By Dan Schroeder
As every reader of Weber County Forum knows, there are few projects in Ogden that are as important or as controversial as The Junction. But this reader, at least, has gotten through the last four years without ever actually understanding the complexities of this project. Motivated by the administration’s recent request for a 12-year extension on its entitlement to Junction tax revenues (and by a lull in the summer when I had few other responsibilities), I set out last week to remedy this situation. This article summarizes what I’ve learned.
The Lay of the Land
The Junction occupies the former Ogden City Mall site, taking up two square blocks (about 20 acres) of downtown. Here’s a graphic from the Ogden City web site, showing a simulated aerial view facing west, which I’ve labeled with the names of the major Junction components:
When the Ogden City Redevelopment Agency (RDA) bought the old mall site, it acquired the entire two blocks with the exception of the Episcopal Church. The RDA still owns most of the site, but not all. At the south end, the RDA traded some additional land to the church in exchange for a parcel across 24th Street. At the north end, the RDA granted one parcel to the Treehouse Museum and sold three parcels for commercial development. Those three parcels are now occupied by the Ensign Plaza building, the Earnshaw building, and the vacant land that was intended for the Ashton Square condominiums. (The privately owned parcels are tinted yellow in the graphic.)The RDA continues to own the parking garage, the Salomon Center, and the vacant land that was intended for the Midtown Hotel (these properties are tinted green in the graphic). However, the Salomon Center is leased to Health & Fitness L.C., an entity set up by Gold’s Gym and Fat Cats.
The rest of the land at the Junction is also still owned by the RDA, but is under long-term lease to the Boyer Company, which built the Megaplex Theater, the Wells Fargo office building, and the various restaurants, retail space, and apartments. (These properties are tinted blue in the graphic.)
The Debt
To finance its Junction-related expenses, the RDA has issued three different sets of bonds, referred to as Series A, B, and C. (For details, see pages 63-64 of the city's 2008 Comprehensive Annual Financial Report.)
The Series A bonds, totaling $7.3 million, were used to help finance the construction of the Salomon Center. The payments on these bonds are about $550,000 per year, and are coming from tax increment revenue from 10 other redevelopment districts throughout the city.
The Series B bonds, totaling $8.9 million, were also used to finance the construction of the Salomon Center. The payments on these bonds are about $590,000 per year, and are coming from the lease payments that Health & Fitness L.C. pays to the RDA.
The Series C bonds, totaling $22.4 million, were issued to consolidate the rest of the city’s Junction-related debt: $6 million to purchase the mall site, $4 million for demolition, $5 million to settle with Woodbury Corp. for its interest in the mall’s tax-increment revenue, and the rest for streets, sidewalks, utilities, and miscellaneous expenses including legal fees. The payments on these bonds are about $1.9 million per year, and are coming from a combination of tax increment revenue (from the mall redevelopment district itself and from the American Can RDA district) and lease revenues from Business Depot Ogden (BDO). If/when Boyer’s Junction developments ever make a profit, the city’s share of that profit will also be applied to paying off these bonds.
All three sets of bonds were issued in 2005 and will mature in 2025-31. Of the total original debt of $38.6 million, the remaining unpaid principal is approximately $36 million.
Incidentally, this bonded debt doesn’t account for all of the city’s investment in the Junction. The city also used various one-time allocations to pay for miscellaneous expenses, cost overruns, and repairs.
The Revenue
As mentioned above, the city (RDA) has two types of revenue to pay off this debt: tax increment and lease revenue. Each of these requires some explanation.
Tax increment financing is the whole premise of the RDA. When a redevelopment district is created, any additional property taxes from new development in the district go to the RDA for a certain period of time. Normally this revenue is used to pay off a portion of the debt from that development. Under some circumstances, however, tax increment revenue can be moved from one redevelopment district to another. In Ogden, tax increment revenue is now flowing from 10 other redevelopment districts to the Junction. Tax increment financing is controversial because it deprives all the taxing entities (school district, city, county, etc.) of the property tax they would normally collect from the new development. Proponents argue, however, that without tax increment financing, much of the new development would never take place at all.
When the city owns a piece of property, it can receive additional income from leasing that property. The city (RDA) leases the Salomon Center directly to its tenant, and began receiving lease payments in July 2007. The RDA also leases 6.3 acres of Junction property to Boyer, under an agreement whereby Boyer pays the RDA 50% of its net profit (if any) on this property. The city has a similar arrangement with Boyer for BDO, which is now returning about $3 million annually to the city.
The Junction’s retail properties, including restaurants and entertainment, also generate some sales tax revenue. The city’s share of this tax is 1% of sales, and this revenue goes into the city’s general fund (not to the RDA).
The Problem
The revenue streams to pay off the Series A and B bonds seem to be coming through, at least for now. In particular, there is no sign that the Salomon Center tenant might walk away and default on the lease, leaving the city responsible for the Series B bond payments.
