I've said it before, and I'll repeat it: Hiring John Wright was one of the smartest things that the Standard-Examiner has done within recent memory. His clear reporting benefits not only the Std-Ex, but it's general readership public as well.Mr. Wright reports that Ogden City officials have decided to take out what amounts to a $30 million debt-consolidation loan, to be funded by the issuance of new bonds, and to be applied approximately as follows:
a) $10 million to repay the money borrowed from BDO in 2001 to purchase and demolish the downtown mall;
b) $12 million to retire the bonds that were issued at about the same time to build out the BDO infrastructure (and to offset the above $10 million cash that was "borrowed";) and,
c) $5 million to pay off the short-term bridge loan which was used to pay off Woodbury Corporation, under terms of Ogden City's settlement of the three Woodbury lawsuits.
Arithmetic-competent readers will of course observe that these figures don't actually add up to $30 million. My guess, however, is that the $3 million that's seems to be unaccounted for will be eaten up by accrued interest, lender fees and commissions, and that once the smoke clears on this transaction, there won't be much small change left over.
And while we're on the subject of "smartness," I believe this is a smart move on the city's part. Not only will it finally resolve the Woodbury lawsuit problem, but it will get the U.S. Army off the city's back, and eliminate what could have potentially become some very expensive and messy civil litigation. If the city can resolve four lawsuits in one fell swoop, while prevailing interest rates remain low, $30 million will buy a lot of piece of mind.
Not only that -- having removed the pesky U.S. Attorneys' Office from its list of persecutors and detractors, City officials will then be able, after September 2006, to "borrow back" the $10 million that it has just "repaid" to BDO, and walk from the transaction with a tidy little "slush fund," to be applied to some of the city's other pressing financial problems. It could even be argued, I think, that such a "transfer" could be characterized not as "borrowing" at all -- but as the settling of accounts between Ogden City and the RDA entity, BDO. That would all depend, of course, on how the new bonding repayment scheme is structured. That's the single detail that Mr. Wright's article didn't make quite clear.
I told you it was smart. Cute might even serve as a better description. By "avoiding a battle with the army," (nice turn of a phrase, John,) City officials will now be able to re-create the original BDO-Ogden City "loan," without having anybody to complain about it.
Am I missing something here, gentle readers? Have Ogden City officials just figured out another clever way to scrape up some additional cash here, in addition to resolving their festering legal problems?
Help me out with your comments, if you will.
21 comments:
What you're missing here, Rudi m'boy, is the fact that the Mayor needs to take out this loan at all. Let's consider this.
Why is this loan necessary? Because of the 4 or 5 lawsuits, that's why. And why the 4 or 5 lawsuits (whatever the number of lawsuits is, for you purists)? Because the people in charge, in their own left handed, incompetent way, didn't follow the rules, tried to get cute, and got caught with their hands in the cookie jar.
This is no way to govern a city. Being sued 4 or 5 times, by some fairly respected entities like the U.S. Army and the Woodbury Corporation especially, speaks volumes about the integrity and forthright honestness of those in charge.
It's their actions that have prompted these legal proceedings, which have resulted in the time and costs necessary to deal with them. What, with the many big time developers walking away from the negotiating table due to the City's attitude (Godfrey's, actually), and the various lawsutis, I ask you: what is wrong with this picture?
The shape that the city's in reflects this leadership, and it begins at the Mayor's office, runs through the Economic Development branch, and finally into the City Council where these off handed, nefarious actions and foolish ideas are blessed by the 5 "rubber stampers" who support this lunacy with their votes (Jorgenson, Safsten, Burdett, Filiaga, and Stephenson).
While other surrounding cities are luring businesses to their respective towns, this "Gang of 6" continues to dream up un-doable, idiotic and ultra-expensive schemes and deal in shady, under the table tactics (the loans and manipulation of funds and the abuse of eminent domain) that have set this city back years and are responsible for its demise.
We should build the gondola, put them all in it, and give them a one way ride out of town and then tear it back down. Once that's completed, we can get real, get honest and work on progress, not the kinds of things that have brought about these lawsuits.
