TOWN CENTER FORECLOSURE SALE.

Both PiPress and Strib carry the story ONLINE. It is not a "Going out of business" promotion by some suspect merchant; it is the real thing. Bruce Nedegaard's lender will be selling the site this month as a result of the Nedegaard death and bankruptcy.

The photo above is from the PiPress coverage, so I will start with it first, see "From Dreams to Desolation," here; with the following photo of Bruce Nedegaard from here; and with a timeline of the plan and its history, here.

I cannot vouch for the timeline's later entries; and I notice the omission of the name Kurak, i.e., there is no mention of Pattiann Kurak running for office in 2000 touting "nice shoppes and restaurants" and "a gazebo" for the site; sitting on council when Nedegaard bought the land and took the plunge; and making an alleged Kurak family land speculation profit of fourteen million dollars on the deal, while on coucil. Ramsey is Ramsey, after all. Land speculation is land speculation. Promotion is promotion.

Here is what Nedegaard looked like, in better times; having suffered for many months from cancer (and its treatment stress), and losing the battle last November, two weeks after his wife of many years had died before him:



I never met Bruce Nedegaard. I did meet and speak with John Feges, and I exchanged emails with Nedegaard as a critic of the project and how it was promoted before he closed the land purchase. Prophetically, he noted in one email "We take our profit at the end, the last 10 - 20% of the development." If not exactly those words, that is the gist of his basically telling me it was his risk to take and the situation was not a riskless bed of roses. It was a fair observation, and absent the market downturn and absent problems with his health and his death, whether Town Center under Nedegaard would have made it over the hump is now pure speculation.

Before excerpting the news; I mention how the Town Center future weighs heavily on the entire Ramsey 2008 Comprehensive Plan effort. And how citizens have been energized by the RAMSEY3 opportunity to meet and discuss things among themselves and with staff and some diligent council members attending. That grassroots activity should continue. Citizen thinking, listened to by an attentive staff and participating consultants, will aid avoiding pitfalls and problems such as those the excerts chronicle. From that perspective, I excerpt the reporting while interspersing personal thoughts.

PiPress's "From Dreams to Desolation" first, then Strib's "On the auction block: Town Center's fate."

Questionable financing. Swiss bank accounts. Creditors out millions. Welcome to Ramsey Town Center. What was supposed to be a $1.3 billion gem now sits mostly vacant, the legacy of a dead developer.
BY NICOLE GARRISON-SPRENGER and DAVE ORRICK
Pioneer Press
Article Last Updated: 07/08/2007 12:00:05 AM CDT

As Bruce Nedegaard lay dying of cancer last fall, his dream - and the dream of [a part of] an entire town - was fading as well. Years before, the longtime Twin Cities developer teamed up with the city of Ramsey on a $1.3 billion vision that promised to put the Anoka County city of 22,000 on the map - a utopia of homes, shops and offices sprouting from 322 acres of cornfields off U.S. 10. They called it Ramsey Town Center.

Even before a single streetlight was erected, the design won a national award and was touted as the future of suburbs. Local leaders poured in millions.

Today, it's a ghost town.

What went wrong? Just about all that could.

A Pioneer Press review of hundreds of pages of court records and interviews with dozens of those involved has found:

City and bank leaders put their trust in the wrong man. Nedegaard lacked the money and had never pulled off such a big project. Even when city leaders later learned Nedegaard had been convicted of a felony, they stood by him.

Can't you see Tom Gamec and Jim Norman leading a chorus, "Stand by your man, ..." with Natalie Steffen singing soprano - the key-noter poohbah at the Town Center groundbreaking months ago, but now having a lower profile while ex-Met Council head administrator Jay Lindgren went to the Dorsey law firm, had the Ramsey Town Center LLC as a fee-paying client there, and the Dorsey firm went through featuring the TC thing on the firm's website and then scrubbing the thing off the site when it ripened. And Elvig and Alena, the Town Center Task Force dynamic duo both singing tenor; and with all the singing the Kruaks high-fiving in the background and Todd Cook standing by saying, "Huh"?

The article continues:

Nedegaard's reported wealth faded away with little explanation. Creditors searching for the money discovered deposits into Swiss banks and a trail of empty promises. As Nedegaard's health was failing, he hit up friends for hundreds of thousands of dollars with stories of can't-miss deals. Many never saw that money again.