The problem is with the Series C bonds. The tax increment revenue from the Junction (including the block west of Grant between 22nd and 23rd Streets, which is part of the old mall redevelopment district) seems to be covering only about half of the $1.9 million annual payment. Most of the difference is being made up by BDO lease revenue, which the city would prefer to spend on other projects.
But in just five years, the situation may become much worse. That’s when the time limit on collecting tax increment from the mall redevelopment district runs out. For the next 12 years after that, the entire $1.9 million annual payment on the Series C bonds would have to come from BDO and/or other sources.
One of those other sources was supposed to be lease revenue on Boyer’s Junction developments. But with so much of its office, retail, and residential space still unleased, Boyer has yet to make a profit. Ogden Community and Economic Development Director Scott Waterfall has stated that he doesn’t anticipate receiving any income from Boyer in the near future.
In an upcoming article I will show in more detail how the Junction’s tax increment and lease revenues have fallen short of what we were promised. I’ll also describe the administration’s proposal to obtain additional revenue by extending the collection of tax increment on the mall district for an additional 12 years.
Meanwhile, the floor is open for comments.
52 comments:
By the way, I'd like to thank Richard McConkie of the Ogden Comunity and Economic Development department for spending two hours last week answering my questions about the Junction.
Thanks Dan for keeping us informed with the facts with your hard work. Some might be interested in the lease numbers to see what the city is actually getting from the leasees. These numbers should be public information.
Yes, thanks Dan. Making sense out of all this is quite an accomplishment.
I know that we could get 3 million dollars from the Ogden community foundation. They're sitting on that money that came from the taxpayers and they should pay the debt off, for some of these projects.
I wish that the truth would be told about that hog wash.
Thanks, Dan.
Well written post, Dan. However, I recall The Junction was voted on SEVERAL years ago, when the economy WAS up and running like gang busters. Had the economy continued its upswing, and not fallen like a lead weight overnight, I'm thinking that much of what we were told about The Junction revenue (Boyer payments, tenants leasing space, etc.) would most likely have come to pass.
Many good minds entered into building something in that horrid, vacant hole in the middle of downtown Ogden, and I think much of the blame for its present difficulties lie with the same economic downturn that the rest of the nation, yea the world, is today facing.
Thanks again Dan, Rudi, and others for keeping us well informed.
Blaine,
My intent was to defer the blame question to a later article, for which I'm still running some numbers. However, I'm having trouble coming up with any scenario in which there wouldn't have been a problem after 2014, when the tax increment is scheduled to expire. It looks to me like the plan must always have been to either ask for an extension on the tax increment, or use BDO lease revenue to pay off the bonds through their maturity date. Under a stronger economy, perhaps only one of these two measures would have been needed. Now it looks like both might be needed.
We could also get into a philosophical discussion on economic cycles and prudent planning. Although the current recession is obviously worse than any in a long time, I think it was foolhardy to assume (if indeed this was the assumption) that the economic boom of a few years ago would continue through the duration of the bond payments. Historically, recessions have occurred every 5-10 years and any public official with half a brain should plan for these cycles.
Blaine Carl, it is difficult to give to much credit to local officals for fixing a "horrid, vacant hole in the middle of downtown Ogden" when these are basically the same people who created the problem in the first place.
It would be interesting to see how much income (vs expenses) is generated from Fat Cats, the Junction's pizza parlor, Flowrider, I-Fly, and Gold's Gym. How many people are actually using these things?
OgdenLover,
At this point, as a taxpayer, my main concern is whether the Salomon Center tenant is making its lease payments. I don't particularly care how much of their income is coming from each of the various attractions inside the building, nor do I know whether they would even provide that information if asked. So if you're curious, I'll leave that phone call to you.
thank you for the assesment. it clears up a lot. i also wonder, idly, what seth butterfield thinks about this whole finacing fiasco?
seth?
Blaine:
Your point has some merit, but at the same time it illustrates nicely why cities should not become involved in fronting the bonds for speculative commercial developments. All such major developments are inherently speculative, as should by now be painfully evident to all. Seems to me still that if The Junction development was an attractive one for investors at the time it was proposed [the boom years], the city would not have had to put the full faith and credit of the taxpayers behind the bonds. Interesting to me that even at the height of the go-go years, the project needed a public guarantee to lure investors.
Saying things looked good at the time, and nobody knew the economy would tank, and if it hadn't, we'd all be in high cotton now just adds up to saying "this was a highly speculative commercial venture with public funds pledged to guarantee the resulting debt."
"Your point has some merit, but at the same time it illustrates nicely why cities should not become involved in fronting the bonds for speculative commercial developments.'
Exactly right, Curm. Government entities should be the most prudent and restrained of all entities who delve into real estate development, inasmuch as they're typically inexperienced babes in the woods (Godfrey's last long term paying gig prior to becoming mayor was working as a pizza delivery boy) in the snake pit of professional real estate development and lending.
