When sorrows come,
they come not single spies,
but in battalions.
-William Shakespeare
(Hamlet-Act IV - Scene V)
I confess I'd lost count, but thanks to John Wright, we learn from this morning's Standard-Examiner page C-1 headline story that the Ogden Recreation Center vote, most recently continued to Tuesday, August 23, 2005, has been again delayed -- now for the ninth time. This time the City Council has taken it off-calendar completely, rather than setting it for some fixed future date. This decision was apparently made last Thursday.
According to this John Wright story, Another problem has cropped up. Although we were earlier informed that the city had obtained a bank letter of credit, to comply with state law, and to permit bond interest payments to be made during the construction phase of the project, somebody wasn't being entirely forthright about it, evidently. It now appears that the RDA still hasn't come to terms with the "bridge" lender, Zions Bank. Until that happens, there is no letter of credit, people.
To further complicate matters, the R&O Construction bid apparently expires on September 1, 2005. After that date, all bets are off, and the project contractor will have no legal obligation to perform at the original contract price. This is certainly not encouraging, inasmuch as we learn, according to Mr. Wright's story, that project costs increased $2.3 million last month alone, due to the late-discovered oil contamination delay. This "environmental" problem, incidentally, has also apparently not been yet resolved.
You can read Mr. Wright's entire story here.
As most of our gentle readers are aware, I've come out in favor of proceeding with this project, which I've viewed as a simple arms-length transaction between ready, willing and able lessors and lessees. I've always believed, however, that it would be the lenders in this transaction who would ultimately determine the feasibility of this project, through operation of mechanism of the free market.
It appears to me that this is what is actually happening here, and that the degree of caution now being demonstrated by the lenders and bond underwriter evidences reluctance, which is not encouraging for proponents of this project. It's difficult to put a positive spin on this latest development.
Mr. Wright's article mentions the increasing cost of concrete as being a primary factor in increasing materials cost, and I'll briefly comment on that. The problem with concrete is that it's heavy and bulky, and that it's transported to the construction sites in heavy trucks, truckload by truckload. The factor that accounts for the increased cost of concrete is not the cost of the material itself, but the cost of fuel that powers the trucks. Anyone who purchases gasoline at the pump is painfully aware of what's happening with fuel prices. Fuel price is such a cost "wildcard" that many cement contractors around the country build in a delivery surcharge, to "hedge" against sudden fuel price increases. You can expect some serious inflation in the original construction price, I think, if the city and the construction lender wind up back at the bargaining table, upon expiration of the existing contract bid.
Comments, anyone?
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20 comments:
Here we go again....another example of steadfast, experienced leadership. Remember the phrase, "we're not debating the color of fire hydrants," made by Rick Safsten, the council chairperson? I think he'd do go to read it, have the others involved read it (including the mayor), sign and attest to their having read it, and then put it in practice and get a qualified developer and financier to head up this fool thing before it all goes up in smoke (or down in mud).
It definiately isn't the color of fire hydrants, and by the way this thing has been handled, you'd think that the Gang of 6 looked upon it in that way.
The house of cards is crumbling.
The curtain is starting to be pulled back and we are getting our first real glimps of the wizard furiously manipulating the levers.
This dumb assed Wreck Center idea is collapsing from the enormous weight of its own stupidity.
If it were really a viable money making project private enterprise would have already built it, or at a minimum be lining up at the trough to get in on the profits. As it is we only have a couple of small time local guys, who have nothing to lose, on the line as our "main" private party players.
Where is the SIGNED agreements from Larry Miller, Boyer, Nordstrom, or any other viable private company that would have to be on board to make this whole Mall scheme fly.
The overwhelming majority of the citizens of Emerald City do not - Rock Climb, wave surf, Parachute jump or even bowl for that matter. Why should this huge majority of people have to pay $20 million plus American smackaroos to built this obcene monument to the little big guy on nine's ego?
Of course we also have an election coming up which could very well over throw this gang that can't shoot straight. Burdett and Jorgenson surely are not so completely out of touch with the citizens that they are unaware of the consequences of their vote on this moronic undertaking. Hey, I admit they are clueless about the needs of their constituents, but surely they are not that out of it - are they?
If I am reading the charts correctly the land of Oz is in for a voter referendum on all this maddness that the Godfreyites have been partaking of.
