The St. Paul City Council meeting on August 21, 2019 highlighted a serious problem with St. Paul city government. Why can’t it learn from its mistakes?
The council has had to pay out hundreds of thousands of dollars for mistakes of city staffers (E.g., $800,000 for Black Bear Crossing) and mistakes of the council (E.g., $3 million in organized trash dumpsters and up to $5 million in damages) as well as mixed council/staff members’ mistakes (E.g. over $450,000 for Street ROW Assessment refunds). This really hurts, especially at a time of serious budget distress and diminishing public services.
Last Wednesday’s public hearings (8/21/19) featured a call for fairness and uniformity of assessment treatment by folks living along arterial streets that serve the entire city.
There was also a call for the council members to be more certain of their legal positions in the face of a series of legal setbacks over the last 8 years.
The latter suggestion was made by Jack Hoeschler, the volunteer attorney who has single handedly obtained a series of refunds and rulings against the city’s assessment practices.
Hoeschler cited a recent district court ruling by Judge Robyn Millenacker to the effect that the city’s rebranded 2018 Street Maintenance Service charges are merely a new name for an old revenue raising gimmick that the Supreme Court outlawed in 2016 (based on a 2011 case brought by Hoeschler).
He challenged the council members to read Judge Millenacker’s decision to see that further enactment of SMSP assessments would be clearly illegal. The only defense for the council would be that they had a supporting written opinion by either a professional appraiser or an attorney (E.g., the City Attorney or the Attorney General). Without that, he said, they were politically and legally naked.
Once again, someone has pointed out that our king has no clothes. The real question is why is the council the last to realize it? When will they learn from their mistakes?
St. Paul has developed a bad habit of doing whatever it likes because we have a single party government. The city administrator relies on the fact that taxpayers cannot afford to take up its challenge: “Sue us if you don’t like it.”
That is not the way to run either a railroad or a government. The rule of law should mean something. Elected officials should know and obey the law, just like the rest of us. Let’s hope that this council finally learns from its mistakes.
August 3, 2019
Just over a year ago, John Mannillo, commercial real estate developer and Saint Paul STRONG chair received an Early Notification System (ENS) email (Appendix A) that included a proposed real estate sale by the Housing and Redevelopment Authority (HRA) to Madison Equities, Inc. The parcel of real estate at 375 North Robert Street in downtown Saint Paul included over 6000 sq. ft. of paved plaza space with a fountain. The city staff proposed sale price for this land was only $2,500. As a commercial real estate broker and developer, John was well aware this proposal was vastly under-priced. At current land prices in the downtown area, the land would be valued at more than $300,000. In fact, at the time of the proposed sale, Ramsey County Property Tax Records valued it at $326,400, a value that remains today.
When John asked the City why it was being sold for hundreds of thousands of dollars under market rate, the response was that because of the location and current building restrictions, there could only be one buyer. The City noted that that buyer, Madison Equities, Inc., owned the rest of the block including the US Bank Property and the old Buttery Restaurant and intended to use the new parcel to expand the Buttery space to include patio dining—though it first had to find a new restaurateur to lease the property.
In the meantime, John discovered that the City had recently solicited an appraisal for the property. In spite of that appraisal valuing the property at $30,000, the City proceeded with Madison Equities, Inc.’s proposal of $2,500. This was essentially a $27,500 mark down. Knowing that the property was worth more than the proposal offered by Madison Equities, Inc. ($2,500) John thought that if the City intended to practice due care and diligence when selling the taxpayers’ resources, the City would not settle for less than the appraised value of the property. So, John made an offer for the full appraised value of $30,000. Here’s what happened next.
John Mannillo and attorney Jack Hoeschler met with Andrew Hestness, staff at Planning and Economic Development (PED). They outlined their plan to purchase the property. This plan included a “right of first refusal” to lease the property to Madison Equities, Inc. Mannillo also identified alternative ideas on how the parcel of land could be used, including adding food trucks with additional seating, and new paving and lighting. The food trucks would be anchored by an ice cream vendor. John later met on site city staff to clarify how their plan could be executed without disturbing the bus stop. They also offered to move the bus stop onto the parcel if the Metro Transit Commission (MTC) was interested. Then….
They never heard again from the City until March of 2019, when John received an email advising him that their plan was not feasible. John responded that he was surprised, because his proposal was, in fact, so flexible and he willing to work with the City, and allow Madison Equities to control the property through a long term lease.
In order to understand more clearly their rejection, John filed a data practices request on March 8, 2019 requesting all communications related to the sale of this parcel. On June 14th, over three months after the original request, John received some partial data from his request. The data received did not include obvious communications that John already had in his possession and some documents that were referred to in communications. John’s proposal was not even part of the data. John did receive a staff report that did not accurately reflect his offer. Even more surprising, the data included a proposal to finance Madison Equities, Inc. up to $30,000, the exact amount John had offered in cash!
John was not notified of a public hearing on June 26th where the proposal from city staff for the sale of the property was to be approved—but when doing an internet search, John discovered that the proposal was to be sold to Madison Equities for $32,500 cash. By the time of the hearing, it had been a year since John’s offer. Madison Equities, Inc. had not found a new restaurateur for the old Buttery Restaurant, which stands vacant to this day. Unlike John’s proposal to improve the site, Madison Equities, Inc. gave no such guarantees. In spite of all of this, the City voted to proceed with the sale to Madison Equities, Inc. So, what’s the problem?
I listened to the hearing on June 26th, which made clear some of the issues with this process. In spite of our City Council members’ assurance that the process was transparent, in fact, there was little transparency. Had John Mannillo not stumbled upon the information embedded in an email (of which many of us are inundated and neglect to read in full), the City would have sold the property for less money than it would take to close the deal! If John hadn’t made their market rate offer, the City taxpayers would have lost $30,000—actually more…because of closing costs. Is this OK with you? Or, was this deal equivalent to financial mismanagement and highly suspect? It certainly does not reflect the due care and diligence of good governance that we expect from our elected officials.
This all happened at a time when our City canceled fireworks two years in a row, (a community event for all), because it couldn’t afford them, so how can it afford to sell City property for $30,000 under the appraised value? Why weren’t other offers solicited and encouraged? Why wasn’t the property ever listed publicly for sale inviting people who we might not even know may have been interested and had other big ideas for the space? Is there some relationship between the City and Madison Equities, Inc. of which we are unaware and uninformed?
Maybe the City should reconsider its decision and place this property (and future City or HRA owned properties) on the open market for sale, not in a back room deal. Many people still believe this property at 375 North Robert Street can yield a higher sale price than $32,500. Don’t Saint Paul taxpayers deserve better than this?
APPENDIX A--Copy of original email sent to John Mannillo regarding the sale of the property.
From: City of Saint Paul [mailto:firstname.lastname@example.org]
Sent: Tuesday, June 05, 2018 11:41 AM
To: John Mannillo
Subject: 375 Robert Street N ENS
Attached is an ENS notice for acquisition of HRA-owned plaza for outdoor dining seating located at 375 Robert Street N.
Author's note: When reading the above linked PDF, please note that when the City says, “Amount of Financial Assistance Being Requested $27,500 land cost write-down…” that means the City is writing down the sale price of the parcel $27,500 from the appraised value of $30,000.
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