Moreover, its public monies that government officials "invest" and eventually squander, when they sign onto investment deals they really don't understand. Of all entities who do this, they are the ones who should be the most cautious and prudent, since it's the taxpayers, and not themselves whom they put at risk.
Curm, Dan, Ogdenlover, Blackrulon, et al....your retorts are sound and I basically agree with all of your premises.
That being said, I remember the old Mall collapsing and then sitting vacant for years while investor after investor entered into talks and negotiations to rehabilitate it. Alas, that didn't happen, and after so long it maybe took the City to kick start the downtown area. Many such cities nationwide have done so, with the help of TIF, RDAs, and the like.
But, that also being said, it is both speculative and risky for a developer, either a city, a venture capitalist, a group such as an LLC or corporation, to assume the burden of development. Such has been the case here, and just about everywhere else in the nation. That makes me wonder, Dan, when you comment that economies usually go downhill (paraphrase) every 15 years, and that being the case anyone with half a brain would know better than to enter into a risky venture, I think your off base. EVERYONE, generally speaking, during the "go-go" years entered into some type of financial venture that was a gamble (houses, buildings, malls, mega-developments, hotels, you name it). And most of them lost (foreclosures, dried up financing that would complete the projects-the list goes on).
Therefore, Ogden's RDA, the Mayor, Economic & Business Development, the City Council and Administration were reacting just about like everyone else. And your premise that those with half a brain really doesn't apply to them anymore than it does to anyone else who got stung by the economic downturn.
The point now is, what the hell can be done to clean up the milk that was spilled? Complaining about the past won't help (history should be our lesson, however), but what can we do today, other than support that which is in place.
Part of the problem is that despite the economic downturn, Godfrey keeps proposing new risky ventures with our tax dollars. The golf course hotel, ice tower, velodrome. He doesn't admit to reality and won't quit proposing new, risky ways to lose money.
Og:
Seems like Hizzonah has spent too much time in Vegas and has picked up the desperate gambler's practice called "doubling down" --- which is a good way to get real poor real fast, even betting on games at which you have only slightly less than a 50/50 chance of winning [betting odd or even on roulette, for example]. Doubling down on bets with a lower payoff is even more risky... and year round outdoor ice towers, gondolas and velodromes are definitely less than 50/50 bets.
Very good, Curm. "doubling down" exactly describes the Boss Godfrey administrations's strategy right now.
Very savvy of you, indeed.
And if Godfrey, Patterson et al. lose on this go-round, and fail to convince the Taxing Entity Committee to provide a "game saving bailout," so what? These Godfrey administration political sociopaths can always move on to new jobs and new scams, and let the citizens of Ogden deal for the next 24 years with the mountain of unsustainable public debt they've recklessly built up over the past 8-1/2 years.
Once they leave the public platform, it will be no skin off their noses, and they'll ultimately get the last laugh.
Blaine,
Let me clarify: I said that anyone with half a brain should plan for economic ups and downs, rather than assuming that the economy will continue booming for 20 or more years in a row.
I did not say that nobody should ever invest money. I have some personal investments that have done poorly over the last couple of years, but that's none of your business and in any case, I was never counting on spectacular short-term performance.
When the government makes highly speculative investments with my money, that's my problem and everybody else's. And as Rudi says, government officials are usually amateurs when it comes to business and real estate investments.
I don't buy into the argument that Ogden had no other choice besides leaving the mall property vacant. We'll never know what all the options might have been. I'm sure there were ways to move forward more slowly and prudently, rather than gambling every spare dollar the city will have for the next 20 years.
Hey Blaine Carl,
Thanks for logging in from Planet Dumb. We always need to hear from you guys so we don't forget your ideas.
Pay attention. There are economic cycles. Smart people plan for them. Dumb ones don't. Note that most companies today are still making money, but a few dumb ones aren't. At the same time, RDA projects (dumb government projects by dumb people) are going belly up and being subsidized all over the place. Thanks for pointing out that lots of government pinheads are as dumb as Godfrey. I've only been saying that for years.
Also, the reason the old mall didn't sell is because the city kept getting in the way. The downtown business parasite brigade (not all downtown business, just the parasites) didn't want to see property values fall, so the city had to keep them up by "redeveloping" the mall. Otherwise, the mall property would have foreclosed and been thriving by now - owned by someone would got it so cheap he could hardly lose - free enterprise anyone?
As far as the mall being a hole in the ground, yeah, that's what it was after Godfrey bought it and tore it down for millions - millions to make a hole in the ground. Yes, then he fixed it with more of other people's money.
The Junkshun was a failure from conception, just like the old mall that was torn down (another RDA project) was a failure - abandoned before it's debt was repaid! You people screw us time and again and you never learn. Spend your own money next time.
Oh yeah, that's right, you can't do that because you don't have any.
Now go find somebody to tie your shoes so you can walk back to the "beam up" point for your return to the home planet.
Blaine Carl,
Okay, you got me going! Please consider my comments above as a tongue in cheek attempt at a rebuttal to you.
