consultants are sandburs

Sunday, November 04, 2012

RAMSEY. [UPDATED] Last post before the election. It will be a vote of confidence. Confidence one way or the other. Status quo vs challenge.

I could have left it at just the photo. Ambiguous that way, but only mildly so.

Instead, this was on the web, attributed to Ramsey's current mayor, a discussion of "management."

Mayor Bob Ramsey: The “Management” of The COR is paid in a monthly fee of $15,000. This includes attending meetings, communications, managing and updating master plans, preparing concept plans, routine land surveying, routine engineering, grant applications, and many other items. When we consider the cost of an employee, it’s not just the salary, but you have to include the benefits, expenses, overhead, training, support, etc – this is commonly computed as a multiplier rate, and for the city we use 2.5, which I still believe is low. The $15,000 monthly is $180,000 annually, or roughly the equivalent of a $72,000 employee, the average manager salary.

In addition to the “management” of the property, Landform has been paid to do engineering, surveying, or planning projects that are considered beyond routine. These are typically subcontracted to firms like Landform, for instance WSB Engineering is doing the plans for Armstrong Boulevard – over $1 million in fees for that project so far.

Landform also receives incentive pay when a deal closes. They work at risk until they get the deal closed, but are paid from the proceeds of the closing at the closing.

Finally, there are reimbursable expenses they incur on our behalf that they are repaid.

Those 4 items together all total up to $1.2 million over the last 3 1/2 years.

[red highlighting added] A word or two about Vegas might have fleshed things out more. Also, there is something I have seen about $10,000 per month advanced to Landform for something, prepaid commission or such. I have seen reference to that but the mayor's statement omits mention. I think that's regular money advanced on "incentive pay" where the mayor sees "risk until they get the deal closed." It serves as sort of a monthly hedge against risk; at least that would be my guess. Readers with knowledge of detail are asked to help via submitting a comment to the post. Are Vegas details and mention/justification of a rationale for the ten grand per month material omissions?

Also, if anyone has evidence that the quote attributed to the mayor is incorrect, or somebody's forgery, please inform me ASAP.

If anyone disputes separate payment of $10,000 per month - separate from and in addition to the regular $15,000 amount (which is not accounted for as an advance, i.e., is a cash transfer without contingencies), please let me know ASAP.

Regular employees do not receive any extra ten grand a month, on contingency. It does not happen. They get no bonus for landing fish.

__________FURTHER UPDATE__________
A spreadsheet provided in response to a public data request to Ramsey's CFO has been posted online showing over a one-and-a-quarter million paid Landform, current as of end of September, 2012 (October not included).

As to actual closings, to my knowledge Landform has only closed the Flaherty rental adventure, nothing else; with published claims that only happened because of eleven million of subsidy (tax money to expand the ramp, compromise of sewer and water SAC and WAC charges, and a multi-million loan financed by city borrowing against the future).

Again, if I am wrong on the closing/subsidy detail, please send email notice ASAP.

__________FURTHER UPDATE___________
Rounding down the spreadsheet bottom line to $1.25 million, since summer 2009, (roughly rounded to three years), by my reckoning is $415 thousand a year, rounded down. Squaring that with the mayor's equivalent of a single management employee is something I cannot do. The numbers do not work out for me, unless I misunderstand something. Reader help via a comment might prove informative.

FURTHER: The mayor says roughly 3-1/2 years, which is rounding up the time frame, but using that it calculates to around $370 grand a year; which is not chump change. [UPDATE: The online spreadsheet from Ramsey's CFO shows the first draw by Landform dated Aug. 8, 2009. I cannot get any 3-1/2 years from then to now. The $1.25 million amount communicated by Ramsey's CFO was as of end of September, 2012. That is three years, two months. Not three and a half years.]

I'd take it, even at the lower figure of three-seventy grand a year, and if getting that cash flow I would even put on a suit and stand and smile with the mayor.

___________FURTHER UPDATE____________
The mayor says over a million in fees for the Armstrong project. As a first observation, that is appalling.

I have to ask, is he saying over a million to WSB, alone; or over a million to WSB and Landform? My understanding is Landform has been dipping its oar into consultancy cash flows from that project. And, is the mayor lumping the Sunwood reroute mess in as part of the Armstrong project? My understanding is all consulting sugar from Sunwood diddling is Landform's, i.e., NOT shared at all with WSB, except perhaps at the Armstrong-new Sunwood interchange. I have heard it argued that all city paid consulting money within the boundary of Town Center is Lanform's, as an exclusive franchise. Excluding the rail stop. I do not think Landform's getting a bite out of that. Again, reader clarification might help.

I liked being able to have better access to Coborns.

I think Coborns has been supportive of Town Center from early on, and has been handed a raw deal in the Sunwood reroute. Lessened ease of access surely is not going to boost Coborns' business, if it has an impact at all.