These are the kind of people that Thomas Jefferson warned us about...
"It's just a different approach," Council Chairman Rick Safsten said Friday. "Let's stop trying to reschedule, reschedule. Let's just stop, wait and, when the paperwork comes in, we'll act."
Safsten's statement reminds me of the cat that runs into the closed screen door at a full gallop, picks itself up and wanders off, acting like nothing happened.
I smell trouble here.
Ozboy, those cards are beginning to bend, aren't they. It will only take one to pop out of the house for the house to come tumbling down.
It now appears that some of the assurances, for the reasons that have caused these 9 delays, have not been assurances at all and those problems have indeed NOT been satisfied, and that the Gang of 6 has just been blowing a smokescreen over the public to cover up their inabilities. This tells me that our original premise, the one where we felt that individuals who are not experienced in development and are driving this ship, should not be attempting to fill these positions. Someone with the know-how and experience needs to be in charge, design and direct, and then take that work to the Council/RDA for thought, debate and approval. But this action should be taken prior to 10:00 p.m., for I recall Councilmember Filiaga saying that he'd be half asleep by then, during the budget sessions, and having to be awakened to cast his vote. I admire his honesty but I wonder, how many others have been asleep at the switchs, from the budget session to the recreation center session? With 9 delays and no vote or Public Hearings scheduled, mounting costs, burning daylight, and December fast approaching, somebody should slip a little No-doz in their coffee, uh I mean their water.
From Wright's article:
"The city secured a letter of credit from Zions Bank, at a cost of about $135,000, to protect GE Commercial during construction.
But it has taken longer than expected to forge an agreement between GE Commercial and Zions Bank"
Does this mean that very recently. Before the environmental tests were in, Before the public hearings, and Before the Council voted on it, the city spent $135,000 on the letter of credit for the financing?
I really think that something else could have been arranged here. Zions could have been approached and told of the plan, and perhaps could have shown themselves amenable to it in writing, if they indeed were. Surely they would have understood that the city would not have wanted to purchase the letter until the Council voted on it.
Wouldn't they?
If I am looking at this correctly, (and of course there is a chance that I am not,) there is a serious problem here with the order in which things are being done. What happens to the $135,000 if the project does not go through---does Zion's refund it in full, at a percentage, or do we lose it? Was buying of the letter of credit put before the Council for a vote? Does anyone know these things?
The article also said that results from the environmental study reached city offices Thursday, the day the meeting was cancelled. Coincidence?
Many interesting, unanswered and dark issues involving this recreation center. I have no PhD in banking, but from what I've read, it appears that this Letter of Credit isn't quite in the can and one hell of alot of money has been spent so far on nothing. I think we've been mislead, once again.
No results from the environmental impact study have been released yet. The RDA saw the report on Thursday. The mayor was quite non-chalant about the oil, chimming in with his "there isn't a plume" statement. Seems to me that if the report was clean, he'd have let us know about it, but 3 days later, NO WORD. I wonder, does this mean "bad news?" Godfrey ought to give old Jed Clampett a call.
And Utmormon and bernie and that bunch have grown strangely silent. Hey, are you guys seeing the light?
Whatever it all means though, it does mean this: regardless of what one thinks of this rec center idea, one has to come away with the thought that whoever's in charge is real close to being incompetent. Every time some other negative impacts this fool project, Safsten or Jorgenson parade themselves in front of a reporter and claim that these are basically boiler-plate type details that have been expected and will settle themselves in just a matter of a few days.
Seems like nobody wants to assume the responsibility here, as nobody has assumed the responsibility of knowing what the hell they're doing. And some of these guys actually have the nerve to be asking the citizens of Ogden to give them another term as our leaders.
No thanks, people. I for one have had enough.
If we were voting for people to debate the color of fire-hydrants, I might vote for 'em.
As for running the city (into the ground), I pass!
I doubt that any city money has actually changed hands, Dian, while all parties haven't signed the dotted line -- on paper.
My question is how the various lenders will secure their positions; they'll all want to be paid first.
The "swing" (bridge) loan is apparently still being negotiated, and you can bet the farm that Zions will want to be paid first. It's the same with the underwriter and "lenders" on the $19 mil bond. They'll be wanting to be in the front-seat if the deal goes sour.
