Stehly’s 2nd attempt to repeal downtown parking ramp may not happen

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Stehly tried to get another councilor to sign onto the repeal, but so far has been unsuccessful;

AN ORDINANCE OF THE CITY OF SIOUX FALLS, SD (THE “CITY”) REPEALING ORDINANCE NO. 119-17 AUTHORIZING THE ISSUANCE OF ITS SALES TAX REVENUE BONDS AND OTHER ACTIONS RELATED THERETO.

The city attorney’s office has said that Stehly has the legal right to propose the repeal.

What is frustrating about the Downtown Parking Ramp is the obvious, the developer involved, Legacy is being sued for wrongful death and a whole host of other stuff. Why would the city want to be involved with an entity that is facing such serious charges and fines?

Stehly spoke about it yesterday at the informational, imploring her fellow councilors to repeal the bonds until the legal matters are settled. The only response Stehly got was from councilor Rolfing who offered, “At least the city isn’t be sued.”

Wow.

And some wonder why such idiotic decisions are made. Just look to the decision makers.

Posted in: Developers, Development, Downtown Sioux Falls, Legacy Developments, Sioux Falls

The Downtown Parking Ramp controversy was always about more than just Hultgren

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As many critics of the deal pointed out, besides the enormous price-tag and sketchy lease deal, we felt Legacy’s involvement was troublesome. Well so do the families that were affected by the Copper Lounge building collapse;

John J. McMahon, Ethan’s father, and John F. McMahon, his brother, contend in their lawsuits that Hultgren Construction performed its construction and demolition activities “under a trial-by-error mentality.” Besides Hultgren Construction, the lawsuit also names Legacy Developments & Consulting Co., and Rise Structural Associates, the project engineer. Three limited liability companies – Boomerang, CLP and Olympia – that had ownership stakes in the project are also named.

The lawsuits contend that Hultgren Construction and Legacy Developments were closely related entities. Aaron Hultgren, Hultgren Construction’s president, was also the director of development and operations for Legacy.

“By using a captive construction company in Hultgren Construction instead of hiring a reputable, third-party construction contractor, Legacy was able to cut costs and save substantial amounts of money on its development projects,” the lawsuits say.

We have said all along that Legacy and Hultgren were working in tandem on the project. To single out just Aaron Hultgren as the ultimate culprit isn’t right. We had further proof of this when we found out about the illegal asbestos removal.

Why is a majority of the city council and city hall still supporting this project? That is the grand mystery.

The bonds are not set to sell until April. With this recent news I hope the council reconsiders once again if it is a good idea to go into business with this developer on this project or future projects. Taxpayers should not be held hostage by a city government that refuses to take a hard and reasonable look at this situation. It wreaks of corruption.

Posted in: Developers, Development, Downtown Sioux Falls, Legacy Developments, Sioux Falls

Sioux Falls City Council MUST repeal Downtown Parking Ramp contract

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Councilor Stehly announced yesterday that she is offering a repeal of the DT parking ramp at the January 2, 2018 council meeting.

The council, ALL of them, need to vote for this repeal. It simply is the right thing to do. The council only needs 6 votes to stop a VETO.

The contract should have not been approved to begin with. We already knew about the OSHA fines levied against Mr. Hultgren. We had a dubious 80 year lease, and the 4-6 million in ‘soft costs’ the city’s taxpayers have to pay for. As former councilor Greg Jamison recently said on the Good Ship Lalley Pop show, it’s a great deal for the developer, not so good for the taxpayers. This is a prime piece of DT property, it should come with a prime price that is beneficial to the city. I truly believe we can find another developer with integrity to partner with.

As we have learned over the past week or so, there is now a criminal investigation into Mr. Hultgren, his defunct construction company and Legacy. There was also an environmental fine levied against Hultgren that was never paid because they said they didn’t have the money. The council probably didn’t know this information before the vote but they know now.

So why didn’t the administration tell them? They knew about the landfill fines they also had to have known about the Federal Criminal Investigation that was filed in November. On Wednesday Mayor Huether told Belfrage on his radio show that the city had to turn over videos to the investigators.

Why didn’t the administration tell the council about the fines and investigation?