____________FURTHER UPDATE___________
Landform having a piece of the Sunwood-Armstrong consultancy cash flow; here and here.

It intrigues me, in the course of his supporting Martha Weaver's unsuccessful bid for GOP senate district endorsement, Weaver's tout site stated:

“We need a leader who recognizes that the money all comes from the same place: the very same taxpayer who is already living paycheck-to-paycheck,” said Mayor Ramsey. “Martha understands that better than most.”

“I support Martha for State Senate because she understands that decisions with local impacts need to be done at the people’s level, not dictated by St. Paul,” said Ramsey.

Surely Darren Lazan is not living paycheck to paycheck, yet the mayor has sympathy for that segment too.

And dictates from St. Paul (or Met Council)? When we recall it was the Governor's bonding bill that allocated Met Council funds for the Ramsey Northstar stop, Bob Ramsey was not complaining about dictates from St. Paul, he was putting on a suit, showing up at a groundbreaking, and giving himself credit for things in a speech he most willingly gave. I suppose dictates from St. Paul differ from largesse from St. Paul, and you can reject the bitter and love the sweet. Something like that. I forget the old saying, just like Bob seems to have.

Thanks, Martha.

___________MONDAY UPDATE___________
Will any reader with knowledge of a date certain scheduled groundbreaking at Town Center post a comment giving the date, for:

The old folks home to be next to Flaherty's Rental Extravaganza?


Super America?


There is an old saying, all talk, no action. How about, all earnest monies, no closings? Or will each, to close, happen only if there is multimillion dollar bonding to create a pile of cash to TO lend an outstretched hand?

What SAC and WAC fees will McDonald's pay, if ever at Town Center?

There is an operating successful VA on the ground that Jim Deal built. There is the Allina Clinic, again Jim Deal being essential. And he's not submitted any invoices to the city, not taken over a million dollars from the city's treasury. To me, that's action.

Prior to Nedegaard's failure, Deal built two buildings at Town Center.

Without being given regular monthly city money.

Darren's been given a mil and a quarter. What's he built?

I admit he must be good at schmoozing the mayor and McGlone, stroking egos, making them feel wise and successful in continuously advocating the decision to pay him, his firm, five figure monthly money. I admit, he co-owns an aircraft with Matt Look.

So he is not without qualities suggesting fitting in well is some reaches of local politics.

Note -- I am not arguing Jim Deal is a saint. Only that he has a track record.

Who do you think was most effective in the Governor's bonding bill yielding funding for a rail stop in Ramsey? Darren Lazan, or Jim Deal?

Finally, who might you guess was more effective in Emily McGlone getting a Flaherty job; Darren Lazan along with his pal Ryan Cronk, or Jim Deal?

You might even guess Jim Deal had absolutely nothing to do with that decision. That is my guess.

_________SECOND MONDAY UPDATE_________
Wikipedia has an interesting post on the term from economics, "moral hazard."

In economic theory, a moral hazard is a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. A moral hazard may occur where the actions of one party may change to the detriment of another after a transaction has taken place. For example, with respect to the originators of subprime loans, many may have suspected that the borrowers would not be able to maintain payments and that, for this reason, the loans were not, in the long run, going to be worth much, but because there were many buyers of these loans (or of pools of these loans) willing to take on that risk, the originators did not concern themselves with the potential long-term consequences of making these loans. After selling the loans, the originators bore none of the risk so there was little to no incentive for the originators to investigate the long-term value of the loans. A party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party isolated from risk behaves differently from how it would if it were fully exposed to the risk.

When public officials gamble, or favor someone's crony with public money, it is not the same as if with their own, and that is another moral hazard example. Also,

Moral hazard also arises in a principal–agent problem, where one party, called an agent, acts on behalf of another party, called the principal. The agent usually has more information about his or her actions or intentions than the principal does, because the principal usually cannot completely monitor the agent. The agent may have an incentive to act inappropriately (from the viewpoint of the principal) if the interests of the agent and the principal are not aligned.

Whether or not a commission is/is not earned might influence an agent, and as the example mentions, an agent may well have more direct and indirect knowledge than a principal, and there's an adage that if you control another's information you can control his/her decisions. Backous has been complaining more than once that different council members on Ramsey's HRA and council sometimes have an information gap, or dichotomy, some being more privy to things than others. Also, all on a council or group decision making body may be kept in the dark or have information flow manipulated so that possibly propagandized sub-optimal decisions can result.

Crabgrass readers are urged to read, using the mayor's "management" term, this section of the moral hazard exegesis.

Moral Hazard Question of the Day: Would an elected fiduciary, having a close family member take a job with a person or corporation that had been greatly favored previously by the elected fiduciary's public body with the fiduciary having played an ongoing key role, be indulging in "moral hazard" activity?

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