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:
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.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:
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.
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?
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