It'll be interesting to see how they resolve this problem -- if they ever do.
The belatedly-discovered state prohibition against bond interest payments during the construction phase is what presents the problem. I hope the city's attornies' malpractice insurance is "paid up."
I know a little bit about these things, and I'll just say the Recreation Center situation is unravelling, based on the info I'm getting from the Standard Examiner.
The problems are multiplying, with a construction contract drop dead date coming on September 1st.
It's pretty clear that Mayor Godfrey's administration is an amateur act, and that we need to clean house with the city council in November.
In an attempt to figure out what has been going on, I did some media research on the financial maneuverings of the city.
I am calling this compilation:
Ozboy’s House of Cards, or “Through the Sale of Bonds.”
It appears that at the end of June 2005, the Ogden RDA was dealing with a $20 million debt, and refinancing this debt at a lower interest rate was being looked into.
“The terms of the refinancing have not been finalized, but it is expected that the RDA would consolidate the $20 million debt into a single commercial loan with an interest rate below 5 percent, said Mayor Matthew Godfrey.
The loan would be financed through the sale of bonds and could likely be repaid within 10 years, ultimately saving the RDA millions of dollars in interest payments, he added."
---Standard Examiner, June 28, 2005, "Ogden RDA May Refinance Debt"
I of course riveted upon the “refinancing” loan for the city’s debt being itself financed “through the sale of bonds”. Wondered if it were a misprint. Why do this? I suppose the lender required collateral, and we wouldn't want to give them BDO, for instance. But what bonds? Surely not these mall development ones. But if not those, which others?
The plot thickens:
"The Ogden City Council agreed Tuesday night that Mayor Matthew Godfrey can obtain a $5 million short-term loan to settle a legal dispute at the downtown mall site. The loan will be repaid with a separate $20 million long-term loan the city plans to obtain early next month to refinance all debt associated with the downtown mall site and Business Depot Ogden, said Nate Pierce, the city's chief administrative officer.
The interim loan is from the National Bank at a 4 percent interest rate. It requires a minimum 60 day interest payment totaling about $33,333 and is expected to be repaid within two months, according to city officials.
The loan is not collateralized and, in the event of default, the Ogden Redevelopment Agency and city would use tax increment funds from development of the downtown mall site and lease revenue from the BDO to cover the obligation. "
---Standard Examiner, July 13, 2005, "Ogden Loan To Settle Mall Dispute"
So as of July 13th, we entered into a $5 million short term obligation, thinking it would be repaid by the new $20 million refinancing deal. We intend to repay it, if the $20 million one didn’t go through, with tax increments and BDO lease money.
While in this state, the city was and is considering issuing what has variously been reported as $16--$19.5 million in bonds to the LLC formed by Fat Cats and Gold’s Gym. These were also to be paid back with leases from those entities, and the ever beneficent tax increments. Really don’t understand this---the issuing of bonds to the LLC. But that is what it has said:
“The main source of funding for the recreation center would be about $16 million in bonds issued to Health & Fitness Holding LC, to include Fat Cats All Out Fun Center and Gold's Gym. Other funding sources are a $2 million loan from the U.S. Department of Housing and Urban Development, as well as $285,000 in 2005 tax-increment funding from 10 other RDA projects. ..
...About $9 million of the bonds would be repaid through leases to Fat Cats All Out Fun Center and Gold's Gym, while the remainder would be repaid using future tax-increment funds from the same 10 RDAs.”
----Standard Examiner, August 3, 2005, “Hearings Scheduled for Ogden Rec Center.”
Guess what? Here is why Woodbury sued:
"Due to a lack of RDA increment funds from the now-vacant mall site, Woodbury was forced to repay the bond debt itself. The settlement from the city will be used to reimburse Woodbury Corp. for some of those payments."
---Standard Examiner, June 8th, 2005, "Ogden Settles Suit."
And the allegations in the letter for Union Square developers stated:
"The city also failed to fund in full the tax increment financing that had been promised, causing a $125,000 shortfall, "
---Salt Lake Tribune, June 23, 2005, "Ogden gets in another fight with 25th Street developers."
I had been looking at this and thinking that the city should not be thinking that lenders would loan on a project backed partially by tax increments, since our track record in that area does not look too good and don’t think bonding companies don’t keep up on these things and demand disclosure.
