Re: [Mpls] The fiscal shoe drops

[Steve Minn]

Title: Re: [Mpls] The fiscal shoe drops

Open letter to the List & CM Ostrow.... I have a big shiny spot on my forehead, from banging my head against the wall for so many years on this topic...I just boggles the mind where prior Councils went wrong on this deal. The poor prospects of Gavidae and City Center payoff was one of the primary reasons I objected to Brookfield getting the Block E deal to begin with. At one point I argued that when Brookfield threatened to sue the city over the Shubert Theater, we should have just retailiated with the Gavidae notes...but I digress... First and foremost...DO NOT DISCOUNT THE TIF LOANS!  Brookfield has been in "default" on the Gavidae loans every since they converted from retail to office.  Office does not qualify for TIF and is a single purpose user violation of TIF law.  The default allows the city to foreclose upon the 2nd position mortgage, which gives the city one of two options.  Even if this option is not pursued.  Non payment on the due date creates a default...1) The city could redeem the foreclosure through the first position mortgagee, which would result in the city paying out cash.  Risky..but the first mortgage is at a discount to full value of the building, and coupled with the debt owed on the second mortgage, the city would own the building if Brookfield defaulted. Resale to a REIT would recoup the entirety, or at least much more than a discount on the 2nd note would at this time. The city has the ability to get into first position on the mortgage, and should!  2) The second option is to take Brookfield into default on face value, go to court to perfect the judgment in Hennepin County, or any other county where they have real property,  and then record the lien against any other property Brookfield owns in Hennepin or any other county.  Those judgments then encumber those properties if ever sold, and can be used in a redemption chain to gain control of those properties.  The judgments and the secured liens might be sold for a discount at some future date to any number of REIT or vulture funds that buy such paper. At minimum, the city would have the benefit of a public auction for the value of the paper, rather than some sleazy inside deal with just Brookfield and some idiot city staffer cutting the deal. Knowing that Brookfield's financial options have been clipped protects the public interest, assures a competitive bid for the city's interest, and ruins Brookfield's chances of squirming out of the debt they owe. -- Steve Minn Principal Lupe Development Partners, LLC (612) 868-9112 (direct) (952) 925-3080 (fax) (952) 925-9505 (home) [EMAIL PROTECTED] Date: Sat, 27 Jan 2001 11:46:50 -0600 From: "jmostrow" <'[EMAIL PROTECTED]'> To: "Mpls list" <[EMAIL PROTECTED]> Subject: Re: [Mpls] The fiscal shoe drops         The way we proceed on the Brookfield loan (Gavidae property) is yet another test of our ability to responsibly manage the City's resources.  While the Council is awaiting a full report on this issue, two issues are central to the discussion.     First, any and all options available to the City for repayment must be considered.  The StarTribune accurately reports that the new finance director is requesting more information about the security for the loan.  Before we jump to any conclusions we need to have this information.  Frankly speaking, any renegotiation must be based on the long term interests of the City and not the interests of the developer.   This is just basic common sense in the business world. Certainly Brookfield will understandably base its decision on its long term financial health.  Similarly,  we must base our decision on maximizing the resources available for community revitalization over the long haul.         Second, we must avoid an agreement that will increase our resources for the short term and leave a huge financial hole for future Councils and residents of the City.  The agency is under a tremendous amount of pressure to find resources for many pressing city goals. However, it is fair to assume that five and ten years from now our need for resources will be no less and will likely be even greater than it is today.  Short term political gain and long term financial problems is not a legacy I wish to be a part of on this Council.     This of course is where you come in.  Elected officials at all levels of government must be held accountable when short-sighted financial decisions are made.  As long as the consequences of these decisions are not realized until years later, there will be those who will be tempted to cash in now and save the pain for later.  Upon taking office in '97, I quickly realized that the City was already saddled with significant debt and deficits in the City's enterprise funds. You need to ask us not just what  we are doing this year but  how we plan on sustaining these activities financially for the long term.  Six of us who opposed the budget in December had serious concerns about our long term capacity to sustain the obligations contained in that budget.     It is too early to make a judgment on the wisdom of any renegotiation of the Brookfield loan.  I would caution against criticism of the agency or Steve Cramer on this issue at this time.  The agency is bringing forward an issue that requires our consideration.  I encourage you to watch the issue closely. Paul Ostrow Mpls City Councilmember, Ward 1 Windom Park (using my wife's email address at home and not the City's server)