I in no way intend to infer anything derisive about you personally.
Your comments made me a little worked up, is all.
Dear Curm, It's alot worse than doubling down. The old mall structure, that really wasn't that old, would have easily housed, everything at the jackass center, a movie theatre, an icicle, all the silly less common activities planned for a veladrome, restaurants and easily as much shopping space as the new dead junction will hold. Might of even been room for a splash and wade Hotel as well.
All this would have required a fraction of the cost to the taxpayers, and custom construction would have been borne by the individuals that were interested in having those types of businesses. Oh, I forgot, the reason Ogden is in this mess is that nobody but the mayor see's any of this as a viable way to make money. Oh well, it would have only required a fraction of the debt had the idiot just used the exsisting ediface. Who cares what the outside of a gym or penny arcade look like? Any thing would look better than the new theatre and what's more important, the inside or outside of the silly velodrome, where outdoor sports that you can do for free, will be done indoors for a fee? Who elected this idiot?
The Ondt and the Gracehoper
Bill C. said:
"All this would have required a fraction of the cost to the taxpayers, and custom construction would have been borne by the individuals that were interested in having those types of businesses. Oh, I forgot, the reason Ogden is in this mess is that nobody but the mayor see's any of this as a viable way to make money. Oh well, it would have only required a fraction of the debt had the idiot just used the exsisting ediface."
You've stumbled onto the root problem.. it would have been only a fraction of the cost, and only a fraction of the kickbacks that all the FOM's received.
It's not what you know; it's who you know.
"I have some personal investments that have done poorly over the last couple of years, but that's none of your business." Then why did you write that on the blog, Dan S? Strange way to rebute the dialogue, by now informing everyone who reads this that you made a couple of poor investments, yet want it known that's it's not our business. The definitive diacotomy. Oh well, like The Junction, things will get better.
And Danny, m'boy--GEEZ! Planet Dumb, huh!?! I was merely making an analogy that Godfrey, et al aren't the only ones to fall victim to the economic crash. Some very brilliant people, both individuals and groups of individuals, have taken their lumps due to the economy. Big O ain't any different. And remember, Danny, Godfrey had to get Council approval for this venture through a Council vote, each member of which was duly elected by the people. So, if there's blame, then there's plenty of people to share it--from the citizen voters, to the Council members, to the Administration.
But here again, much of The Junction is viable and the premise leasing will rebound as the economy does.
I don't take your comments personally, even though they were abit obtuse and juvenile (Planet Dumb, JunkSHUN, "you people screw us" [what people?], and "tie your shoes so you can walk back to the 'beam up' point) and I appreciate your follow up explanation. Next time someone on the blog works you up, maybe you could rebute him or her with a little more latitude and a bit less tongue in cheek cutsies.
But, no harm, no foul. I'm just looking for some good dialogue and a way to fix things. And, as you and many will most likely to agree, the fix isn't by building ice towers and velodromes.
I agree with most of what you've said about "spilled milk", Blaine, but I also agree with what many of the other posters have said.
My point of view is informed by a conversation I had with Mayor Godfrey in the heat of his re-election campaign in October 2007. I am writing this from memory, so I may paraphrase, but he said "the Junction cannot fail". Not..."the Junction concept is sound" or "the Junction is going to do well".
I remember this point in the conversation because of my rebuttal. I asked him to consider the hypothetical, that the Junction would go "belly up" (my exact wording, as I recall). He reiterated that it would not. I pressed him on the point.
In my mind, it's not just that he and his team didn't consider the inevitability of economic cycles -- that's a massive, but perhaps forgivable sin. What I cannot and will not forgive is that he was warned, and did not heed the warnings. Rather, he dismissed those making the warnings with his characteristic bluster and condescension.
When considering the people who are so negative now, remember that they got to this position by being ridiculed in the recent past.
Which Republican is worse? Godfrey or Richards?
Richard Richards new school of ethics, Wow, Who would of thought that a Guy that was going to have all the old ladies that were election judges back in 1974, Have them commit perjury on the stand to make sure that his candidate would win the Election of a state Senator.
This is a guy that used Money from a robbery to pay the court fees, of another case.
Boy if this is the best the republicans can come up with as a person of ethics, I would not want to be part of there party.
Would it be interesting to ask him about all the scandals that he has been associated with.
Would it be nice if the Standard examiner would do a search of the history of the person that they think so highly of.
Remember History is truth and you can't run from it.
So lets tell the truth of the history of this guy.
Blaine Carl
right now what the city needs to do is pull in its horns and focus on making what we have in place today work. as you say no ice tower no velodrome and no golf course and hotel at the top of 36th street.
the city needs to minimize the bleeding until the economy improves. to help in that effort since the economic outlook is that we most likely will see the slow economy for at least a couple if not more like a few years the city could substancially cut back in their business development department. i.e. let a few of the high priced help go. this department has a budget of over a million dollars a year. since it will be inactive for some time why not do away with it.
