CHELSEA — Selectmen voted unanimously to hold a special town meeting next week to see if residents would agree to a $25,000 settlement with former town clerk Flavia “Cookie” Kelley.

The meeting is at 6:30 p.m. on Thursday at the Togus Veterans Theater.

Kelley and her attorney threatened to sue the town in a dispute over the validity of her contract.

Former Town Manager Angela Gordon signed a three-year contract with Kelley without authorization of the Selectboard.

Town Attorney Stephen Langsdorf has said since selectmen lacked the signatures from selectmen the deal was invalid.

Residents who attended Wednesday’s meeting at the Grange Hall said they didn’t want to pay Kelley “another red cent.” But Langsdorf explained that without this settlement the town would be faced with a legal suit. And if Kelley won the suit, the town would have to pay her $90,000, which is what she would have earned in her three-year contract, along with attorney fees.

“If this case goes to trial it’s going to cost the town more than $25,000,” Langsdorf said. “There’s a strong likelihood that she’s looking for the $90,000 so the scenario could be much worse for the town. The best possible deal is to negotiate and at least present it to the town (for a vote).”

Rick Danforth, a former selectman, said he is concerned people at the special town meeting won’t want to go along with the settlement because Kelley is undeserving.

“I don’t like that mentality,” Danforth said. “We have got to make sure this does not happen again. When I was on the board we did not give anybody a contract except the town manager.”

Selectman Linda Leotsakos said it is the intent of the Selectboard to stop giving contracts to town office staff, except for the town manager.

Selectmen said the money would come out of the town’s wood lot account. That fund came about with the sale of 90 acres the town received for unpaid back taxes. There is more than $100,000 in that account, officials said. The only other way the money could be raised is through taxes, selectmen said.

Langsdorf said he would do a good job explaining the consequences to townspeople at the special town meeting so they understand what would happen either way.

He said Kelley has already signed the agreement pending residents’ approval.

Selectman Michael Pushard said people must decide.

“Do we take the chance and have it cost us $125,000 or take it out of the tree fund?” Pushard said. “It’s just sitting there collecting interest. It’s a hard pill to swallow, but that’s why we’re going to town meeting, to see what you all think we should do.”

Leotsakos said most towns have a surplus account, an undesignated fund, but Chelsea’s has been “decimated.”

Residents asked if there were any other “stone unturned” that the town will have to face in the aftermath of the arrest of former selectman Carole Swan who was arrested Feb. 10 on charges she extorted cash from a plow contractor.

“The only other issue is the plow contract,” Langsdorf said. “He claims he has one year longer on his contract. That’s the only other issue unsolved besides the criminal actions with Carole.”

Frank Monroe, the Whitefield contractor who is involved in the probe of Swan, said he would sue the town for breach of contract if selectmen put the winter plowing contract out to bid.

Langsdorf has said Monroe doesn’t have a valid contract on file to plow Chelsea’s roads past 2010.

Police allege Swan received a total of $10,000 in kickbacks from Monroe on two occasions in 2010. One of those payments, for $3,000, was in February 2010 — a month before Monroe would retain the disputed contract. The other payment from Monroe to Swan — $7,000 — occurred last fall, police have said.

Mechele Cooper — 621-5663

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