Monday, July 19, 2010

Standard-Examiner: Plenty of Work Left to Make New Hotel a Reality

For reasons which should be fairly obvious, we believe this is a project which must be closely watched

Ace Reporter Schwebke gets back into the groove on the Junction Hotel Project story this morning with a writeup which reveals a few more facts and opinions regarding the proposed financing for this project:
Plenty of work left to make new hotel a reality
Among the most interesting new fact revelations are these:
1) Specifically, the Ogden Redevelopment Agency has been allocated on behalf of Sequoia Development about $9 million in Recovery Zone Facility Bonds for hotel construction.
2) The state also has allocated the RDA $3 million in Recovery Zone Economic Development Bonds for construction of the parking garage that would be owned by the city.
Up until now, Mr. Schwebke's reports have been rather vague about the nature of this new proposed bonding; but with the terminology we've highlighted above, we're now able to refer to online documents to find out a little more about the basic mechanics of this proposed bonding:
Recovery Zone Bonds - Low Cost Financing Options
Notably, both Recovery Zone Facility Bonds and Recovery Zone Economic Development Bonds are bonds which are issued by municipal entities, as borrowers. This of course clears up the question about who the primary obligor would be in this proposed transaction. Yes, gentle readers, it's the Ogden RDA, the issuer of these bonds, which will be ultimately "on the hook" if and when this project goes forward.

Having made that observation, we'll refer you to this Richard McConkie quote:
The RDA will have no obligation to pay off the bonds if Sequoia Development defaults, said Richard McConkie, city director of community and economic development. If that occurs the lender could sell the hotel to recover the debt, he said.
With all due respect to Mr. McConkie, we do not believe this above statement accurately squares with the true nature of this proposed bonding. What happens, we ask, if Seqouia were to build out the project and default, for instance? While it's true that the lender in this transaction (the bond holder) would have recourse to the property security (the hotel), what happens if there's a deficiency in the property's selling price after foreclosure? Who would then be "on hook" for that deficiency?

The Ogden RDA, that's who.

Although the facts still remain fuzzy at this early stage of this proposed project, we believe this is a project which must be closely watched by Ogden City taxpayers. The last time that we were promised the taxpayers would not be "on the hook" for an ambitious Boss Godfrey Junction project, it didn't quite work out as advertised, did it?

Who will be the first to comment?

20 comments:

Britney Spears said...

Honestly, I think we should just trust our Ogden City Mayor in every decision that he makes and we should just support that.

googleboy said...

Great admonition, Rudy!

Idiom: Fool me once, shame on you; fool me twice, shame on me.

Scared shitless the council believes said...

Godfrey "if it goes tits up we just sell it so we don't have to pay for it".

ozboy said...

Traditionally there were two kinds of "Municipal Bonds" that were tax exempt.(The bond holder didn't have to pay taxes on the interest income)

They were: General Obligation Bonds which were the most secure as they were backed up by the property owners of the jurisdiction issuing the bonds - ie. Ogden City, and could only be approved by a public vote. The interest rates on these bonds were the lowest because they offered the most security.

Then there were "Revenue Bonds" which were issued by private entities under the sponsorship of a political jurisdiction. The repayment of these bonds were pegged to the revenue generated by the enterprise financed by said bonds. They qualified for tax exempt status - which makes borrowing costs a lot lower - because they are supposed to be tied into some underlying public good - including economic development projects.

With the huge corrupt jumble that is the current financial market - thanks to 10 years of deregulation and unfettered greed - there could be any number of fancy, but treacherous, ways of "bonding" that true masters of the universe like Magic Matt Godfrey have nightly visions of.

Perhaps they are talking about some version of "Revenue bonds" wherein the RDA and tax paying citizens aren't on the hook for these millions.

Given Godfrey's track record, I doubt if he could in fact do a deal that didn't involve tax payer guarantees. He certainly has never done one yet that I have heard about.

Curmudgeon said...

In addition to the bonding questions [who's on the hook if the project fails], I found the following interesting:

"Kevin Ludlow, president of Sandy-based Sequoia Development Group, said that in the coming months his company will focus on completing a detailed feasibility study on the proposed four-story, 125-room extended stay hotel at the northwest corner of 23rd Street and Washington Boulevard.

Two things might be worth noting: (a) Sequoia is planning a "detailed feasibility study" because, I imagine, it needs to attract investors who will front the necessary millions to complete the project. Imagine that. A feasibility study, a detailed one, to be completed before money is committed. Not the Mayor's preferred MO as we know from his flatland gondola fiasco [commitment first, feasibility study second]. And (b) seems then that the state has committed itself to bond-issuing before it has seen a detailed analysis of the commercial feasibility of the project it's bonding for.

I know zip about commercial real estate procedures, and perhaps this is being done in the usual order [commitment of public bonding first, feasibility study second]. I can certainly understand why private investors being asked to front private money for the hotel would want to see a good case made for its being a commercially viable project first. But shouldn't the public bonding agencies want to see that up front too?

churl said...

Ogden does not need more hotel rooms, period.

Danny said...

. . . so it turns out it is exactly as I said.

To clear it up some more, the state doesn't care about any feasibility study, since it's not on the hook at all.

And Sequoia's feasibility study will be heavily tilted to convince people, including the city council, to go along.

Jobs! Revenue! What are we waiting for! Oh, it is all so easy! Bond for a motel! Pure genius! Pure innovation!

Ogden taxpayers will be on the hook, pure and simple.

Just as I said some time ago.

Richard McConkie, as well as being a moron, is also a complete liar, when he says taxpayers will not be on the hook.