Why didn’t the developer tell the council about the possible litigation? Seems a little sneaky to me.

What I find ironic is that if Hultgren and Legacy can’t even pay a $20K fine, how do they expect to get $30 million in investors? Also, who would invest with someone who is facing serious criminal charges with possible Federal prison time? You would have to be completely bonkers or incredibly f’ing stupid to invest with these people.

I also find it a little ironic that the council didn’t ask for testimony from the developers at the initial vote of this project. In fact besides Stehly offering amendments, NO councilor discussed the pros or cons of this project that night. This same council will debate for 45 minutes about a church electronic sign, chew out C-Store owners over alcohol stings and pursue limiting malt beverage sales in poor neighborhoods, but doing business with a possible criminal who can’t even pay it’s fines gets passed without any debate or discussion.

Pathetic.

The council will now have the chance to take this all back and redeem themselves. I hope ALL eight of them do a lot of soul searching over the holiday season and come to a proper conclusion - Stopping the project – there really isn’t any other options at this point.

Posted in: Developers, Development, Downtown Sioux Falls, SF City Council, Sioux Falls

UPDATE: Proposed Downtown Parking Ramp; A BAD DEAL for taxpayers

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Trust me, I’m still baffled why possibly six city councilors and the mayor support this ramp with so many strikes against it. I am not one least bit surprised though that the development community and their upper crust friends support this, if this passes it will set a precedent paving the way for them to cut the same deals.

The laundry list of issues are obvious; A rock bottom, 80 year lease. Taxpayers covering over $6 million in ‘soft costs’ that should be either shared or paid entirely by the developer. Not enough parking spots (we will only net beween 290-390) for the price we are paying. No clear explanation of rate increases and how the bond will be paid back besides the detrimental idea of using the 2nd Penny as collateral. Not even an inkling of who the hotel franchise might be, the retailers or ‘possible’ private investors – lack of transparency. And lastly, the most egregious, we are possibly signing a contract with the person who is responsible, according to OSHA’s levied fines, for the Copper Lounge collapse making him an obvious legal liability.

But what is even more troublesome is the ‘deal’ we cut for the taxpayers. If we are going into a Private/Public partnership, shouldn’t we be negotiating a good deal for the taxpayers instead of the other way around? Especially after we have spent almost $1 million on engineering, architectural and legal fees, not mention this will be built on OUR land.

This has to be one of the most poorly constructed proposals the city has ever presented in the past decade, and I really mean that. As a councilor, I would be ashamed and embarrassed to vote for such an obvious scam.

If the council thinks they heard a lot of vitriol and rancor from the public before the vote, if they vote for this, I think the second round of frustration will be a lot worse.

Good Luck tonight, you are going to need it.

UPDATE: I just got a tip from someone who works in the hotel/motel industry in SD that the hotel partner will most likely be a ‘select service’ provider (similar to a Homewood Suites). This is NOT considered a FULL SERVICE Hotel. So I asked him if Legacy (and the city) probably knew who that was provider was, and that it was most likely. So I wondered why they have not said who it was yet, and encouraged a city councilor to ask tonight.

So I also asked this person about the lease agreement. They basically said what we have all known for awhile that it was a heckuva a deal and really unheard of (one time payment for 80 years). Like I said, we are getting hosed on this all the way around.

Posted in: Developers, Development, Downtown Sioux Falls, SF City Council, Sioux Falls

It’s NO misconception we are getting hosed on the Downtown Parking Ramp

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God Bless Him! You can’t ever deny that Councilor Neitzert really digs in his heels when it comes to issues facing our city and does his research. He sent out this press release explaining the 12 misconceptions of the parking ramp debate. While I agree with him on some of these, the problem is that Greg gets so lost in the weeds on the finer details he misses the ‘Big Picture’ and doesn’t answer many key questions, mainly “Why are we subsidizing the building of the Hotel?” AND “Why are we signing a contract with Aaron Hultgren before his OSHA fines and legal problems are settled?”

But let’s take a finer look at what Mr. Neitzert came up with;

Misconception #1: The parking ramp cost has increased

Reality: This is the first time we have a specific project with a detailed design with a concrete number we can be confident in.  All previous estimates were just that – estimates based on theoretical assumptions and ballpark figures for planning purposes only, and many only included construction only costs.  Comparing this final project plan to previous conceptual projects is not appropriate.