Why do some people still trust the mayors judgement on financial matters? Look at the people that he chooses to support. Chris Peterson, who cannot even convince his father-in-law to support him. Gadi Leesham, filed for bankruptcy and facing additional charges in California. Val Southwick, who the mayor invested his own money with, in state prison and awaiting federal charges. There are many other examples but why trust Matthew Godfrey for any type of sound financial judgement? The late Illinois senator Everett Dirksen said it best"a few billion here, a few billion there, and pretty soon you're talking real money"
WCF - Monday, July 18, 2005:
"A helpful and attentive Weber County Forum reader submits this cartoon panel via email, and suggests that yesterday's Scott Adams cartoon may have certain "implications," shall we say... regarding current local government leadership and optimism"
Dilbert: On Leadership & Optimism
Dan,
I thank you very much for taking the time to dig into this information and present it to the rest of us so that we can get some sort of an "above sea level" view of this. Too often the waves of debt are so high, we can't possibly envision or predict exactly how low the next trough will be. So we are already blind. Not to say your article tells of some future, but I think the reality here is that many of us reading this can at least realize the massive debt and problems this city is faced with due to completely irresponsible and negligent (in my opinion) practices -or "investments" made by this current admin, to include people who were key figures in helping this whole mess come be. Lies and more lies.
I look forward to re-reading this article of yours, and trying my best to make sense of it all. I also look forward to your next chapter on it.
Much thanks.
PPK
Blaine,
I mentioned my personal investments in response to your claim that "EVERYONE" (in all-caps, no less) made investments when the economy was strong and that most of them lost.
My point was that there are two big differences between my personal investments and the city's investment of public funds in the Junction: (1) my personal investments are made at my own risk, not someone else's; and (2) the loss that I've taken on my personal investments over the last couple of years is no big deal because I wasn't counting on any short-term payoffs anyway.
Dan,
I want to expound and clarify your comment that “When a redevelopment district is created, any additional property taxes from new development in the district go to the RDA for a certain period of time. Normally this revenue is used to pay off a portion of the debt from that development.” This comment was made relative to the Series A bonds.
Actually that is only part of the function of Tax Increment Financing. The RDA funds are used to create a higher valued piece of property by improving the properties use or value, thus when the debt is satisfied the City would theoretically enjoy higher property taxes on that piece of property, thanks to the use of TIF to make the project possible. Ultimately the idea would then be to return the property to the City’s General Fund for tax collection to help run the services of the city. Each project should stand on its own financially and be operated as a separate and independent entity. This way it allows the basis for the projects to be judged as to whether they are successful or no. This allows the city to use the individual projects as learning tools for the potential next project. Each project should over time be expected to contribute to the city’s revenue stream.
Unfortunately Ogden City is using the funds from not just one project but all of the profitable RDA projects to subsidize the Junction thus none of the other projects will ever contribute to the City’s General Fund as long as the Junction is in need of help. This was not the intended mode of operation of an RDA concept but rather the abuse of the RDA concept by our city. If the city is truly getting $550,000 per year from the other RDA funded projects then this is at the cost of those funds not being returned to the General Fund as was to happen after the Tax Increment Financing concluded. This diversion of funds needs to be included in the subsidizing costs of the Junction by the City’s general Fund and you can be assured that the City will be asking for these TIF funds to be extended in their duration as well.
Additionally Dan if you will remember the City has written off $6 million dollars for each of the last two years of loans made by the City’s various General Fund departments to the RDA as no performing loans. This was in my opinion and here again against the concept of the projects operating as individual entities, to allow the city to use the funds from all of the performing projects to be used exclusively by the Junction. This $12 million dollars write off must also be added to the costs that the citizens are being asked to subsidize the Junction.
Dan,
I had to break the comment into two parts because of its size.
Relative to the Series C bonds and their $1.9 million dollar annual payment, it was never intended that the BDO funds would be used in this manner. If I recall right the city actually got in trouble with the US Government in how the city was using these fund. I think the city actually had to pay the Army something to get around the City’s misappropriation of the revenues coming from this project. The city had I believe originally earmarked those revenues to be spent on our water and sewer system. So the one million dollars a year coming from the BDO has to be added to the subsidy of the Junction.
The only way the Junction would have ever carried itself would have been if everything and I mean everything would have come together at once. I been involved in several large projects and can assure you that that never happens. What we have now is a situation where in that every day that goes by that the project is not completely built out the debt continues to grow (or in our case the city needs to continue to increase the subsidy), and the property itself old gets older, and the likelihood that it will stand on its own diminishes. The contracts with Boyer Company were sophomoric; reflecting too much arrogance in the project’s success and not enough business sense towards risk.
The city has some hard choices ahead of itself but I think the first decision should be to get a handle on this project before it ventures out to develop anything else. As someone mentioned above doubling down is never a good idea especially when you’re dealing with other peoples money or in this case with public money.
