David Flaherty's getting richer because he appears adept at convincing municipalities to take his risks for him, committing minimal capital of his own into adventures he says he believes in, and we are told such town bankrolling of private adventurers will catalyze greatness - which some foresee as surely as pigs flying once the lipstick's been put on.
BOTTOM LINE: The Village of OP Board of Trustees voted for their Flaherty ramp-wrap-rental by the rails project with only one dissenting vote - a stronger show of majority support than exists on our council for turning City of Ramsey into a risk-financing bank.
Reporting exists now about yesterday's OP decision, and more may go online during the day. The headline quote is from an opening report paragraph here.
Point and counterpoint, here, here and here, the middle item favoring the project with this earlier editorial by one of the OP area politician-skeptics. I believe it is healthy that politicians take their thinking public and that Orland Park has a willing outlet for controversy to be aired by first-person politicians' op-ed items spanning the spectrum from project friends to project foes. The third item in the point-counterpoint trio of items sums up opposition opinion well:
Gira and Schussler further complain that Trustee O'Halloran issued his open letter not to them and Mayor Dan McLaughlin but to the public through the media. Are they saying that they prefer that all questionable public financing projects be discussed in closed door sessions among themselves? That's what got Mayor McLaughlin in trouble last week when the public demanded to know more about the project at a public hearing the village only scheduled at the last minute in response to complaints.
What we are seeing is not strategic leadership but rather politics at its worst. Instead of addressing issues, they attack individuals. Instead of discussing the project with the public -- the taxpayers of Orland Park -- they want the issue to be put behind closed doors.
The letter makes many ridiculous claims that are intended to distract voters away from the real priority here.
The Village of Orland Park should not be a banker, especially in today's economy, underwriting risky projects that are direct burdens on the taxpayers who are already over taxed. The Village Board should suspend action on this project and give the public more time to hear all sides to this debate before rushing a decision at today's board meeting.
I urge the Village Board to postpone a vote on the Ninety 7 Fifty Development and instead spend more time listening to the feedback of the public, the taxpayers and the community, and get a back-up plan before pursuing this monumental project and its financing.
Trustees Gira and Schussler, after arguing that Orland Park had a history of accumulating reserves and controlling spending, with of all things an AA+ bond rating, then wrap up their argument as one may expect:
Trustee O’Halloran is certainly free to vote as he chooses, however, it is inappropriate to address an open letter to the Mayor and then send it only to the media. He could have shared those concerns with the rest of the board and perhaps swayed others to his beliefs. Why would someone go to the media before sharing his thoughts with the board with whom he professes to work?
The two questions that we have repeatedly heard about this project are “Why apartments?” and “Why is the Village of Orland Park loaning money to the developer?” Luxury apartments are being considered because that is where the market is at this time. We have two market studies that indicate luxury apartments are in short supply and the demand is growing. As you know, these market studies are available on the village web site for review and analysis. In addition to those expert opinions, in a recent letter, Mr. John Jaeger, senior vice president of the CB Richard Ellis, Inc. real estate firm, made the following statements regarding this project, “The project itself is well designed and thought out….The suburban MSA needs additional apartments to meet growing demand due to the shift from home ownership to rental living.”
Is "Mr. John Jaeger, senior vice president of the CB Richard Ellis, Inc. real estate firm," going to imperil his three legged milking stool to say "Flaherty's project stinks, don't touch it?" It borders on being disdainful of the OP folks' capability to find out the ongoing goodwill between Flaherty's operation and CBRE, based on commissions earned at least in part, for Flaherty to trot out a tarnished testimonial from an ongoing business partner. It is like putting Cronk on Lazan's Landform "Task Force" and tarting him up as if an independent without fiduciary ties to Flaherty. It is an insult to the intelligence and sound judgment of a public. OP Trustees Gira and Schussler continue,
There are two reasons the Village of Orland Park is considering loaning $38 million for this development: it puts the village in a first lien position if problems are encountered and it allows the village to recover all or a major portion of the $23 million incentive that is necessary to get this project under way. If a third party lender were involved, the village would not be in a secured position if a default occurred and the village would not be able to recover the $23 million incentive.