I have moved two posts of mine from elsewhere to here and combined them, since they are on this topic.
There were two articles about Ogden yesterday in the SL Trib, both by Kristen Moulton. The fact that they ran together on the same day is really interesting, as you will see.
The first one deals with contamination at the mall site.
In one test hole on the 1.5-acre site, the concentration of diesel fuel residue was 1,040 times higher than the level at which the state requires action.
Okay, well then, this will require some attention, one would think.
The second article deals with the fact that Ogden City is trying to get financing to pay back the money the federal government contends it misappropriated from BDO. It is now revealed that this is the 30 million dollar loan we have discussed previously, and part of it is also going to pay the short term 5 million dollar loan we obtained to pay the Woodbury lawsuit, the interest of which is over 16 thousand a month.
How will we pay this back?
"Johnson said the $30 million loan would be repaid with a combination of lease revenue and tax-revenue increases from the new mall and BDO. The refinancing is expected to be completed in October, he said."
But wait! The "new mall" is stalled because of toxic contamination, as we see in the first article. This is not generating revenue.
We are refinancing the money we owe BDO with money earned from BDO? A portion of which we are supposed to be funneling back into BDO?
This sounds a bit shaky to me.
Thank you, Kristen.
It sometimes has seemed to me that I am sort of alone in being deeply concerned about this massive debt. Here this is going on and people are trying to build enthusiasm for these gondolas.
From the news coverage, it appears that the only revenue the city has to finance anything, whether it be the issuance of bonds for rec center development or the refinancing of its own debt, is mall site development and BDO.
Well, there are No revenues currently emanating from mall site development that I know of except for the one sale to Earnshaw Enterprises,, and we Owe money to BDO! Kristen's article makes it clear that we are trying to pay what we Owe BDO with money from mall site development and, once again, BDO.
We also now have additional costs incurred from state mandated toxic clean-up, and I imagine the costs of constructing the rec center have popped up since we did not meet R&O's August 31st deadline.
This simply doesn't make any sense as it stands. I cannot imagine what loan officer or lending institution would look at this situation and be willing to work with us at all. The term they would use is "overextended."
In addition to this, the July 13th article in the Standard about Ogden City refinancing its debt mentioned the figure as being $20 million.
"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."
Since this figure is now $30 million, the conclusion is that in a little over one month, we have evidently incurred a need for $10 million more dollars to pay off debt.
This is astounding.
To me, the best solution for Ogden City right now is divest, divest, divest. Start selling off all the accumulated property of the past few years and start paying things down. We may be land rich and dollar poor, and if we are, there is a chance we can turn this around, painful as it may be to sacrifice these proposed projects. Yes, the carpetbaggers may come in, but that's the chance we have to take at this point, to my way of thinking.
It is interesting how the 20 mil went to 30 mil. We are so far upside down it's pathetic. If the wreck center got the OK today, the beginning tab, before we pour the footings, would be close to $40,000,000. Meanwhile, the infrastructure, which is flat ignored by the Mayor and 5 council members (I've heard Wicks and Garcia address this time and time again, but to no avail as the others are "too busy" figuring out the mall ventures), has a price tag of $148,000,000! How are we going to come up with that? Plus the mall costs? Plus the loans? Plus finishing off the stalled projects like Union Square and Riverfront? Plus taking away the people's homes and givng the land away at a discount to WalMart?
This is a Monopoly game to the Mayor and his council bunch. I think this RDA/free money disease has effected them to the point of no return. And they keep coming up with more costly ideas like the gondola. The supporters of this madness, especially including certain bloggers like Utmomo, Bernie, et al, seem oblivious to the reality, the cost, the danger to our town's heart and soul, if we continue on this path. To continue in this way could be just as devestating to Ogden as Katrina and the floods were to the Gulf Coast. We can be wiped out if this sh-- doesn't stop!
Does Godfrey run his own affairs this way? Does Safsten, Jorgenson, the others run their financial affairs this way? I wonder if Burdett's husband, the dentist, treats his business like it's only play money?
