I am writing this as a New Brighton resident with concerns about the Northwest Quadrant redevelopment project. About six years ago when the City's consultants provided "cash flow" projections, I brought two prominent developers to the site to get their opinions of the viability of the project. I told then-city manager Matt Fulton of the developers' opinions: one stated that the project was too dense. The other did not feel that we would receive the high-end dollar projections on the townhomes due to the proximity of the two freeways and the noise associated with these freeways.
Let me make an analogy of the density issue. At The Lakes development in Blaine, the project has a density of approximately 9 units per acre. The density at the Northwest Quadrant is at 15 units per acre. To me this would be like backing out of your garage and into your neighbor's living room. However, the City decided to proceed with these cash flow projections.
The city awarded the initial development agreements to two excellent developers. After 18 months of sales efforts, only 17 units had an indication of interest for pre-sales, therefore, this was not enough in pre-sales for the developers to draw down on their bank financing commitments. In this same time frame the city took $10.7 million out of surplus from other TIF districts and put the money into the Northwest Quadrant in the form of infrastructure such as roads, light poles, curbs, etc.
The City then purchased the Midwest Asphalt property for approximately $19 million on a non-contingent basis. With commercial purchase agreements in Minnesota it is normal to include environmental testing and inspection clauses. Why is this important? Answer, because if a property is found to be environmentally contaminated, the purchaser faces a potential unlimited liability to clean it up. I asked why the City waived its right to test and was told, "if we had done the testing, Midwest Asphalt would not have sold us the property."
Under the agreement with Midwest Asphalt, Midwest was to stop operations, and they did, and then Midwest proceeded to move a short distance north to Bel Air Properties and again they commenced with operations. Also, within this time frame the State of Minnesota stated that the Midwest Asphalt property was contaminated and had to be cleaned up before any development could take place. In 2008 the City of New Brighton hired Bel Air Excavating to do the cleanup of the Midwest Asphalt property.
The City is recently taking great pride in going to the Legislature to get permission for the pooling of our funds. This simply means being able to co-mingle funds - not a good thing as it makes it easier to obfuscate the performance of the individual Tax Increment Districts, no doubt a goal the City desires particularly as it relates to the Northwest Quadrant.
My question to all our residents is this: "Why did the City ever take on the role of developer and banker, and expose the taxpayer to such a risk?" We have approximately 33 TIF districts in New Brighton and I believe the City of St. Paul has 17.
In conclusion, we are currently $100 million in debt and have sold two commercial lots. We are exposed to an unlimited environmental cleanup liability on contaminated sites. Finally, the City now has permission to co-mingle funds making it harder to track the accounting by project. I feel that this is a total breach of fiduciary responsibility.
Dennis Flahave
New Brighton Resident/Economic Development Commissioner