The Village of Orland Park will not own an apartment building; it will be owned by Flaherty and Collins, the developer. Just as we own our homes, a lender, in this case the village will carry the loan for the project. We will be repaid as Flaherty and Collins repays the loan, a process we are all familiar with as we pay the mortgage on our homes. Bonds will be sold to obtain funds to lend to the developer. The bonds will be repaid from the net operating income of the building not from real estate taxes. The Main Street Triangle is a Tax Increment Financing District, a TIF. TIF incremental revenues or sales tax can be used to carry the project if it isn’t rented as quickly as projected. There are also other parcels to be sold and developed that will contribute financially to the triangle redevelopment.
This project should have no adverse financial effects on residents. There has been no referendum because residents are not being asked to pay more in property taxes. In fact, when the project is completed and leased, it is estimated that it will produce over $700,000 in real estate taxes annually and have the potential to reduce the village’s portion of our residents’ tax bill. People who live in the development will shop our local business community and 400 to 500 construction jobs will be created over a three-year period. Standard and Poor’s and Moody’s have reaffirmed our excellent bond rating, fully aware of the plans for the Ninety 7 Fifty development.
Because of conservative budgeting and prudent decisions that were made by successive village boards over the last forty years, Orland Park is a very desirable place to live and work. [... and now the wrapup]
The current economy calls for creativity and innovation if Orland Park is to remain a dynamic village. We need to invest in the future. Orland Park has hired the best consultants and advisors who have indicated that the Ninety 7 Fifty project maximizes returns to the village and minimizes the risks. It will act as a catalyst for millions of dollars of future private investment in the Main Street area of our Downtown Orland Park. On September 19th, we intend to vote yes on this project and for the future of the Village of Orland Park, one of the most dynamic communities in the State of Illinois and the country.
Trustee Patricia A. Gira
Trustee Edward G. Schussler III
Village of Orland Park
You don't need a laugh-track to accompany the catalysis claims, and ditto for "best consultants and advisors" (reminiscent of Lazan-Landform in Ramsey); best by what measure and in whose opinion; in light of the Cosmopolitan proof on the ground that ground floor [retail] opportunity does not mean a positive catalytic followup. Catalysis maximus, or catalysis reductus in pulvis, for Ramsey; and/or for Orland Park?
Put another way, (and this could be a sidebar poll), in terms of an outcome proving the wisdom or folly of a risk, which image would you attach to the likely ending stature of the gang of four (HRA Chairman Elvig, the mayor, McGlone and Wise) who are forcing the issue on Ramsey's being David Flaherty's Minnesota rental-adventuring risk-bearing bank -- you be the judge for now, while history will settle the question:
_______________UPDATE_________________
Coverage bylined as of 9:27 am, today, here, this mid-story excerpt:
Several of the O’Halloran supporters repeatedly interrupted – with challenges like “Don’t make us your piggybank!”
Trustee Pat Gira, responding to concerns the village would be left in financial straits if the project floundered, said, “I have every reason to believe we will be made whole.”
Responding to a barrage of shouts, she offered to let residents speak, but Village Clerk Dave Maher stopped one resident, telling him to not speak unless Mayor Dan McLaughlin authorized it. McLaughlin said residents had had sufficient opportunity during two other meetings and prior to board deliberations.
Antoinette “Toni” Zaro, one of the three residents who spoke prior to the board discussion, offered the most succinct advise to McLaughlin: “You can be mayor or you can be a developer, but you can’t be, shouldn’t be both.”
Best citizen commentary, Patch, here:
Andrea Williams
4:38pm on Monday, September 19, 2011
Frank, these trustees are operating under the old adage, "It is easier to ask for forgiveness than permission," which is why they are refusing to put this up for referendum.