Hey McConkie, chrome domed piece of crap, if that's so, put it in the contract, explicitly, that under no circumstances will the city pay debt or interest on the bond under any circumstances.

No, there are reasons you can't do that, right? Yeah. Burn in hell liars and fools who go for this.

ozboy said...

Danny

All "feasibility studies" are scams. Have you ever, ever, ever heard of a local governmental entity commissioning a "feasibility study" that didn't get back the confirmation that yes indeed, this goof ball scheme is "feasible". Have you ever heard of a "feasibility study" that came back as "NOT feasible".

The whole governmental "Studies" game is a crock of crap.

In reading the article on this new bonding scheme, It appears that the bonds are not tax exempt, but the Feds pay 45% of the interest which makes it an even cheaper way for cities to raise money than the tax exempt route. Other than that, it appears that the city has to still put the proposed project up for scrutiny and compete for money in the big casino on wall street. That means that there has to be collateral, and no where did I see in the attached article that said Uncle Sam was guaranteeing the bonds or buying them- just paying half the interest.

So perhaps the answer to the question "just who picks up the tab if the damn project busts out" will depend upon how good a deal they can present to the market place. If the project really did have legs on its own merits, then maybe they could sell bonds without the tax payers co-signing the contract.

I would be awfully surprised if any deal engineered by Matt Godfrey could ever come close to getting conventional financing - without tax payer guarantees. The dood is a total loser in the deal making world.

Fireman Joe said...

Oz-Didn't the first feasibility study on The Junction say it was a loser, so another study was done to get the wanted results?

Danny said...

Oz,

This speculation is unnecessary.

The bonds will be let by the RDA (Ogden City). The residual financing mentioned is in ADDITION to that.

These bonds have the feature of being either tax exempt, or of the feds picking up part of the tab. The reason is to get a lower interest rate, to encourage debt.

This deal will be 100% entangled with Ogden City on the hook. Count on it.

The unholy, lying, corrupt slezebags in Ogden City will be working OT to think of lies both for why the city will not be on the hook as well as lies for why nobody can review the final documents besides the duped ninnys on the city council.

vallyn said...

This is my first blog post here and I have to say, there are some really intelligent bloggers in this forum. I think some of you would make excellent city leaders.

Before today I never paid much attention to what people say about Mayor Godfrey, and it's not because I don't care. It's because I usually hold all matters of government, city or otherwise, in equal disdain. My feeling on the subject is that all political officials are dishonest, self-important fiends that put up a good facade come election time, then reveal their true evil tactics once in office.

But what really amazes me is how many people I see complaining about Godfrey's abilities (or lack thereof), yet this fiend keeps getting reelected. I'm not insinuating that every participant in this forum votes for him, but he isn't putting himself there, WE are. Unless the citizens of Ogden band together and have the cajones to elect someone more to our benefit, things are NEVER going to change, or even have prospects of getting any better.

No disrespect intended to anyone here.

OgdenLover said...

Vallyn,
452 stolen votes (out of 14,000) put Godfrey in office last time. All the construction he backs with city funds guarantees him huge campaign donations from real estate and construction groups. He raised $80K compared to a fraction of that for his opponent who wouldn't take money from big corporations. His Bishop says he walks on water, which is apparently enough for many in this city.

Wagner said...

In politics, there is no such a thing as a stolen election.

Read your Machiavelli: there are only winners and dead men.

Curmudgeon said...

OL:

It was a close election, but you'd be hard put, I think, to establish that the winning margin consisted of "stolen" votes. There were the votes that had to be cast provisionally when the Mayor's supporters began challenging voters willy nilly at the polls to prevent their votes from being immediately tallied --- as a result of which shoddy behavior, the legislature changed the law to prevent Hizzonah's minions, or anyone else, from doing it again. But the disputed votes were not sufficient to have changed the outcome.

The Mayor was well funded in his campaign. He had several well-heeled interest groups in his corner, and he was running with an experienced and proven campaign organization, challenged by a first-time candidate with limited funding and a put-together-on-the-fly campaign organization. And they almost took him down. The Mayor just barely hung on. But he did hang on.

Add to that the fact that most Ogdenites don't follow city elections, most are not policy wonks such as WCF readers/posters are. Most city residents just don't much give a damn about city elections without a first rate scandal or disaster to catch their eye.

He won. By an eyelash, but he won, however much you or I might wish he had not.

Dan S. said...

Godfrey raised $228,000 in the 2007 campaign and spent $182,000.

Van Hooser raised $64,000 and spent $70,000.

Dan S. said...

Also, OgdenLover, I don't think it's correct to say that Van Hooser "wouldn't take money from big corporations". She took $5000 from Staker Parson, a company that gave Godfrey twice as much but was apparently trying to hedge its bets. But mostly, Van Hooser just wasn't in a position to solicit large contributions from commercial interests.

PPK said...

This is a fun little read...sorry, off the topic of this thread. Enjoy.

California is basically bankrupt because why???

vallyn said...

Ogden Lover, thanks for the info...I had suspected as much about the "His Bishop says he walks on water, which is apparently enough for many in this city." comment. So basically, in a manner of speaking, Godfrey did put himself there, along with the help of a few hundred of his closest Sunday friends. That just goes to show that separation of church and state is SO overrated. In THIS state anyway.

vallyn said...

Wagner, very well said.

Hindman said...

Just my two cents on this old news. I so wanted Van Hooser to be a good candidate for mayor, but she just wasn't. I know how much I dislike Godfrey as mayor but every time I heard Susie talk she spent too much time 'attacking' Godfrey and so little time telling us her platform I just could not vote for her.
Now that she is a CC member I don't see anything special about her, or any council members for that matter. They all just tend to roll over and yes with Godfrey.

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