Blaine Carl
until the rda gets its house in order with the projects it already has on the books the city should stop funding it.
Ogden Resident,
I wish I knew more about Ogden's other RDA districts, and about BDO. So many questions.
As you say, there's something fishy when revenues are diverted from all the profitable RDA districts into one that apparently can't pull its own weight. My understanding is that the Legislature has permitted this only at certain times, and only for certain purposes. One of the purposes was recreation facilities, and apparently the Salomon Center qualifies. In fact, the law on diversion of RDA revenues must have been what drove the city's decision to build a recreation facility at the Junction.
I'm not aware of any push to extend the time period on the other RDA districts. My impression is that the payment schedule for the Series A bonds has been designed to accommodate the existing expiration dates on these districts.
In one respect I think your comments are incomplete. When the TIF on an RDA district expires, the taxes revert to all the applicable taxing entities--not just the city. In Ogden the largest taxing entity is the school district, followed by the city and the county.
I was aware of the $6 million writeoff in 2007 of a loan from the city to the RDA. McConkie told me that this was originally federal grant money that the city tried to use for a loan program of some sort. Are you sure that there was a second $6 million write-off? If so, please provide details.
Hey Dan,
The other RDA district is the airport where Godfrey's best buddy put a restaurant and empty buildings called the Kemp building.
Candy,
I know where all the other RDA districts are (since the city has published a map of them). But what I'd really like to have is a district-by-district report describing the financial status and expiration date of each. Any idea whether such a report exists?
What quality of Mt Ogden Park makes it an RDA district?
mono,
Good question. I believe that RDA district dates back to before the golf course was put in, when the future of the old St. Benedict's building may have been in doubt. The tax increment financing may have helped build the condos around St. Benedict's and perhaps renovate the building. By including the park in the RDA, the city must have received tax increment from the portions of the park that were sold for residential development.
As you can tell, I'm not completely sure of any of this. Can anyone out there confirm?
Dan, it seems that even the state legislature believes it right for government to spend money to provide recreation, and it seems in one case the mayor agrees, regarding the jackass center. This would be an example of words spewing from both sides of his mouth if we include the Marshall White Center and the golf course.
I'd like to point out that Blaine Carl still exhibits faulty reasoning, but forgivably perhaps, since his misconceptions are widely as well as foolishly held.
His ideas are as follows.
1. When things turn out well, it was the leader who did it.
2. When things turn out poorly, it was an unforeseeable external circumstance and not the leader's fault.
3. When those circumstances change, the leader's leadership will be vindicated.
Thus Blaine Carl claims that the JUNKshun is sound, and indeed will do well once "the economy" recovers.
But the facts are as follows.
1. A leader must anticipate the future and plan for it, both good and bad.
2. The leader is responsible for all outcomes.
3. The JUNKshun was failing, would have failed, and will fail in almost any economy because it was so poorly conceived that it was completely impossible for any other outcome. (Of course, Godfrey's cronies did take the money and did kick some back to Godfrey so the primary mission was accomplished.)
Blaine is starting to sound like he is a Godfrey apologist doing damage control. It's great that at least, like the the SE, he recognizes that the days of velodrome, ice tower, gondola, and golf course condos fantasies are over, or at least should be.
Danny, you need to READ more carefully. Nowhere did I say it was "the leader who did it;" nor did I say that it was only "an unforeseeable external circumstance and not the leaders fault." I don't believe I said the "The Junkshun is sound," either.
What I was infering was that it took MANY people to create the Junction (albeit it was the Mayor's idea and pet project, but he needed others help in developing and building it) and the economy was a least partially to blame for The Junction's lack of ANTICIPATED progress. To call The Junction a failure at this time shows that you have difficulty understanding the difference in a short term investment vs. a long term investment. Some things take time to come to fruition. Just because you might not like The Junction concept doesn;t mean it's a failure. True, it's in need of help, but it should do much better once the economy does better--just like housing (on the uprise again), Wall Street, banking, etc.
Again, read Danny, and don't credit me with words I haven't written or your interpretations of them.
I doubt I mentioned that an economic upswing would "vindicate" Godfrey. I said it should aid the financial recovery of The Junction, which is something we, as Ogden and Weber County residents, sorely need.
I fail to see how this is faulty reasoning. I feel that this is your spin on a difference of political philosphy when, in fact, it is a hope for a better financial outcome for a project that now exists, like it or not.
The whole concept of the junktion was built on a lie to begin with.
In the beginning of this long sad saga, when the city first took the plunge to buy the mall, there was a lot of discussion as to what to do with it. Some wanted to remodel it, some wanted to tear it down and start over. The mayor was the leader of the latter.
There were some "surveys" the mayor said he had taken about public desires pertaining to the mall site. Some people were supposedly interviewed at the mall and at the NewGate Mall. One of the common themes from these interviews was that people wanted an "exercise element" to the place. This was all centered around the mall strolling that had become popular with both of Ogden's malls, and that is what people were referring to when they voiced a desire for an exercise element. They wanted it walkable!