First Runner-up comment so far, same thread:
Joseph J. Solek
7:33am on Monday, September 19, 2011
Eleven years ago when trustee O'Halloran was on board, the triangle project did not include a rental aspect to it. In these difficult economic times when Metra is considering raising their prices up to 30%,I find it hard to believe that rental commuters would want to live far from their work place. The Village's own market studies state that the demand for this type of developement is "weak". With most of the businesses gone from the triangle and no other developer interested, the village has no plan B. This project will pass. I hope it is successful, for the sake of the future of Orland.
Second Runner-up:
Todd Probasco
11:21pm on Monday, September 19, 2011
If this was put to the voters to decide there is no way this would have passed. The elected officials represent the people not their fellow board members and running mates, what a shame. This decision should have been decided by the voters.
Again I applaud the OP press outlets, especially Patch, which was linked to above with the point-counterpoint trio of items, and which at the end of August carried the OP mayor's optimistic bifurcated argument, "It's a catalyst, I know it will be - we did research, we cannot lag behind our neighbors [none to my knowledge being reported to be out on a limb on any rental deal of a comparable scope to OP's or Ramsey's]," this excerpt:
First of all, the public needs to know what we are trying to achieve with our Main Street re-development. It is very simple. If we don’t invest in our community, if we don’t carefully plan for our future and our children’s futures and if we sit on our hands, we will be surpassed by those communities that have the vision and the courage to build their communities, leaving us to solve the problems created when Orland Park is passed over by businesses and residents moving to those progressive communities.
Communities and states often leverage their resources and partner with private enterprises to advance local economic development and that is what Orland Park is doing. We have painstakingly researched the best ways to launch a re-development for the village’s downtown and protect the community’s investment – while maximizing its return.
This project will create substantial short and long term job opportunities, strengthen our commercial base, attract new businesses, enhance the beauty of our village – protecting property values – and help us preserve Orland Park’s reputation as one of the most desirable communities in the nation. What’s more, it achieves all of this without increasing property taxes.
Under the terms of the agreement, the village will secure the financing for the project by taking advantage of its very strong financial position. The village will serve as the lender, thereby securing the loan with the new improvements. The village will also invest in the project through a “project incentive” and recover that through the performance of the project over time. The developer will also contribute equity toward the project. Over time, the village is taken out of the deal by the developer, with ample opportunity to recover the community’s investment. By the village controlling the financial and development levers, we do just that.
From the beginning, the new downtown project has been a painstakingly, carefully planned initiative designed to renovate an older part of town in order to create a true lifestyle center that enhances Orland Park’s reputation as one of the most desirable communities in the nation.
________________FURTHER UPDATE________________
_________________FURTHER UPDATE__________________
A.
Putting aside wanting Ramsey to avoid the eleventh plague, unparalleled Crabgrass growth, and hoping Ramsey is passed over that way, one citizen comment struck me on this thread:
jakebraekesnow
6:44 AM on September 20, 2011
The (public) servants have become the masters.
Unless there is a dramatic turn around in the economy the residential units will go empty.
Orland Park had a downtown anchored by Randy's. These faux downtowns that have been developed all over the country are the 21st century equivalent of the big box mall. They are everywhere and generic. Orland would have been better served to have preserved the business and the jobs and spiffed up and retro fitted the existing mall and brought out the real charm of the downtown, which is what people and shoppers are looking for.
Just like implants, they look good at first glance but everybody knows they are fake when you get up close.
Like that OP news reader, I view the entire Ramsey Town Center fiasco as wrongly thought out plastic fantastic grow-it-from-a-box Met Council inspired "livable TOD community" utter and shameless phoniness - phony propagandizing of it as having a spirit and phony telling us people want it, and phony stuff ending up on the ground to be with us for years; lego-land along Ramsey Blvd. being my poster child for such bad stuff to be put into a community which already has built its own, different character.
Nedegaard's comeuppance pursuing that flawed idea came as no surprise.
B.