I'm aware that somewhere in this pile of debt might be a couple of good ideas, but doing this kind of business is not the way a city should be administered. They are spending us and borrowing us to the brink, and every day it seems they try to explain it away and then dream up another multi-million dollar project.
Thanks, Dian. Great research and analysis.
I believe many of us are growing increasingly concerned about Ogden City's burgeoning debt-load.
I've also contacted a pal of mine who's an expert on hazmat cleanup in another state. I'm going to pick his brain to see whether any reasonable conclusions can be reached from the facts reported in Ms. Moulton's article.
A plain reading of Ms. Moulton's article would lead to the reasonable inference that the mall-site contamination may be far worse than City officials are letting on.
I'll see if I Ms. Moulton's story raises any "red flags" with my environmental quality expert, and get back to everyone with what I find.
I agree that this contamination may be quite serious, Rudi, in view of the fact stated in the article that they went down 12 feet and hit groundwater and there it was, and so they now have to go deeper.
Am really looking forward to hearing what your hazmat friend has to say.
How can one not appreciate the wry comment of Rudi's mother that the mall currently looks just as it did when Lorin Farr pitched his tent in 1850? Ah, but wait -- it's not quite the same ... surely in 1850 the site was TCE- and diesel fuel-free. Yes, a hazmat expert consultation is an inspired move.
Hey, and how 'bout Kristen Moulton's final paragraph in her contamination story: "And because of redevelopment-agency law affecting tax-increment financing, construction must be launched by Dec. 31."
Something tells me that with City Hall's track record -- surely I was not the only one whose spirits sank at the Std-Ex's weekly announcements of "postponements" of the crucial RDA vote -- Dec. 31 ain't gonna happen. Dian, you are admirably prescient. Divestiture is a distinct possibility in the near future.
Of course Dian, a real question would be of the 30 Million that they are going to borrow, which it doesn't sound like even encludes the bonds to build the rec center, what is the value of the land that they could sell? I am guessing that the value of the land that Ogden holds in these projects is no where near enough to make much of a dent in the $30 million.
And to top it off, if Ogden isn't able to start the rec center by Dec 31, not only do they loose the future haircut tax increment for recreation but also the amount that they have collected over the last 2 years will go back to the taxing entities. The biggest windfall if this happens would be the county which just increased taxes in part because of this increment diversion.
So if Ogden fails to start the rec center and money goes back to the county do you think that next year the county will reduce taxes? I wouldn't hold my breath.
In the carnival they call it a shell game.
" Divestiture is a distinct possibility in the near future."
You intrigue me, MM! Do tell us more!!!
You know, it was in 2002 or thereabouts that I personally first heard the rumor that the Grand Plan for the mall site was that it was to be sold to the LDS Church.
I was told smugly to wait and see.
Your comment above made me think of that, and if the LDS Church comes in like a deus ex machina to bail us out of part of this, all I can say is that this is a extremely convoluted way to go about the execution of the Grand Plan, not to mention being quite expensive.
Actually, there could be quite a few people interested in quite a few investments here who have just been holding off to see what the City is going to do. If it decides to do nothing but sell, we might see a lot of development really fast. Whether this would be what we would want is another matter entirely, but I think we might get offers.
Arcritic, I thought about whether the land was even close also. I have no idea how much the city owns, especially since it also has been buying up HUD homes. So no clue. And I also don't think the $30 million includes the bonds--I don't see how it could.
Insofar as Weber County reducing taxes if it gets the increments goes, it should show itself as the benevolent entity it truly is and reduce them now. Why not? I see no reason why it should not simply go ahead and base its actions on forward thinking statements about a future windfall like everyone else is said to be doing.
But am not holding my breath, of course.
The $30 mil is for dead horse debt. The Wreck Center is probably wrecked. I've called attention to the fact that these Inspections and Evaluations are serious business from day one, warned Godfrey and his followers that to minimize this was foolish, and that money people don't play games with the product they are about to put money on. What was once a "common occurence" when the first test showed oil is now a very serious problem, as the first test led to another, which showed more contamination, and now the money folk want a couple of more; and no letter from the Mayor's pals will get GE to lower their guard and call off the dogs. Meanwhile, costs are skyrocketing, due to OPEC, Hurricane Katrina, the Iraq War, and whatever else you can think of.
