Another City Center II Issue

Additional Deliberations:

I took the following letter to the City Clerks' office today, asking that it be entered into the public record for the May 5, 2009, Council meeting. These few short paragraphs were not part of that letter, but for this Public Response posting, I'd like to add this brief introduction:

This letter is of immediate importance due to the fact that the DDA is poised to spend over $5 million for the purchase of properties on Evergreen, slated for the City Center II parking garage.

I want to make it very clear that I am not opposed to developing this area --I was one of the three people who submitted alternative plans-- but I am opposed to spending tens of millions of dollars on a parking garage to service a project that will never be built (the developer has not secured the funding to see this project to completion --and probably never will due to the simple fact that he is in court facing judgments totaling at least $28 million). The letter follows:


May 5, 2009

Phil Bellfy
513 Dorothy Lane

I ask that the following be entered into the public record:



EAST LANSING CITY COUNCIL APPEARS TO HAVE ACTED IN VIOLATION OF SECTION 4.8.a OF THE CITY CHARTER.

Section 4.8 of the City Charter reads:

4.8. Restriction on Powers of the Council.
a. The Council shall not have the power to contract with ... any person who is in default to the City, except any contract to cure the default. (emphasis added)

For clarity, I am providing legal definitions for a few terms that appear in this Charter Section.

First: contract --an agreement with specific terms between two or more persons or entities.
Second: person --a corporation or company treated as having the rights and obligations of a person (I would suggest that paying one's property taxes is an obligation under any definition).
Third: default --the failure to make a payment when due.

The City of East Lansing originally signed a Development Agreement (a contract) with the “City Center Two Project, a Limited Liability Company,” on July 15, 2008. That contract was extended, again, on March 24, 2009.

On July 15, 2008, the date the contract was first signed, CADA Investment Group, a subsidiary of Strathmore Development Co. (as is City Center Two Project), was in default to the city of East Lansing for at least $175,000, the sum of the unpaid taxes for their building at 100 W. Grand River for the tax years 2005, 2006, and 2007. Unpaid taxes on 100 W. Grand River for the 2008 tax year has increased that tax default on that one building to over $224,000.

Furthermore, the City Center Two Project, corporate owner of the properties at 341 and 345 Evergreen Ave., and 124-140 W. Grand River, is in default to the city for an additional $112,000 in over-due property taxes.

In total, the Limited Liability Companies owning property described in the City Center II Development Agreement, are in default for taxes totaling over $336,000.

I have included copies of the relevant tax records from the city's “Internet Services” property information website (for the Public Response version of this “open letter,” I direct the reader to:
Property Information to access those documents). I also include a summary table of those tax defaults here:


ADDRESS OWNER AMOUNT DUE
100 W. Grand River CADA Investment Group $224,063.08
124 W. Grand River City Center Two Project, LLC $15,444.72
128 W. Grand River City Center Two Project, LLC $5,846.73
130 W. Grand River City Center Two Project, LLC $6,385.26
136 W. Grand River City Center Two Project, LLC $49,641.32
140 W. Grand River City Center Two Project, LLC $6,308.83
341-345 Evergreen Road City Center Two Project, LLC $34,792.96

TOTAL: $336, 174.07


It is my contention that the Council was expressly prohibited from signing a Development Agreement with the City Center Two Project, LLC, due to the simple fact that Section 4.8.a. of the City Charter expressly prohibits the Council from entering into such an agreement with an entity that owes the city money. I reprint that section, here, for clarity:

4.8. Restriction on Powers of the Council.
a. The Council shall not have the power to contract with ... any person who is in default to the City....

Of course, if the city has no legally binding Development Agreement, then there is no “project,” and, consequently, neither the Council, nor the DDA, has legal authorization to purchase any property in support of that non-existent project. In fact, I suggest that the City Charter expressly forbids the Council or the DDA from doing so.

So, in summary, I would ask the Council to place a hold on the closing on the properties on Evergreen until this issue is resolved. And, in order to clear up this matter in the most expeditious manner, I would suggest that the Council ask Mr McGinty for his legal opinion concerning this issue at tonight's (May 5, 2009) Council meeting.

For the record, I have filed a Freedom of Information Act request asking the city to provide me with the documents that address this issue. The text of that FOIA request is as follows:

I ask for any and all documents submitted to the city by the City Attorney relative to the Development Agreement entered into between the City of East Lansing and the City Center Two Project, LLC. (the Agreement is dated July 15, 2008). The documents I seek should also include any legal opinions relative to any of the Addenda to that Development Agreement submitted to the city by the City Attorney.