the attorneys wrote. “This indicates, on information and belief, that the Treasurer viewed himself as the gatekeeper of the program, despite the Legislature creating the program and ordering him to make loans under it to qualified institutions.” 

Attorneys also said that the Governor’s Office had given “positive representations” about a potential Governor’s Emergency Education Relief (GEER) Fund allocation but was then told in September that they would not be receiving the funding.

Gina Maiola, a spokeswoman for the governor, declined comment on Wednesday, citing the litigation.

Most students who experience a school closure do not re-enroll in college, according to a 2022 report done by State Higher Education Executive Officers Association and the National Student Clearinghouse.