What if Things Go South?

Seemingly awakened from his long neoCON slumber, Chamber of Peoples' Deputy Chairman Comrade Safsten is suddenly asking the very same question the wary Ogden townsfolk have been asking about the Rec Center scheme for over a half-year, according to this morning's John Wright story. "What if things go south?" he asks.

That's a very good question, Chairman Safsten; and we're glad you finally got around to asking it. GE Commercial Credit, the lender who'd originally been lined up to finance the Rec Center project, apparently asked that question too, just before they pulled out of the deal. The new lender, Bank of New York, also apparently made the same query. Having gotten a very unsatisfactory answer, they demanded extra security, in the form of a public guarantee. And it would come as no surprise at all if we were to learn that other un-named commercial lenders may have asked the same question and politely said "No thanks," upon taking a little closer look. A south-bound trip is a distinct possibility, as the Rec Center deal is now structured. An $80,000/month lease payment over 20 years would seem a pretty tough nut to crack, for an Ogden bowling center/gym combo, even assuming that bright and creative young entrepreneurs are manning the helm.

"Shuddup Comrade Safsten," the rest of the Gang-of-Six say! "We're the annointed ones, after all, and we NEVER talk 'out of school.'" "And we NEVER EVER plan for failure."

I've taken a certain amount of heat over the past few months for my tentative support of the Rec Center project. I always looked at it as an-arms-length transaction, involving a ready, willing and "able" set of prospective lessees on one side of the transaction, and an eager land-owning prospective landlord (Ogden City) on the other. My less than enthusiastic support had always been predicated, however, on the assumption that the entire transaction would either stand or fall on its own economic merit, and that the taxpayers would never be placed on the hook. If the deal were to go forward, commercial lenders and securities professionals would take care of the feasibility studies and credit qualification themselves, by operation of the mechanism of the free market. Failing that, the project would just "go away."

Well, my assumptions have proven mostly correct. The Ogden City administration has peddled the financing package all around the country; and the original deal has now fallen flat on its face, due to its inherent lack of economic merit. Lacking the confidence that Fat Cats & Golds have the financial capability to perform their lease obligations, the only prospective lender left standing, The Bank of New York, has demanded and gotten, at the eleventh hour, a 100% public guarantee. As far as the lender is now concerned, the Fatcats/Gold's principles could file their bankruptcy petition any time at all, and The Bank of New York won't be out a single dime -- and the taxpayers will be left dangling on the hook.

Mayor Godfrey and Chairman Safsten have pulled the old "bait-and-switch" on the taxpayers of Ogden. It's high-time at least one of them started asking a few questions.

The additional questions they're asking are the wrong ones however, gentle readers. Instead of asking whether the project should be scuttled entirely, or at least put on hold for a public feasibility study, they're motoring full speed ahead, hoping to squeeze "additional security" out of the hapless Fatcats/Gold's principals.

John Wright reports this amazingly naive Dave Harmer comment from last night's council work session:

"Harmer said although the lease agreement is "substantially" finalized, he would ask attorneys involved in negotiating it whether there are additional guarantees the city could request."

It's time for Dave Harmer and the other clueless Ogden city big-shot development poseurs to wake up and smell the coffee. If Fatcats and Gold's wind up in bankruptcy court, the Ogden city taxpayers will be standing in a long line, along with other creditors. Fatcats and Gold's run multiple debt-laden operations up and down the Wasatch front -- and its unlikely there will be sufficient assets to make any creditor whole.

I say It's time to pull the plug on this deal, Mr. Harmer and Mr. Safsten, and to ask yourselves honestly whether anyone in his right mind would proceed onward from here.

The further pursuit of this project has gone far beyond careless and is in the area of outright reckless -- and there could be personal legal repercussions.

And what say our gentle readers about that?

Update 11/4/05 4:32 p.m. MT: It seems the Standard-Examiner editors chimed in on the some note in this morning's editorial.