One series of bank transactions netted two of Nedegaard's partners $20,000 each. Investigators are scrutinizing some of the players.

What was supposed to be a model for development has disintegrated into a hard lesson in the perils of bold city planning.

Nedegaard died at age 58 last year, two days after he was forced into bankruptcy. The Columbia Heights man left behind about $70 million in debt and 230 creditors, court records show.

On Monday, 150 acres of the Town Center will be sold at a foreclosure auction.

"We're starting all over again," Ramsey Mayor Thomas Gamec said.

The idea of a Town Center first came from Ramsey City Administrator Jim Norman in a 1998 brainstorming session. It was promptly shot down.

There is a propaganda technique, called, "Blame the empty chair." The chair can blame others. The article continues.

By 2000, backers of a commuter rail line through the area had decided to put a station in the neighboring city of Anoka. Ramsey leaders felt jilted.

Norman pitched his idea again, saying a transit-oriented project could win Ramsey its rail stop. This time, city leaders bit.

"I floated it for the wrong reason," said Norman, who is now in private practice. "I had a council that hated Anoka so much."

There is nothing wrong with the "town center" concept, say leaders with the Metropolitan Council, which gave more than $3 million for its infrastructure. Success stories can be found near cities like Washington and Las Vegas.

Ramsey, noted Met Council member Natalie Steffen, is "a lot of land with a lot of potential."

It's unclear to me whether the council hated Anoka too much, or did not hate Jim Norman enough, but oh no, please, please do not say "land with a lot of potential." Help. There's an ex-gun club, and a "Pulte project" along Hwy 10, Steffen's sundy school pupil on council, and acres of Thomaswood that are stell left as hay farm after the south 40 went Village of Sunfish Lake sardine-can single-family.

There's "potential" for Met. Council, after all, in selling lots and lots of flushes. They put the CAB pipe in over at Champlin, Ramsey buys in back in the early dark ages (when someone besides Gamec was mayor for those who can remember back that far), and all those hook-up and monthly fees the growth generates pay for all the Met Council planners on staff, stoking the fires of growth in Ramsey - a big circle plan - citizen goals and preferences notwithstanding. Ben Dover, the taxpayer can stand it, and keep forever smiling. And who knows how or why the faces of yesteryear strangely have vanished?

"A lot of land with a lot of potential," and you can bet it is intended in the eyes of some to become wholly overrun with crabgrass. Crabgrass to the right of us, crabgrass to the left of us, in front, behind; and woo-choo-choo-Charlie, look at the numbers on this latest property tax statement ... Uh huh. Told you so. But that new palace and ramp look so pretty ... there by themselves, visible from afar when the weeds are kept down.

The article continues:

Planning trudged along, and by 2003 Ramsey leaders were ready to commit. They enthusiastically inked a deal with Nedegaard, despite misgivings they had about him.

A former president of the Builders Association of the Twin Cities, Nedegaard was a respected businessman who had completed a number of projects across the metro. But he had never done anything this big.

You need money to make money, and Nedegaard didn't have enough. He had only about $1 million on hand when he borrowed $35 million in 2003 to get the project started, Norman said.

That $35 million loan came from Community National Bank of North Branch. But Community National didn't foot the entire bill; about two dozen other banks pitched in. Executives at Minnwest Corp., the parent company of some of those banks, say they, too, had concerns about Nedegaard and the project.

Community National executives quelled those fears by saying a town house developer was about to buy into the project.

"We thought that there (were) ... some early purchasing agreements that indicated some level of market acceptance," said Russ Bushman, chief credit officer for Minnwest. "Obviously, some of the purchase agreements fell out early. Others didn't materialize."

On the city's end, Nedegaard's reputation and enthusiasm tempered leaders' concerns, recalled Mayor Gamec.

Uh huh. And that's why the council kept entirely quiet with us when Goodrich and Norman supplied each an email copy giving notice about the felony plea; with the message passed on to bond counsel and to the parking ramp guys.