The $20 million refinancing deal was supposed to go through in early August, which was the timeline for the public hearings and vote on the mall. I haven’t heard anything on this deal, whether it went through or not.
Was it in any way tied to the rec center, one wonders. Was the redevelopment of the mall crucial to the paying of this $20 milion debt?
In effect, beginning development of the rec center would lead to a cash infusion to the city via leases, which could be comprised wholly or partially of tax increments. Were these increments factored in as a method to pay down our pre-existing debt? In view of the successful Woodbury lawsuit, it seems that until development starts, there are few or no increments. Is Ozboy’s house of cards resting on tax increments and future leases made up of those increments that are dependent on the development of an undeveloped site?
Or are these things separate deals? Both paid back “by the sale of bonds?” Which bonds? Sort of goes in a circle, doesn’t it?
Can you believe the incredible amount of man hours and dollars that have gone into the maneuverings of the various "dead horse" loans and other issues that have arisen due to someone's incompetence and their "pretned" position of "major Issues,' not the "color of fire hydrants?"
It never stops, this taking money from here,putting it there, then taking the futures tax increment dollars and putting them back in the original position in order to pay off the secondary loan that went to pay off the borrowed money needed to pay off the interest and or penalty or agreed upon sum from the lawsuit? Is it all clear? Well, not to me it isn't.
And yet they keep on with it.
You raise some interesting questions in your 8:46 a.m. comments Dian.
I'm furnishing a scanned copy of an Ogden City-prepared flow sheet, which graphically illustrates the relationship between the various parties and entities, and the financing relationship for the recreation center project.
It seems to me that what we need is a larger one, which would take into account all the loans, bonds and obligations existing between all the city agencies, entities and principals who are participating in all the ongoing RDA projects, if we're really going to get a handle on this.
I'd intended to post an article on this topic today, but after some research, I determined that I just didn't have sufficient information.
Do I hear anyone who'd like to volunteer? ;)
I have no idea how one would obtain that information. Here is some "old" information, as of 6 months ago, written by Stuart Reid and published in the Standard.
At least, it gives us a list of them. Things have really changed since then, though. Actually, I find it very confusing, but here is part of the article:
"RDA projects and so-called associated-debt Ogden RDA projects breakdown:
1. Kiesel Avenue parking garage ($760,000): This debt is financed by new property tax values created by the development that are credited back to the development. There is no tax levied against the taxpayer.
2. Hampton Inn ($1,505,000): This debt is financed by new property tax values created by the development itself and credited back to the development with no recourse to the RDA or city. There is no tax levied against the taxpayer.
3. BDO infrastructure ($10,830,000): This debt is financed from new property tax values created by the Business Depot Ogden development and credited back to the development. There is no tax levied against the taxpayer.
4. Union Square Townhomes ($675,000): This debt is financed by new property tax values created by the development itself and credited back to the development with no recourse to the RDA or city. There is no tax levied against the taxpayer.
5. Ogden City Mall pre-1983 property acquisition, 25th Street pre-1983 infrastructure improvement, Washington Boulevard property acquisition ($9,803,754): This debt is internal debt. It is debt in the name of the RDA owed to the city. There is no tax levied against the taxpayer.
6. Mall redevelopment, purchase and other costs ($10,462,085): This debt is internal debt to the city. The city borrowed from BDO, which is a development owned by the city. The city will pay back the loan from BDO with interest. The payback moneys will enhance BDO profitability, thus benefiting the city. There is no tax levied against the taxpayer.
7. American Can Building renovation with parking garage ($8.3 million): $2 million of this so-called debt is not debt. It is a federal grant to the city; $2 million is debt financed by tax values created from the parking-garage project. The remainder of the debt is financed by tax values created by the American Can Building development project. It has no recourse to the city or RDA. There is no tax levied against the taxpayer.
8. Fresenius Medical expansion ($1,942,253): This is not a debt to the city or RDA. The RDA passes through property tax value created by the developer back to the project in the form of a tax credit. There is no tax levied against the taxpayer.
9. Williams International expansion ($4,998,698): There is no debt to the city or RDA. The RDA passes through property tax value created by the developer back to the project in the form of a tax credit. There is no tax levied against the taxpayer.
10. Wal-Mart project ($2.1 million): This is city debt that will be paid through revenues created by project sales and property taxes.