Here's another thought: land is worth what a person will pay for it, especially land like the mall site dirt. Many seem to think it's very high priced real estate because it's in downtown Ogden. Huh? With not that many people kicking in the door to buy a piece or two, and the surrounding property (except for the Church and Lindquist Field)not being very desirable, this land may not be worth what everyone thinks it is.
The potential is there, but often times, potential doesn't drive the price. In fact, the "market" drives the price, and, except for the Wreck Center, there really ain't much of a market. So, comon down and make an offer. You just might wind up owning a chunk, along with the massive debt and an assement for Matt's gon-freakin-dola!
This is a little off the subject but has anyone seen kent jorgi's signs? They are laughable! They have two mid-teen girls (I assume are his daughters) with the caption "two good reasons to re-elect kent jorgensen". These signs are insulting to say the least. Hey kent why don’t you give us some real reasons to vote for you? You have already given Ogden voters enough reasons to send your Rick Moranis looking MUG out of city hall. Now that the heat is on, you are resorting to distancing yourself from the Mayor, and using your Elizabeth Smart age daughters to disguise your record. By the way I thought nailing your signs to tree's was against the election rules, but hey what are rules when UTA wants their PR guy in Ogden government? I’d like to see how much $ they have given you for your campaign!
P.S. you can see one of these pathetic signs on 36th street heading east, about 2 blocks from Harrison.
There is another catch-22 in all of this financial meandering. With the mall site under water and under an oily cloud of EPA mandatory clean-up, how long will it be since the mall site will be generating any sort of tax revenue?
Let's say that the city does divest itself of the mall property through individual sales. The site, due to clean-up costs and dubious worth due to the failed businesses on the other side of Washington Blvd, has to be dropping in value. The city has created a gigantic hole that is now sucking revenue instead of creating revenue.
As the debt mounts, the sales and property tax revenue decreases. We, the taxpayers are actually being hit from two different fronts. It makes me wonder what constructive solutions could pull us out. Basically, the city needs revenue quickly from the mall site. I would echo the thoughts from dian and mcconkie... divestiture seems the quickest and most effective way to turn the whole of Washington Blvd from 25th to 20th around.
If the city were to make a gift (without tax incentive) of the mall site at this point to a worthy developer in exchange for quick resolution, we might just be able to turn this around. The city could use the resulting sales and/or property tax revenue to pay down the $30mil debt just generated by the whole fiasco... and the downtown area would be on the "road to recovery". We may take a hit on it right at first, but the resulting resolution might just be the ticket to help us climb out of this quandry. Any thoughts?
We keep hearing about "for years the place has been for sale and the private sector has never come." I wonder what would happen if they put up a "FOR SALE" for real and marketed it throughout the adjacent 48, Hawaii, Alaska and Japan?
I know this crew of Godfrey's is "too busy," to look at offers, but that makes me wonder how many other offers they have summarily dismissed or neglected simply because it didn't fit into their Disneyland scheme.
No more toys, Matthew. You need to learn how to take care of the one's you have before we'll give yuou any more. There's more to city growth and progress than arrogance and rubber stamps.
Anonymous: Oh, that's rich! The obvious next move for some enterprising wag is to cross out the word "Two" on the Kent Jorgensen campaign posters and substitute "Four." That would let Jorgensen know what we think of his contemptuous assumption that we can't abide a substantive campaign.
Questions for Realtor On Deck:
The way this deal seems now is that the projected loan will be paid back with projected lease revenue from mall site development, etc. But if there is none, because of the contamination issue, the lenders might require the property itself as collateral. (Do not know if they would even want it in its present condition, but they might.)
Was thinking that if this mall site is being used as collateral for this projected $30 million loan, it might not be able to be sold.
But how would anyone know loan collateral arrangements except for what one reads in the paper? Is there any mechanism to determine whether or not a property is being used as collateral for a loan?
Loan collateral would be different than a lien, wouldn't it? As long as one keeps current with payments, there would be no lien and therefore no public record of the arrangement??