But Ben Dover; keep Ben on a strict need to know basis; and Ben does not need to know what might not keep him smiling. The article continues:

Without the deep pockets to develop Town Center, Nedegaard had a strategy: Spend money to prepare a tract of land, sell it and use the proceeds to prepare another.

He turned to Community National for the money to get started.

Executives from at least two banks that pitched in on the $35 million loan now say they would have had pause if they had known about cozy relationships between some Community National bosses and Nedegaard.

A few months before the loan's approval, Nedegaard started a title company called Powerhouse with some executives at Community National, including CEO William Sandison and his son, as well as the attorney who drafted the Town Center loan. According to the Minnesota Department of Commerce, Nedegaard had the largest stake. The operation was based out of Community National's building in North Branch.

A title company collects fees for researching property deeds. On a $1 million sale, Powerhouse could collect roughly $2,200 in fees, according to rates supplied by Darlene Milless, who ran Powerhouse's day-to-day operations.

Darlene was on Ramsey's Charter Commission that had amendments put through to assist the developers - to help the crabgrass grow - and who do you supposed owned the raw land or a part of it east of the Kurak parcel? Duh, smile Ben, it was Darlene Milless. Goes around. Comes around. The article continues:

In a big project like Ramsey Town Center, a lot of titles and money change hands. And Powerhouse benefited.

However, few of the businesses and people involved contacted by the Pioneer Press say they knew that Nedegaard and the bankers at Community National also owned Powerhouse.

"That's a violation," Minnesota Department of Commerce spokesman Bill Walsh said. "It's OK to refer (business), but you have to disclose your interest."

Jim Deal bought about 26 acres from Nedegaard to build office buildings. Powerhouse's name was all over the paperwork. "It was Nedegaard's choice," he said.

Same for the city of Ramsey.

"Any time we'd do any documents with Bruce Nedegaard, we had to use Powerhouse," Norman recalled.

The Department of Commerce conducted an investigation - sparked by another Nedegaard project - into Powerhouse in 2006 and subsequently shut it down. It turns out Powerhouse was operating without a license, reports from that investigation reveal.

Side deals included more than title fees.

John Feges, former president of Nedegaard's Town Center corporation, said he was kept out of discussions involving such financing.

"I guess because I ask tough questions, they didn't want me in on the bank stuff," he said.

I think the minutes from the beginning of this year have Feges representing proposals for more build-out of Thomaswood hay-lands; and I recall his involvement in Village of Sunfish Lake drumbeating. He had one map over at the Nedegaard Columbia Heights office, with the Town Center land outlined in Yellow, along with the land to the West - including the Pulte plan, I think, and land south of Highway 10, while Al Pearson was on council. Someone should ask Feges about having a look at that map, these days. The article continues:

But Feges said he believes there were many side deals in which Nedegaard's Town Center corporation paid fees to Community National or its officers.

In one case, William Sandison and Community National officer Jerome Peterson each pocketed $20,000 in a complicated deal involving a $3 million letter of credit, according to a lawsuit pending on the deal. The money came from Nedegaard's Town Center company.

[... attorneys deny there was any wrongdoing, calls from PiPress are not returned]

Within six months of Nedegaard getting the $35 million loan, the money was all spent, Feges said.

The real cash cow of the project - the homes - was lagging. Nedegaard fell behind on building water and sewer lines and roads, Feges said. And by late 2005, the real estate market began to slump.

"If (Nedegaard) would have sold some of the land, he would have had enough money to keep him in operation and paying interest to the bank ... but he wasn't able to sell anything," said Peter Dahl of Crown Bank, one of the banks that pitched in on the loan.

By 2005, "Bruce ran out of money, and his (worsening) cancer was making it difficult for him to be out there raising more," Feges said.

Nedegaard turned to his friends, borrowing hundreds of thousands. That money is gone, according to bankruptcy filings.

"Banks lend based on numbers, and friends lend on hearts," said one woman who lent Nedegaard $200,000. She spoke on condition her name not be used because of embarrassment. "He took advantage of our little family."

Nedegaard often told friends that his investment in a European pipeline was on the verge of coming through. Some say he told them the deal concerned oil in Bulgaria; others say diamond mines and natural gas via Swiss investors.

Creditors later discovered Nedegaard transferred $600,000 to Swiss bank accounts in two transactions, according to bankruptcy fillings. Why he did so remains unclear.