Thought is worthwhile, over "because we were careful and prudent over time is why we can afford - and hence should take a major big time gamble" rationalizations -- a we -our predecessors- were the diligent ants for years so now we -ourselves- should feel entitled and enabled to become the profligate grasshopper of Aesop's fable:
Orland Park is one of a very small number of municipalities in Illinois that has the financial ability to handle a project like Ninety 7 Fifty. At the end of our most recent fiscal year (2010), we had more than $37 million in fund balance reserves. The village’s debt, as a percentage of equalized assessed value, is low. In 1992, we had just under $22 million of outstanding debt which was 2.93% of equalized assessed value. In 2010, the outstanding debt was over $79 million but the percentage of equalized assessed value was almost the same, 2.89%. The board only borrows for capital projects and never to cover operating expenses. That is one of the reasons why approximately $4.4 million was cut from the operating budget during the last three years.
The highest Standard & Poor bond rating is AAA and ten municipalities have it. We, along with 24 other Illinois municipalities, have the next highest rating of AA+. Our per capita debt and liabilities are $1,811. The average per capita debt and liabilities for southwest Cook County is $5,244. Conservative fiscal policies have kept the village real estate taxes low. In the last ten years a single family home with a value of $300,000 has paid an average of $533 per year in real estate tax to the village. If you factor in the property tax rebates that were given to residents in the last ten years, the average amount of taxes paid to the Village of Orland Park drops to $184 per year. This amount includes a levy for parks and recreation. Orland Park residents do not pay a separate tax to a Park District. That certainly is not the “high taxation” that Cook County Commissioner Elizabeth Gorman mentioned at our last meeting. Perhaps she was referring to the Cook County taxes that burden us and our businesses each year.
That, per OP trustees Gira and Schussler in their letter to the Patch editor, again - this link.
C.
Worth the time to read and review, is some of the stuff that suggests a gamble on shared-wall rental is a good gamble, two PDF docs, here and here - from folks in the business of marketing shared-wall rental. It might be a good short-term gamble of a build it rent it out, sell it, and move on operator - especially if municipalities take a shine to risk shifting to boot - but the municipalities are the ones who will be on the hook long-term and neither of those items is too reassuring about anything like long term forecasting that shared wall rental will stay attractive, especially long commute projects in culture-starved outer-'burb locales where, so far, the Town Center young-affluent dwellers, if there are any, have to drive to JR's or Anoka to find a bar. And further to find a desirable restaurant.
_______________FURTHER UPDATE________________
Two things a second position would offer, which Ramsey will not have on the ramp-wrap-rental because David Flaherty does not want to give one, is a hammer on any condo conversion - a second being a blanket position so that things such as selling on a contract-for-deed would be required if the second is not cleared before a conversion. Also, state law may prevent conversion if there is any blanket encumbrance - Goodrich and Bray would be the ones to know that. The other thing, if you take the LLC as security, with a personal guarantee or not [without knowing the soundness of a guarantee and what other guarantees have been given in other states and times] the thing can be sold as a sale of assets, title to a purchaser free and clear if the first position is satisfied, PNC's $20 million place, and then in a year or two the money's been earlier conveyed and the LLC ceases paying an unsecured second, and it would be like Nedegaard's LLC - and the guarantee is what you'd have to chase.
Answer, DEMAND IN THINGS THAT FLAHERTY'S FIRM AGREE TO A DUE ON SALE PROVISION - A PAYOFF OF THE CITY IN FULL IF THEY WANT TO SELL IT TO ANOTHER PARTY. That way, if a solvent party buys and will assume the debt and secure it, a bargain that way can be struck and if a potential buyer is too risky or unwilling to negotiate, you either kill the deal or get paid off. No diddling.
Aside from being able to quell a condo conversion, I cannot think of much value to an eight million dollar position, secured as a second lien or not against the real estate, if the real estate turns out to be such a dog that it is not worth on the market - the ever moving uncertain market - the value of the first position. This thing could be such a big time failure that the City takes gas big time, for a ton of cash. That, Colin McGlone, is how it can fail.