While that is true, many want to know why some of these ‘ballpark’ figures were off by over 50%? That is either lazy or incompetent government at it’s worst.

Misconception #2: Tax dollars will be used to fund the project

Reality: The parking division, like our water, sewer, and landfill divisions, is an enterprise fund.  This means it gets 100% of its funding from user fees – in the case of the parking division parking meters, leases on ramps and parking lots, and fines.  Likewise, 100% of its expenditures come from user fees.  No general sales tax or property tax dollars can be used to fund the system.  Your property and sales tax dollars will NOT pay for this ramp.

True, the bonds will be paid for by user fees (and the 2nd penny if the enterprise fund runs low). But the real misconception here is that DT employers are going to be able to just float or eat those additional costs for parking for their employees. Those costs will be passed onto their consumers in higher prices for their products and services. All costs get passed on. It’s the left pocket, right pocket argument, is it a tax or a fee? IMO, any time government charges you for a service, that’s a tax.

Misconception #3: Rates for parking meters and leases of parking will have to be increased to pay for this ramp

Reality: Rates were already adjusted two years ago so that the parking enterprise collects enough revenue to fund operations, repair and maintenance, and capital cost to replace or add new parking ramps.

Greg must have missed the email from the council’s legislative and budget analyst showing that rates will be increased over the next 10 years. Maybe he needs to check his email box.

Misconception #4: The parking division cannot afford the debt service on this ramp

Reality: The parking division has no debt currently.  Stress testing scenarios and a detailed financial analysis have been performed on the system.  Even with a loss of major tenant’s downtown, the parking fund can make the debt service payment, maintain a cash reserve, fund operations, and continue repair and maintenance on existing ramps and parking lots.

If the parking division can handle the debt on their own, why are we using the 2nd Penny as collateral?

Misconception #5: The investors in this project are being kept secret

Reality: The public portion of the ramp is being financed with bonds that will be sold on the open market.  The private portion will be financed by investors and banking institutions that the developer must obtain.  When we enter partnerships with private firms, award bids for major road and sewer projects, or enter into contracts with private entities, we know who the winning firm is.  However, we do not know all of the investors, shareholders, or part-owners in those entities.  This is not something we obtain as a matter of course.  The city does not and will not know who the investors are in the private portion.  The city cannot keep something secret that it doesn’t know itself.

I can partially agree with Greg on this one and I understand his argument to an extent. The difference is 1) we are subsidizing this developer by at least $6 million on this project unlike a road project 2) Of the investors listed (4 guarantors) one of them is contesting $200K in fines from OSHA for the Copper Lounge collapse. I guess I’m more concerned about the liability of Mr. Hultgren than I am of the UNKNOWN investors.

Misconception #6: The City is paying for private development

Reality: The development agreement which runs over 100 pages stipulates in very specific detail who is responsible for what.  The city will construct the ramp, and the private entity will construct their private portion.  The developer is paying a portion of the storm drainage work, which both the ramp and private development will benefit from.  The developer is paying for the incremental share of the cost for the foundation which must be larger to support the hotel on top of the parking ramp.  The city is not paying or subsidizing the private development.

While it may be true that the developer is sharing ‘some’ costs, it is a very big stretch to say they are sharing all of the soft costs, because they are not (that has already been admitted by councilor Neitzert). It’s obvious in the price tag of this project and the number of spaces we are getting that we are paying a much bigger share of the ramp than what we should be. He can call it whatever he wants to, but I call that subsidizing the project.

Misconception #7: We are building a ramp for a private developer

Reality: All of the parking spaces will be publicly owned.  The developer will lease spaces like anyone else – at market rate.  The developer does not get any free or reduced price spaces.  The public will be able to lease or use spaces in this ramp, because they are owned by the city.

Not sure if this has ever been a misconception or even a concern. It’s a given. The concern is we are not getting enough (public) spaces for what we are paying.

Misconception #8: We are building a foundation for a private developer

Reality: The developer is paying for their share of the foundation, specifically the increased cost of the foundation to support the hotel on top of the ramp.