Even if only projected revenues get tied up in a loan arrangement, wouldn't that narrow options or maybe even block a sale? Would anyone else even want to develop it if it were in that situation?
In other words, if the city obtains this "debt consolidation loan," would that lock us in to following the city's development plan because of this lease and rax revenue arrangement with the lenders? What would be our prospects if the lenders required the property itself? Is this loan going to narrow or close our options for that property?
Dian, my thoughts as to the mall site land being used as collateral for the $30 million loan are this: a mortgage is basically a loan, with the Deed in the owners name but a lien placed on the property, which is basically collateral for the loan given the owner by the lender. In this case, if the land is the collateral, I see no reason why the land itself could not be sold, provided there is nothing contractural prohibiting such. What is generally the case, in either a "formal" mortgage type loan or a "Seller Financed" arrangement, is the inclusion in the contract of an "Acceleration Clause." This term allows for the sale of the land but if that should happen, the maturity or "due date" is accelerated to the date of Closing, which calls the note due and payable then. Once that is addressed, the new contract is Closed, and both, or all three, parties go about their merry ways. Any prepaid penalities are also in the contract terms, as many lenders don't want the loan to be paid off early and if that happens, they'll smack you with a fairly substantial "ding." Some lenders, however, don't include that term, and a smart borrower will try to negotiate that condition out of the lending papers. It's all about the money!
Hope this clarifies a rather "muddy" situation.
Thanks, ROD, it does clarify things, especially the Acceleration Clause. That would bear thinking about.
Right now, the terms we read about for this loan are "lease revenue and tax revenue increases from the new mall," and I don't think there are any, which is why I was thinking about the lender perhaps wanting the land and what would happen then.
The only time I have seen the land option mentioned in these financial dealings was in the proposed issuance of bonds for the construction of the rec center, and this was only in the event that Health & Fitness did not pay their leases. The rest of the time the option was lease and tax revenue increases, but never the land.
It will be interesting to see how this loan plays out. Meanwhile, we continue to pay interest on the short term loan from Woodbury, and what the US Army says we owe BDO is still outstanding, and will be, to my understanding, until this loan goes through.
Interesting situation, to say the least.
Dian, according to today's newspaper, the rec building will collateralize the $8.3 million bond. How they plan on making the payments is lease revenue and tax increments, none of which has hit the table and won't until the tings built and the leasees make their payments. If they can't make the payments, guess who gets stuck with the tab?
I think that Mad Matt is pretty mad about now....the State won't issue the mall a "green light on liability letter" due to the contaminants and now wants the whole mall site inspected. Looks like Godfrey has bought himself a real do-zy. Probably should have thought of this prior to buying the mall or at least had these inspections addressed WAY BEFORE he sunk all of this time and money into a project that might not be a project. I'll bet there's some unhappy campers on floor 9 today.
And it's a holiday to boot. Nice way to spend it, eh?
"...the rec building will collateralize the $8.3 million bond. How they plan on making the payments is lease revenue and tax increments...",
Ah-ha. That makes sense, from the lender's point of view, that is. I was wondering how this was working in that lenders usually require hard assets, not revenue one might make in the future.
Maybe what they're going to try to do is make payments out of the $30 million debt consolidation loan until the rec center gets up and running. They may not have to pay all the debt at once and might be able to juggle a bit if this is allowed.
I'm thinking the lenders will want to see a revenue stream, as a loan is a one time thing and is already working against the revenue that is allegedly forthcoming because it has to be repaid somehow. Serious business here. It can't be run like the city cooks its books, taking a bunch from this place and putting it in that place, moving it here from there, and everything is fine, except the bottom line.
Help!
The bank (Wells Fargo) is fully aware of all the details of this sordid affair. They know many times more than us simple civilians. They are full and willing participants in this squirrly scheme.
If the little big guy on nine's dream comes true then the bank (bond dealer) will make a shit load of money.
If the dream goes bust then Wells Fargo will own most of four square blocks in the heart of Emerald City for pennies on the dollar.
In any event the good old tax payers (you and me) are going to get to pay for the clean up of the site and the substantial losses that will magically become the banks gains.
Some things never change.
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