Pick up the thread from there, in PiPress's own coverage; at the sub-headline, "INVESTIGATORS ARRIVE." Read on in the PiPress account of events. They have to sell papers, so buy one, make it a keepsake.

You will pay more, much, much more in taxes, than the cost of a Sunday PiPress. So, find a back issue during the week. Download the online story. Raid the birdcage if you have to to get a copy of the story back from Tweeter, value added.

I wrap up my PiPress excerpting with two final excerpts:

Minnwest took action. On Nov. 28, the bank filed a petition to force Nedegaard into Chapter 7 bankruptcy.

Two days later, Nedegaard died. A mountain of debt, surpassing $70 million, was later revealed in bankruptcy court.

Federal investigators' interest in Nedegaard and his financiers continued.

Last month, "25 to 30" federal agents, including U.S. Postal Service and IRS investigators, paid a visit to Community National offices, North Branch Police Chief Steve Forner said.

At 4:30 p.m. on June 18, the agents entered the bank building with a search warrant. They could be seen inside past midnight. Why they were there hasn't been made public; the warrant is sealed.

IRS Special Agent Janet Oakes would only say, "It's an ongoing investigation."

"Ongoing" and may it also be deep and widespread. Asking into the pre-Nedegaard dealings, setting the land up for high-density. John Feges would know, he was walking point. The entire "sewer-here, sewer-not-there" decision making has an interesting pattern to it - and there was land once owned by Federal Cartridge, etc. Lift every rock. Study the life forms crawling beneath the rocks in the moist dark musky loam. Put them under the microscope. Whose relative is which banker, which landowner, etc. If that's a consideration - investigate.

PiPress wraps up with crocodile tears for the bank. The bank thinking Ramsey folks are being unreasonable by not intending to let the Town Center densorometer reading hit maxed-out saturation. Show some love for the bank and drop thoughts of amiable shops and restaurants; to make or allow it as density housing, pedal to the metal.
Bankers did dumb lending and want to recoup as much as they can.

So what?

Should Ramsey folks bail them out by welcoming garbage housing into the community in hitherto unseen amounts and densities, more even than the current developer-friendly largesse envisions - so a bank at foreclosure can get a better price? Is that just?

Nedegaard's bankruptcy and death has left the Town Center project at a standstill.

A grocery, coffee shop and municipal buildings draw a trickle of traffic. But a strip mall sits largely vacant. One of two office buildings stands mostly empty. A 580-space parking ramp towers, mostly unused, over acres of empty fields.

Except for a small section of homes being built, construction on the project has nearly come to a halt.

The dream of Ramsey Town Center led Nedegaard into financial ruin. It hasn't been too kind to others who shared it with him. Among those left holding the bag are numerous contractors.

Blaine-based Glenn Rehbein Cos. claims it's owed nearly $4.7 million from Nedegaard. Its subcontractors, in turn, are suing Rehbein. Blake Drilling Co., for example, said it's owed nearly $263,000, and Lino Lakes-based EJM Pipe Services said it's owed $552,000, court records say. Lawyers for the companies say there are many smaller contractors without the resources to hire attorneys that are also out money.

In all, some $17.74 million in public money has been spent. City officials emphasize that most of that money has paid for streets and utilities that are either in use or ready to be used as soon as the market turns around.

But Ramsey is out the millions in tax revenue it had anticipated the Town Center would generate. And if nothing ever gets built, Ramsey leaders admit they might be forced to make some tough decisions in future budgets.

Despite all the problems, the Ramsey City Council stands by the vision of the Town Center.

That is unrealistic, said Minnwest's Bushman. His bank was expected to be among the lead bidders at Monday's sheriff's sale. It's now not sure.

"We've had estimates done of what it would take to finish the project per the development agreement, and the costs are far in excess of what would be derived by completing the project," Bushman said.

The city itself has no plans to take over where Nedegaard left off.

"No way," said Community Development Director Patrick Trudgeon. And that makes Monday's auction a big question mark. Nedegaard's bankruptcy and death has left the Town Center project at a standstill.

"No way," indeed. It is easy to agree with your friends when they say "No way" to a greedy banker and builder wanting to shovel off their bad decision-making on a foreclosure buyer and a nice town. End of PiPress excerpting. Strib next.

