Ramsey HRA considers the money spent on The COR
As the seven members of the Ramsey Housing and Redevelopment Authority (HRA) consider what they want changed before agreeing to a new contract with Landform Professional Services, they wanted to know what the HRA has spent on The COR project.
Since it purchased 150 acres of the 322-acre defunct Ramsey Town Center (RTC) project from Minnwest Bank Central in 2009, the HRA has spent a total of $13,712,471.47 on the project, which includes the $6.76 million land purchase and special assessments for infrastructure improvement projects.
Without the special assessments, the HRA has spent $7,861,274.99
In 2009, the HRA spent $341,817.17 on rebranding the project and travel to market the newly named The COR project.
According to City Finance Officer Diana Lund, the city also received $240,000 from delinquent property taxes in the project area and $83,184.55 from the RTC letter of credit to offset some of the expense.
In 2010 and 2011, the HRA has spent $194,519.50 on marketing, legal costs, professional services to patent The COR name, travel and membership registrations at four International Council of Shopping Centers trade shows, including the Chicago conference in 2009.
In addition, the HRA spent $469,761.59 for work done by Landform between August 2009 to March 7, 2011, including work Landform did on the city’s proposal for a Veterans Administration Clinic, the 2009 water resources bonding effort and work in The COR prior to the April 21, 2010 contract.
Fifteen Landform people have put in roughly 3,300 hours on The COR project since March 2010, according to Landform President Darren Lazan.
[...] The city has been drawing on its tax increment financing (TIF) districts to pay for work in The COR, said HRA member David Elvig.
“We are borrowing from TIF to support the investments in The COR, like paying for Landform’s contract, project subsidies and parking ramp expansion,” he said in a follow-up interview.
Funds in those districts are running out and “I want to slow the spending and get more cash out of this,” Elvig said.
“We have to slow the rate of spending until we have a rate of return.”
TIF is not reimbursed until there are land sales and it takes about 18-24 months to come online, Elvig said.
“My feeling is we have polished the penny enough that we can easily slow down the planning process and the spending on planning,” he said.
Before the Landform contract comes back for approval March 29, Elvig would like to see the monthly administrative fee of $15,000 for planning reduced and suggested the monthly advance of $10,000 in incentive compensation be replaced with incentives dependent on land sales.
Even though Landform has done a great job, there has to be an option to reduce the amount the city is spending on the consulting, Elvig said at the meeting.
“I am interested in slowing the cash burn and somehow raise the incentive,” he said.
Although one suggested option was to reduce the administrative portion of Landform’s contact, HRA member Jeff Wise does not think the city should reduce it.
There are still a lot of issues that need to be cleaned up from the previous RTC project, including title problems, he said.
The only way not to spend money on The COR is to do nothing, said Wise.
Bravo, Jeff. You have figured out what for now is a sound course, the market being as it is. A gold star for that insight.
Sakry continued:
“And the residents of Ramsey did not want to be on Channel 5 anymore. They wanted the train. They wanted all of theses things,” McGlone said.
“We had to reposition the project for success.”
The cost of projects like this are always higher in the beginning, McGlone said.
The cost will go down as dirt starts to fly, he said.
The city can’t get out of the project now and the HRA needs to figure out how to get there from here and it’s not by slowing spending and not providing an incentive for sales, McGlone said.
“We need to continue building on the success,” he said.
That's what I call "The Big Muddy Mentality," which, of course, is no mentality at all. It relates to the Pete Seegar song, this excerpt:
The Sergeant said, "Sir, are you sure,
This is the way back to the base?"
"Sergeant, I once crossed this river
Not a mile above this place.
It'll be a little soggy but we'll keep slogging.
We'll soon be on dry ground."
We were waist deep in the Big Muddy
And the damn fool kept yelling to push on.
"Captain, sir, with all this gear
No man'll be able to swim."
"Sergeant, don't be a Nervous Nellie,"
The Captain said to him.
"All we need is a little determination;
Follow me, I'll lead on."
We were neck deep in the Big Muddy
And the damn fool kept yelling to push on.
All of a sudden, the moon clouded over,
All we heard was a gurgling cry.
A second later, the captain's helmet
Was all that floated by.
The Sergeant said, "Turn around men!
I'm in charge from now on."
It looks as if the Ramsey city council, (aka the HRA with a different set of hats on but the same magnificant seven), has too many of those captains and too few pragmatic Sergeants.
Sakry continued:
If the city would not have purchased the 150 acres, then Allina Clinic would not exist and the VA Clinic would not be here and the rail station would not be coming, Mayor Ramsey said during the meeting.
Sakry also had a photo captioned, "Although construction on property owned by the city of Ramsey has not started, the Allina Medical Clinic is nearing completion in Ramsey’s The COR." Meaning, to me, that the mayor is taking credit for Jim Deal being a smart man.
The only thing built recently at Ramsey Town Center has been because Jim Deal is a smart man.
The VA clinic. Deal's deal. The morgue, Deal's deal. Allina, from that caption, Deal's deal. Allina I am unsure of. The others, nailed down certain, not Darren's deal. No way. Darren's dirt being moved? Foundation work for a few signs. Sakry concluded her report:
Flaherty & Collins is expected to close in late April on the 3.03 acres, west of the existing parking ramp for The Residence project.
The Indianapolis company is planning to build a 221-unit luxury apartment complex with nine, two-story rental townhomes.
Suite Living is expected to close in April or May on a 1.85-acre site also west of the existing parking ramp on Sunwood Drive.
The White Bear Lake company plans on building a three-story facility and will have 84 of living/memory care units.
There are also nine to 10 other businesses that he is actively working on deals with, said Lazan.
Lazan said he is also actively talking to 20 entities that are interested in The COR.
[italics emphasis added]. I will not dispute, Darren has been actively talking. I'm sick of it. Two HRA meetings, the most recent I've seen, Darren actively talking.
Darren, what of that stuff Sakry mentioned can be taken to the bank?
Returned to reserves?
My short synopsis of Darren's wonderful magic contract that turns public city dollars into Darren dollars; where the city is, and what got the city there; via this image:
__________UPDATE_________
Of everything I heard, the thing that made the most sense, was Randy Backous saying that if Landform with far enough time and spending for planning already in the past, should, if it is allowed to take out $10,000 per month from now on, that it be a draw against commission, so that the performance incentive (bounty) given the firm on deals that close is reduced when earned, by the amounts drawn in advance of earning the commission. Unless I misheard, nobody said hold the commission until the deal closes, yet they talked of hard escrow and soft escrow.
What I know, if there's a dispute over what's to be done with earnest money, and the holder does not want to be sued for bad faith, the thing to do is to pop the cash into an interpleader action in district court to let the claimants and the courts resolve things, with the earnest money holder exiting things that way. So if a deal flips, and there's an interpleader, why allow a possible premature release of big amounts of money.
Why, I wonder, would a contract not anticipate a deal flipping; and given history, a counter-party bankruptcy is not like a "Wow" event, particularly on unsecured promises of a thinly capitalized project-specific LLC, as Lazan is likely talking to in most instances.
History is that Nedegaard went belly up, about mid-decade, and it seems the town savants have no learning curve about counterparty risk.
If the deal flips, if there's a counterparty problem, whatever, don't dole out city dollars as Darren dollars prematurely. Yogi Berra had a saying that deserves attention. Wait for Brunhilde's final aria, the one ending the last act of the fifth and last of the Ring operas, because it ain't over until it is.