A Reader's Open Letter to the Mayor and City Council

As you are probably aware, I've extended a continuing open invitation to readers to submit articles for publication in this space. One reader has taken me up on this at last, and I'm thus posting, for your information and discussion, the following open letter, together with the author's short introductory cover letter, which I received this morning via email.

I'll also mention in passing, that by the posting of this letter, I'm not necessarily endorsing its contents. My object, in originally creating this electronic gathering-place, was to provide an open forum for the discussion of any and all issues of concern to the citizens of Weber County. The Rec Center is certainly one of those. This open letter is by far the most articulate statement that I've heard to date arguing against the rec center project. The article belongs here, especially in a context where the information contained herein has been effectively censored and blacked-out by the local outlet for the corporo-fascist neocon media moguls in Sanduskey. This place is all about free speech, folks! What little of it is left in modern AmeriKa, still exists here.

Read the letter. Then post your comments.

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To: Weber County Forum:

I have been trying to get Don Porter [Standard-Examiner editorial page editor -ed.] to tell the truth re the proposed bonding for Ogden's sports complex.

These are the facts I tried to point out to the Mayor and Council from their own literature..And to Don Porter. They don't want to know the facts.

You have my permission to post this on your blog site.

Dorothy Littrell

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Dorothy E. Littrell
Certified Public Accountant
228 West 3275 North
Ogden, Utah 84414
801-782-5906
d.littrell@comcast.net

May 31, 2005

Mayor and City Council Members:

I have been asked to look at the High Adventure Recreation Center Taxable Variable Rate Demand Bonds proposal for $8.9MM from Northland Securities, the $7.5MM Letter of Credit proposal from Wells Fargo and other documents pertaining to the Center as they affect Ogden residents and also Weber County residents such as myself.

I have spent many hours this past week reading everything available you have furnished the public and also going online to obtain financial information on the principals of Golds Gym and Fat Cats since your information did not provide that.

I have several concerns pertaining to financing and issuance of the proposed bonds. The following costs to Ogden City need to be itemized and taken into consideration in taking on this project:

1.) Variable rate of interest is to be reset weekly at current market rates for 20 years and to be paid monthly. Bonds are to be secured by a first mortgage lien against the property and leasehold improvements on the $8.9MM issue as well as the leasing revenues plus a direct pay letter of credit. Variable rates over a 20-year period can be very risky.
2.) Interest rate of Prime plus 7% in the event of default or a liquidity draw on the Wells Fargo Letter of Credit on the $7.5MM Tax Increment Revenue Bonds for 13 years can be very risky.
3.) Underwriter's fee is 1% of bond amount at closing plus .02 % annually of principal amount outstanding for a period of 20 years on $8.9MM offering.
4.) To get a bond rating of A or better in order to sell the $8.9MM bonds there will have to be another Letter of Credit from a financial institution.
5.) A Letter of Credit fee is 1% of the principal amount outstanding of the guarantee as of April 1 and is collected on that anniversary date.
6.) 1% of $7.5MM is $75,000. plus 1% of $8.9MM is $89,000. for letters of credit fees the first year of $164,000. In addition to the annual Letter of Credit fee there is a charge for figuring interest which is estimated to be $275.00 per month.
7.) There are the charges for a MIA appraisal compliant with FIRREA and USPAP; charges for a Phase I Environmental Report on the property; surveys, title review and lender's title insurance, UCC lien and other searches, customary insurance, legal fees incurred by lender regarding searches, etc. which can be very expensive.
8.) Attached is a December 13, 2004 MEMORANDUM from Deputy Director McConkie listing all Ogden City RDA projects and debt on each project. I am having difficulty identifying that list to the 10 identified redevelopment areas pledged to Wells Fargo for collateral on the $7.5MM Letter of Credit. Please explain why the two do not agree.
9.) Who is going to repay the $10,462,085 due Ogden City for Mall Redevelopment due 12/26/11?
10.) The December 13, 2004 MEMORANDUM list of RDA debt totals $49,276,790 with $20,265,839 due Ogden City, so I am assuming the difference of $29,010,951 is outstanding RDA debt on Ogden City's 10 RDA redevelopment areas which will be pledged as collateral for the $7.5MM Letter of Credit. So am I to understand that tax increment collected must first go to pay this RDA debt of $29,010,951 before any goes to pay Wells Fargo?

I have additional questions regarding the prospective tenant, Health & Fitness Holding, LC whose principals are Gary Nielsen, Sean Collins and Dave Rutter.

Landlord, Ogden City, is providing $11,928,740 for tenant's use to construct improvements plus $4,375,000. to purchase specialized equipment plus $2,450,000 for a SkyVenture vertical wind tunnel for total funds provided of $16,303,740 or more.

Documents provided do not name the person or persons designated as (landlord) Ogden City's representative for construction oversight nor are maximum fees set forth for Design Phase Compensation nor Design Phase Fee.

Guarantors are named as:
Total Fitness Center, Inc. LLC and DSI Enterprises, Inc. with no information as to their ability to guarantee. Public internet access provides information on Dun and Bradstreet and Smart Business Reports that indicates their financial capability is suspect.

Fat Cats-Provo had Tax Lien Filings in 2004 with Utah County Recorder for Federal Tax of $6,868. and with Utah County District for State Tax in the amount of $5,565. In 2003 the State Tax Lien amount was $6,387 and $1,141.

Fat Cats-Salt Lake City shows sales of $1,352,000. for 2004 with high credit risk of delinquent payments.

Why is there no security deposit on a project of this magnitude? Why is there to be no recording of this lease?

Why is Ogden City charging tenant 8% on past due rent when they are paying Wells Fargo Prime plus 7% on delinquent amounts?

The information furnished for SkyVenture, LLC shows a purchase by Ogden City of the equipment for $2,450,000. It also calls for minimum royalty payments of 5% of gross revenue or an annual minimum license of $25,000. to SkyVenture by Health & Fitness Holding, LC. Does this accrue to Ogden City as the owner of the equipment in the event Health & Fitness does not perform?

Ogden City's publication of the Mall Recreation Center Work Session dated May 17, 2005 of the Master ProForma Recreation Center Estimated Annual Income and Expenses begs the question of how this venture is expected to survive and justify Ogden City's investment of $16,303,740. I have attached that one-page calculation for your inspection.

Ogden City is going to have additional security expenses to patrol the parking lots and the improved properties which they have ignored in their projections of costs for the City.

Based on the financial information available about the High Adventure Recreation Center, my professional opinion has to be that this is a no-win adventure for all parties concerned including Health & Fitness Holding, LC with the Underwriters and Wells Fargo Bank being the only winners.

Signed:_________________________________
Dorothy E. Littrell, CPA

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(I attended last night's City Council session, by the way, during which Council Vice-chair Jorgenson announced to the few citizens in attendance that Council voting on the Recreation Center bonding has now been re-calendered from June 21 to June 28.)