Strib is less detailed, and more inclined to serve us blame-the-market damp toast non-news. Yet it captures the heart of the real Ramsey question, not what happened, in lurid detail, but "What's next":

When the Anoka County Sheriff's Office auctions off 150 acres of farmland along Hwy. 10 on Monday morning, Matt Look will be one of many people in Ramsey eagerly awaiting the winning bid.
The buyer will likely control the fate of Ramsey's much troubled Town Center, a $50 million, 320-acre project that includes dreams of developing a downtown along the proposed Northstar commuter rail line.

The 150-acre parcel is in foreclosure because Town Center's lead developer, Bruce Nedegaard, was forced into bankruptcy. Nedegaard died of cancer last year.

Look, a member of the Ramsey City Council, wonders whether the city will ever see a return on its investment in the project: Ramsey is spending $19.2 million on a new Municipal Center in the Town Center development, including $1.5 million for the public parking ramp.

An empty Town Center means no tax revenues for the city, Look said.

"A lot depends on who will buy" the land, he said. "We are being held ransom from a tax base standpoint ... It will be an interesting day at the Sheriff's Office."

[...]

Ramsey had high hopes for Town Center, a mixture of housing, restaurants, entertainment, shopping, businesses and public space that was supposed to complement a stop along the planned Northstar commuter line. In addition, city officials were hoping to attract a big-box retailer to a nearby 67-acre site dubbed Ramsey Crossings.

Then the housing market stagnated. Not enough businesses moved in. Growth didn't clip along as expected; some city officials said the timeline expectations were unreasonable for such a large project. About 70 percent of the land is still undeveloped. The developer originally had estimated it would be completed between this year and 2009.

"At this point, we are still going to focus on the vision," said David Jeffrey, a City Council member. "The vision of Town Center is what the residents of the city want to see ... I don't know if we would have done anything different."

Look disagrees. In hindsight, the project might have been too ambitious, he said. Perhaps the city should have sought out more developers before deciding on Nedegaard. Plus, Northstar will not begin service until at least 2009, a long year and half away.

"I'm not going to invest [millions of dollars] in something and hope for the best," Look said. "I'm going to need some guarantees. And so far, we don't have any."We're at a razor's edge," he added. "Do you modify the project so it will move faster? Or do you sacrifice your investment and wait until the [real estate] market stabilizes? But is it economically feasible even if the market turns around?"

I am no fan to any degree of David Jeffrey. I find Matt Look direct and trustworthy. Matt's views of property rights and land use regulation are too far off the spectrum from reasonable, in my view, for me to give him any blanket endorsement. Sure, if he ran next cycle against Gamec, yes I would support him. Against Gamec the call's not difficult. Against Gamec I would draw the line at Charles Manson, or some other individual besides Matt Look but coming from the Mike Jungbauer madrassa politics.

Moreover, here I disagree with Matt and agree (in part) with Dave.

Ben Dover the Ramsey taxpayer has no benefit in bailing out this lender.

The lender made a bad loan without keeping watch of the court files and knowing who they were dealing with. Put it out strong - BUYERS ARE ON NOTICE, there will be no sweetheart deals or substantial changes after the dust settles.

No change this, change that.

While Jeffrey has rose colored glasses on saying it's a great plan and we keep it, he's wrong. It's a mess of overly-dense cheap looking shared wall housing in the current as-is plan -- that in a community where that's not been a housing pattern, and where it is generally not wanted. Not next door, not really anywhere.

But you do not make it worse with more density and no hooks on amenities for the rest of us; for BEN. Not to keep fat bankers corpulent at our expense.

What's hard to grasp in this equation: No shops, no restaurants = Let it stay fallow forever.

Fallow forever is no skin off my nose, wherever.

Sure it might delay the cashout west of the distressed Town Center site; and the family interests at stake over that may weep; but it is only one family in Ramsey and they will get an ultimate land-deal profit. Let them wait. We should not be hammered to make that well off family more corpulent immediately. They already had their way with sewer to the gun club. Let them wait.