Can we see those numbers broken down? While I think they may be kicking in a portion, I don’t think they are truly sharing 50% of those costs. As I mentioned above, the high price tag for this ramp blatantly shows we are subsidizing either the developer or the construction company, and my money is on the developer.

Misconception #9: The developer is paying $1,041 dollars a month to lease our land

Reality: The development agreement is not a month to month lease and the developer is not obtaining exclusive use of the parcel.  It is a lump-sum payment based on current market value and appraisal for the rights to lease the air above the ramp and the portion of our city property in front of the ramp where the private commercial development will sit.  The appraisal takes several factors into account including the fact that the city is still able to use the parcel to its fullest potential for a parking ramp and the increased cost for the developer to build on top of a structure instead of bare ground.  The city will receive 1 million dollars in three portions before, during, and upon completion of the private development.  This lump sum payment takes into account the cost of the increased foundation that must be built to support the hotel and the fair market value of the air rights and partial use of the parcel in front of the parking ramp.

If you do the math, the lease payment does come to $1,041 per month. But that is neither here nor there when you look at the bigger deal. This is the first time the city has gone into a lease agreement like this of a one-time payment for 80 years. Not only is it unusual and poorly negotiated by the city, by allowing this kind of lease to be setup we are setting a precedent for other private businesses that want to lease from the city. I can here it already, “I want the Legacy lease deal.”

Misconception #10: We are only getting 390, 270, or X parking spaces

Reality: The ramp is projected to have 525 spaces.  All of the current spaces on the surface lot we are building on will be replaced with spaces in the ramp.  While the net increase in spaces will be about 390 (525 – 135 current surface parking spaces), the total number of spaces is 525.

So what was the misconception?

Misconception #11: We are not building enough spaces because we are allowing a developer to build on top of our ramp

Reality: We are building enough spaces to satisfy projected demand for the next decade.  Regardless of whether something is built on top of our ramp or not, we would not build any higher than we are building our ramp.  We also cannot go any farther horizontally.  Even if there was no private development, we would not build the ramp any larger or higher.

We are not building enough spaces for the value we are getting. But that has nothing to do with the size of the lot or the height of the ramp, it has to do with this NOT being the right plan. We should be getting 600 Public Parking spots for around $13-15 million. Instead we are getting 2/3rds that for $20 million. Having this partnership with a private developer is actually detrimental to our parking needs downtown. We would be better off and get more value and space building the ramp on our own. The city’s job, especially with an enterprise fund (sewer/water/parking) is to provide a service from a fee/tax. It is not the responsibility of an enterprise fund to subsidize private economic development. One of the reasons a partnership like this has probably never been done before, because it simply isn’t a good deal for the taxpayers.

Misconception #12: We are paying twice the national average for this parking ramp

Reality: The price for this ramp is approximately $26,000 per space using the standard construction cost only number.  The national median cost of a parking ramp per space is $20,000.  The standard median parking ramp for purposes of comparison is a basic bare bones ramp.  Our cost is slightly more because we are adding features and amenities either by code requirement (fire suppression systems) or for user comfort and increased service levels (example: wider drive aisles and parking spaces).  The newspaper article that stated this ramp would cost twice the national median price was based on an apples-oranges comparison of our total project cost (including construction, site prep, financing, debt reserve, architectural, engineering, and other costs) to the national median cost which includes ONLY the construction cost.

When San Franciso and LA can build EARTHQUAKE proof parking ramps for cheaper than we can, you have to question the price tag. As I said above, it isn’t a misconception, it’s pretty obvious with all these extra soft costs, etc., we are subsidizing the building of the hotel AND building them a Cadillac parking ramp. With the mention of the fire suppression system my guess is that the hotel’s portion of the ramp will be enclosed and heated. Still waiting for them to spring this on us, of course, after the contract is approved.

Like I said, many of the councilors, the mayor and his staff are missing the big picture on this project. It’s too damn expensive, it doesn’t provide enough public parking and we are signing the contract with a person who is a major legal liability. Argue about foundations and investors all you want. The simple fact is we are getting HOSED on this deal.

Posted in: Developers, Development, Downtown Sioux Falls, Greg Neitzert, SF City Council, Sioux Falls