The mayor, in his true and constant manner of superior thinking and dissembling, took that element and said that the public was demanding a sports recreation complex - just like the one we ended up with - as the anchor for the new mall! It was a lie then and it is a lie now.
Later as the whole stupid concept gained steam, the Standard did two or three surveys about the mall site. Those surveys indicated that the public actually opposed by two to one the concept the mayor was pushing - the one that ended up costing the city forty million of debt to build and the one he had in his mind from way before any of this even hit the radar screens!
(I'm sure those Standard polls are buried in the WCF archive somewhere Rudi, I know they were the subject of some early WCF discussions)
The mayor and the Standard both chose to ignore those polls. The mayor, when questioned about it, dismissed the polls out of hand and said they were inferior to his superior data (his informal surveys!)
One of the original big operators that were considering the mall project was The Citi Group. A big time nationwide outfit that is part of Citi Bank I think. They bowed out of the project because they thought the concept of a bowling alley and penny arcade anchoring a mall was quite idiotic and a sure loser.
I think there might have been some other big operators that also took a pass at the concept during those early days.
Our beloved and local MoMo Boyer corporation initially took the same position and turned down participation based on the ridiculous plan that the genius mayor was now locked into.
Boyer later changed their mind and did get involved, but only after the genius mayor and the genius circle of incompetents he surrounds himself with sweetened the pot so much for Boyer that they absolutely could not lose. Boyer has no skin in the game. They have no cash invested anywhere in the whole project, yet they are getting all of their expenses paid and they will share fifty fifty in any profits that ever do get here. The tax payers of Ogden are taking 100 percent of the risk of this very risky venture, and they are only getting half the profit which may or may not exist after Boyer pays all of its own expenses - a lot of which is to itself! This "risk" is currently costing the tax payers millions and will continue to do so long into the future.
And just think, the mayor steadfastly insisted from the very beginning that the tax payers and citizens of Ogden would never ever ever ever be on the hook financially for any of the cost! The grand scheme was going to be built with free monopoly money and there was nothing to worry about.
That empty promise lasted until the last meeting of the last council. Lame duck losers that they were, they succumbed to the Mayor's sleazy back room dealing and did the big switcheroo! Yep, they went against the mayor's constant promises and their own constant promises and they stuck the poor citizens of Ogden with the whole damned and gigantic tab!
(Continued in part 2 of this message - next)
(Ozboy message, part 2)
In another life I spent eight years doing freelance work for an investment banking firm out of SLC. I would take on troubled companies that the firm had invested in and that had got into trouble. I liquidated most, litigated a bunch of them and ran a couple until they could be sold. A lot of these companies had the classic Utah Stock scams at their hearts. Of the 70 or 80 companies I had some involvement with over those years the one constant factor was how incredibly dishonest and incompetent they and their promoters were at their hearts. Lots of scams, empty promises, bogus due dilligence and endless greed. All of the hallmarks I later observed in the Godfreyite movement by the way.
I read the two contracts that exist between Ogden City and Boyer over the Junktion. they are some of the most one sided contracts I ever did look at. They gives all the power, half the profit and none of the risk to Boyer. Boyer can pretty much dictate not only what happens at the mall site, but also all the other Ogden RDA projects as well - even though they have no other involvement in most of them. They can even take a free walk completely if they want and if the situation deteriorates bad enough.
These two contracts are all the proof any logical and business savvy person would ever need to conclude that the Mayor and his incompetents are a total joke when it comes to negotiating a deal. This is the kind of deal making that would get any of them fired in any free enterprise company in the world. But then they have the tax payers money to toy with in these reckless and arrogant games they have been playing for the last few years.
I have no doubt that history will get it right and ultimately show what incompetent charlatans the Mayor and his gang really are.
Ozboy,
From what I’ve heard from others that have read the contract, it’s as you stated above, one of the most one sided contracts that’s ever been created.
I wish I could get my hands on a copy of the Boyer contract. I suspect that it’s even worst than the Salomon Center contract, which I have a copy of, if you’re interested.
I love it when a blog comes together. For the last couple of days, I've been reading the saga of the Junction that Dan S, Danny, B. Carl, and others have written. Good readin; good debate; good dialogue; interesting concepts. Some merit, some logic, and very informative.
I was wondering when Ozboy would wade in. As usual, his points are valid, informative and concise. And anti-mayorial, as it's no scret that Ozboy is not a big supporter of the mayor or his surrounding suits.
It all has made for a good read, though.
I too recall several groups that investigated the purchase and possible renovation of the old Ogden Mall, and Ozboy's correct, Citi Group, a subsidiary of Citi Bank, was one of them. But wasn't Citi Bank, if not the then one of the biggest Eastern Seaboard financial institutions, about the first bank to go bankrupt when our economy started to slide? Bad purchases of home mortgages and other irresponsible loans?