The upshot. Sylvia and planners and engineers on staff are well intentioned and well mannered and bright; smart enough to get things right if left alone in listening to the rank-and-file citizens expressing thoughts and hopes in the RAMSEY3 meetings.

Just don't tolerate for a moment contrary monkeying-around counterefforts of those others, the ones responsible for this kind of press coverage attaching to Ramsey; those sitting and formerly at the council table. Forestall any such efforts to screw things up any worse than they've already been screwed by these individuals, their families and their cronies and colleagues. For whose benefit you should ask, have they managed to screw asunder a pleasing community balance and ambience in dumb and easy ways they could have avoided. There's not a thing wrong with being Ramsey, the quitely pleasant rural stretch along Highway 10 between Anoka and Elk River. Not a thing.

Oppose the arrogant few who moved a modest city hall at a convenient centralized location to an overbuilt place in the midst of a mess. Push hard, very hard on the brakes or the cart's over the edge. The theme of the Ramsey 2008 Comprehensive Plan should be exactly that - push hard on the brakes.

Despite what David Jeffrey says and thinks, it's a mediocre existing plan, a failure so far, but David is right saying do not make it any worse by rubber-stamping yet more over-dense housing because some banker's gotten out a crying towel. "No way" as planner Trudgeon put it.

These pre-foreclosure articles are about those elected individuals who handed the community this mess, as much as about anyting and anybody else. My answer there: Get the broom for 2008. Do some thorough sweeping.

"We're starting all over again," Ramsey Mayor Thomas Gamec is quoted saying.

Let's start over by throwing some of the dead weight overboard.

Lighten the ship of state.

And remember this - on the vote to give preliminary plat approval for Town Center - the step that triggered the contract condition for the Nedegaard interests to have to pay the land speculation-ownership interests and the step that set the row of dominoes falling after that as they did; the council was made up of Kurak, abstaining, Zimmermann against, Strommen against, Elvig for, Cook for, Pearson for, and Gamec for - with Strommen and Zimmerman on record as saying wait until the development contract gets negotiated, know what the terms and conditions and pratfalls are before taking the big step. Wise to me then. Wiser in hindsight.

And who checked out the players? That was about the time I prepared and gave city officials a notice summary about public data in some files from the 1990's at the Anoka County Courthouse. A copy was given to each councilmember, and to the City Administrator, and the City Attorney, as I recall. The notice was about how the state-administered real estate trust fund had to bail out some people burned in home purchase dealings in the 1990's, people alleging fraud and gaining default judgments; all to the tune of about $700,000 or so total in trust fund mop-up money being spent.

Yet the deal went through. The City Attorney at that meeting noted I, not the city, had prepared the item; and I believe it went to bond counsel as I had suggested, so that investor notice occurred to protect the city. That was the point in Norman and Goodrich passing on the Nedegaard plea information the same way, to bond counsel.




So what do I think? About the future? Not just finger-pointing. But what do we do now?

FIRST: I posted a comment, here. Check it out please. And people in Ramsey, keep that thread going, please.

SECOND: I also had this to say, Jan. 14, 2007, "A recipe for total disaster."


As easy as baking a cake. He says.

Slam dunk. Follow the recipe. Heat the oven. Pop in the pans. Set the timer.

After that, stacking the layers and icing on the cake.

Uh. But it comes out looking like this, and what about all those acres and acres of empty space?





At least for the crabgrass people, the answer of let them eat cake is better than having taxpayer money given them to go all over town and buy time, if not buying a better recipe.



THIRD: On the following day, Jan 15, 2007, a further thought, "Privatize the Town Center Parking Ramp":

Or at least take bids, to see what the thing is worth - in a market. It might be an eye-opener, to see how the market values that kind of "asset."

It is not unthinkable, Chicago has been privatizing parking structures, for good cash, and is even looking to privatize its Midway Airport. There are pros and cons, but Ben deserves a spectrum of choice, Ben the Ramsey taxpayer out in the cold across from the new city hall.

They would not privatize the new city hall, would they, possibly with sale-leaseback voodoo economics and such? Would they? If so what would be the rights of the City to default and downsize the payroll appropriately and move to more modest housing? Executory contracts can be voided in a bankruptcy proceeding, and where is this council taking us, and Ben?

It's all hypothetical, isn't it?