11. High adventure recreation center ($16 million): This is RDA debt that will be financed by property tax values created by the project paid by the tenants and lease revenues paid by the tenants. There is no tax levied against the taxpayer.
12. Gateway project/airport ($2.3 million): There is no debt to the city or RDA. The RDA passes through property tax values created by the developer back to the project in the form of the tax credit. There is no tax levied against the taxpayer.
13. River Project ($3 million): There is no real debt. If and when the debt is established, it will be assumed within days by the developer. There is no tax levied against the taxpayer."
Thank god! We have $72,676,790.00 of debt which, according to Reid, Godfrey and the boys, isn't debt. It's a credit, to be credited back to the developer, with no encumbrances to the tax payer. Only $72,676,790.00....
And Bernie, Utmormon, and those guys want to keep this crew in office. We're making progress, they claim. The mayor's a visionary, doing what's best for our city. Boys, boys, boys, you are really close to being sent to bed without your supper.
Again, Dian, Rudi, thanks for the insight.
Thank You, Politico, for doing the math! It's probably worse now---six months have passed, and you know the cost of concrete nowadays.
I wonder if anyone even thinks about paying that debt down.
Since you guys are such math geniuses, you can only figure that the money to pay down the debt is going to come from one of two sources:
1) Taxpayers (ie. raise property taxes)
2) bringing in businesses that will help bring others to Ogden and keep the tax rate low through their sales tax revenues....
Oh wait, I forget, this is an anti-bringing businesses to Ogden site. (Or at least I haven't heard any great ideas since all everyone here wants to do is stomp down any idea to bring in OUTSIDE revenue.)
Have fun paying property taxes through the nose!
Amused, it's about INEPTNESS. If these idiots who got us into debt knew anything at all about Balance Sheets, P & Ls, basic principles of business, then we wouldn't be upside down the way we are.
Some of these projects would have merit if they had been administered correctly at the start. Unfortunately, the Gang of 6 has RDA fever, doesn't understand that debt is debt, not credit, and that driving projects of the magnitudes of these needs qualified people at the top, not some mayor who thinks he's Donald Freaking Trump.
It's you people who need to straighten up and fly right, not those of us who recognize the problem and the causes thereof. Our horrid financial situation will not be resolved by accruing more debt, beginning more projects via tax increment, and taking a person's home away from he or she.
Want an example? Go ask your buddy Godfrey why the hell he bought the mall in the first place and then tore it down, thereby eliminating any property tax income by that action. Combine that loss with the interest and the lawsuits that followed, the money diverted from Public Services and the infrastructure to keep the wolves away, and you might just cop a clue. But I doubt it.
Want another look? Take a walk down on lower 25th and tell us what you see. It's a bloody ghost town down there. Two residential units have been sold (residential, not residential/business combines), and one of those is up for sale. The business condos are mostly up for rent. The project sits teatering on the verge of collapse. Phase II is virtually lost. It ain't because of we "obstructionists," pal; hell no, the deal was done. It was not managed properly from the git-go.
Another example? Why oh why have there been 9 delays at the recreation center? Is it because of good management? Nope....it's because whoever's in charge is out of his league. One, two, maybe three delays. But nine? Comon, give us a break. Why should we support that kind of ineptness?
We shouldn't.
That is why we're where we're at. Those in the top positions just can't cut it!
Once again proving my point, p.o.- all it seems folks want to do here is rant and when someone (like dian) actually comes up with a decent idea, they get railroaded (pun intended) off topic because it might be just a little to close to what the current administration might be doing. Keep in mind- much of that debt was already there when Godfrey got in office. True, he hasn't helped much by going into further debt, but at least some of the ideas have potential. He's not sitting around WAITING for something to happen (ala Glen Mecham).
Rather than just complaining about the debt and poorly handled management, give a viable option
(and saying things like "private investors should pay to help build Ogden" isn't helping- we've already got strikes against us- check out Bernie's comments.)
The comment of Dian's that I referred to is one she posted a few weeks ago- really good in the way of problem solving, but was too "Godfrey-ish" for some.
Bernie's an idiot. A Godfrey supporter, right or wrong, all the way.
How can he reduce debt by giving us more debt?
Maybe he might try to finsih something he's started before he abandons it and moves on to something else?
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