I don't know how or if that fact would have effected the old Mall, now called the Junction, but this whole mess seems to have been snakebit from the first of Ogden's old, beautiful buildings that the Dirk Administration tore down so that the Ogden City Mall, the "wave of the future" could be erected.
What a pity. This whole sordid affair has been a blight on Ogden. Any ideas on where we go from here?
Joe Jones
you obviously have been following the dialog. where do you think the city should go from here.
Oz,
I haven't seen the contract with Boyer, but I think I understand the basics: The city didn't spend a penny to actually put up any of the Boyer buildings (Megaplex, Wells Fargo, restaurants, smaller residential and retail), though it did commit to putting in the streets and fixing up and maintaining the parking garage. If and when Boyer makes a net profit on its buildings, the city gets half.
So I don't understand what you mean when you say Boyer has no risk. If not, then who paid for all those buildings? Nor do I understand in what sense Boyer can dictate what happens in the other RDA districts, although I do understand how the tax increment from those districts is being used to pay off the Series a bonds. Finally, I don't understand why Boyer would walk away from all those nice new buildings it put up.
Joe,
I agree that the blame for the Junction's woes goes all the way back to the decision to build the old mall. But I wasn't here then so I can't say that with much authority.
I have another article in the pipeline that explains the Junction's financial situation in much more detail. Next, if I have the stamina, I'll attempt a third article that discusses what our options are from here.
Dan
There were two agreements between the city and Boyer entered into in December 2005. One was a Development agreement that defined the relationship as it pertains to the Junction land and its development. The other was a lease agreement that went hand in hand with the development agreement. It defined the terms between the city and Boyer as it pertains to the long term lease and control of the finished project.
Boyer has no financial risk in the project. The buildings were all financed by outside lenders on an individual basis. In the case of the theater the building loan was leveraged against Miller's lease. The Eberhart building was financed internally and was seperate from the other sub projects.
Under the development agreement the RDA owned land under the buildings could be pledged to collateralize the building loans. I assume they were. Boyer could also, at its sole discretion, sell off or lease any of the underlying RDA land it wanted.
The whole damned thing was done with borrowed money. The only people taking any risk are the tax payers of Ogden and Weber County.
It is doubtful that Boyer will ever show a net profit on their buildings until they are completely occupied. Before they show a profit the mortgages will have to be paid on all the buildings rather they are empty or not, and all expenses will have to be covered, including Boyer's executive salary burden along with their peon wages and burdens.
As far as Boyer dictating terms with all of the city's other RDA projects - there is a clause in the development agreement wherein Boyer, again at their sole discretion, has unilateral veto power over any commercial or retail contracts the city enters into in any of the RDA project areas until Boyer has completed 100,000 square feet of commercial space in the Junction and rented 80% of it.
If all those nice buildings Boyer put up became a huge financial black hole, Boyer could - at its sole discretion - walk away from it all and let the city tax payers and the lenders work it out.
I have copies of both those agreements by the way, and you are welcome to peruse them if you want. I haven't looked at them for several years but I know where they are and can retrieve them quickly if need be.
Oz,
Lemme see if I have this straight: You're saying that if Boyer walked away, the lenders who financed the buildings would have a claim to take possession not only of the buildings, but of the RDA-owned land under them?
Given the current state of things, what do you think the chances are that Boyer will try to get out of the Junction? The theater and restaurants seem to be doing well, but the rest of their buildings are still mostly unoccupied.
I guess I would like to see those contracts.
Dan
Yes, if Boyer did default and take a hike, and if they in fact did pledge the underlying RDA land as collateral, then the lenders could take possession of that land as well as the buildings Boyer put up.
That "right" was given to Boyer in the Lease Agreement dated 13 Dec 05. I will copy the pertinent chapter and verse:
Section 12 - Tenant's Financing
12b Pledge of Leasehold (page 22)
"With the Approval of Landlord (Ogden RDA) Tenant (Boyer) shall have the right, at any time and from time to time, to pledge or encumber to any Lender a portion or all of the Leased Premises as collateral security for a loan."
So the question of how much skin Boyer has in the game depends on if they exercised the "right" to pledge the land in their subsequent building loans. I rather suspect they did, and I see no reason why the RDA would not have gone along with it.
I think things would really have to collapse before Boyer actually walked away from this fiasco. Remember, with no financial exposure to speak of it would take a whole lot for them to take a hike. Besides, all the expenses, overhead, salaries and DEBT SERVICE has to come out of any rent income on the buildings BEFORE Ogden's RDA even has a chance to get any money back. That leaves a huge cushion for Boyer before it becomes untenable.
Even as losses accrue, including debt service, Boyer is really not gambling anything because all of the past and current expenses (losses) will have to be paid back from any eventual income before the tax payers (risk takers) of Ogden see one lousy dime from this boondoggle.
I have the contracts in hand, email me if you want me to lend them to you. I will be in Ogden this evening between 6 & 8, maybe I could get them to you then?
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