Wednesday, December 26, 2007

City and JRP Agree to Further Negotiations

After being in a state of flux since the Oct. 22 Garzini memo to JRP, Kuratek and Holzman signed and returned a Dec. 11 followup from Garzini. The followup requested their signatures to "...memorialize JRP's and JRI's (the investor group, such as it is) intention to negotiate in good faith the terms and conditions of a DDA in accordance with my earlier memo." This followed a harsher Dec. 6 letter that stated
If, on the other hand, there are one or more bulleted points set forth in my memo of Oct. 23rd that you are unwilling to discuss with the goal of incorporating them into the disposition and development agreement, we will consider all negotiations termintated.
The signed letter signifying JRP's willingness to negotiate appears to have been delivered in person at the City Council meeting Dec. 13.

A series of emails that preceded this signing gives us a little view into the status of the investor group that is to finance JR and share in the proceeds with the City. At this point, it consists of Kuratek and Holzman, with no large investor since AIG pulled out. The original structure with AIG as a partner, called Juniper Ridge Ventures, LLC, was never executed and filed. JRV consisted of Juniper Ridge Investors, LLC, AIG, and Juniper Ridge Partners, LLC (as the managing member). Juniper Ridge Investors, LLC, is composed of JRP and "our investor group". What that group is seems rather nebulous at this point.

Relevant documents:
Oct. 15, 2007 City Policy Summary on Juniper Ridge DDA
Oct. 22, 2007 Garzini letter laying out redline bullet points
Nov. 1, 2007 JRP Response (no letter, Bulletin article behind pay wall)
Nov. 30, 2007 JRP response offering to negotiate, perhaps with a mediator
Dec. 6, 2007 Garzini letter requesting acceptance of Oct. 22 bullet points
Dec. 11, 2007 letter requesting JRP signatures as proof of intention to negotiate

Will things be patched up? How long will this next chapter take to play out? Will the City ever receive a return? How close to bankruptcy will we come with a single tenant that received land at 50% off, paid no SDC's, and was given $8 million in further improvements for access? Will any other potential tenants agree to stricter terms than Les Schwab?

Only time will tell. The saga continues...

Sunday, December 23, 2007

The First LS Sale Has Been Completed--We Think

According to a deed filed with Deschutes County at 4:09 PM, Dec. 19, 2007, Les Schwab has received title to Parcel 2, 12 acres, for consideration of $3,671.236.80. That is the $7 per sq. ft. price. The following is page two of the recording:

The recording states that the actual sale was witnessed Dec. 7 by a Notary Public, as it was executed by Eric King, acting City Manager. It was recorded shortly before the 12/19/2007 City Council meeting. There doesn't seem to have been any mention of it at the Council Meeting, but I'll listen to the recording and see if it was.

So I guess the whole Contingency Removal Notice thing was ignored, as I received a response from the City dated Dec. 21, after the sale was recorded, that no Contingency Removal Notice from Les Schwab had been received by the City.

UPDATE: I just listened to the 12/19 Work Session and "Jerry" (I thought it was Eric King at first, and it might be as the recording is hard to understand at that point) stated that "Focusing on the Les Schwab headquarters for one moment, we think the sale is going to close this week, we think there will be a big check coming to the City yet this week, and so we're delighted (nervous, happy laughter from Council) to have that happening, pretty much on schedule. And of course they've broken ground and are doing a fast track permitting process out there."

He goes on to state that they know they need to get a Master Plan for JR in place as soon as they can, and Eric hopes it is the Cooper Robertson Master Plan, i.e. the one Kuratek and Holzman worked on. The target, the goal, is to get the first 50 acres beyond Les Schwab to market as soon as possible, hopefully by the 3rd quarter of 2008. This will require a Land Use Master Plan to allow the City to pursue zone changes and land partitions. Assuming the trips are available at Cooley and 97 they can prepare to develop of the next 250 acres.

The City is counting on selling that first 50 acres, most likely at a comparable price to the LS sale, to get us out from under the $15M we are going to be into it by then. While, that may not be all we are into it, as the Cooley/97 mid-term upgrade is going to cost another $37-40 million, if all goes as planned.

We've already seen how things go "as planned", with the $1.6M upgrade to the Knife River contract for the LS driveway.

My question is simple--commercial is going to be going under next year, so who is going to buy land in JR? Do we have anybody working on selling it? It seems like a huge risk. What happens if that 50 acres just sits there along with all the other RE?

Thursday, December 20, 2007

Bend City Council Executive Sessions--Legal or Not?

This is a question that has been on my and many others minds for a long time: is the broad and secretive way the Bend City Council holds Executive Sessions completely legal under Oregon's Open Meetings Law?

Oregon Revised Statutes Chapter 192 — Records; Public Reports and Meetings contains the relevant law in paragraphs 192.610 to 192.690. The relevant paragraphs state:
192.610 Definitions for ORS 192.610 to 192.690.
As used in ORS 192.610 to 192.690:

(1) “Decision” means any determination, action, vote or final disposition upon a motion, proposal, resolution, order, ordinance or measure on which a vote of a governing body is required, at any meeting at which a quorum is present.

(2) “Executive session” means any meeting or part of a meeting of a governing body which is closed to certain persons for deliberation on certain matters.

(3) “Governing body” means the members of any public body which consists of two or more members, with the authority to make decisions for or recommendations to a public body on policy or administration.

(4) “Public body” means the state, any regional council, county, city or district, or any municipal or public corporation, or any board, department, commission, council, bureau, committee or subcommittee or advisory group or any other agency thereof.

(5) “Meeting” means the convening of a governing body of a public body for which a quorum is required in order to make a decision or to deliberate toward a decision on any matter. “Meeting” does not include any on-site inspection of any project or program. “Meeting” also does not include the attendance of members of a governing body at any national, regional or state association to which the public body or the members belong. [1973 c.172 §2; 1979 c.644 §1]

192.640 Public notice required; special notice for executive sessions, special or emergency meetings.
(1) The governing body of a public body shall provide for and give public notice, reasonably calculated to give actual notice to interested persons including news media which have requested notice, of the time and place for holding regular meetings. The notice shall also include a list of the principal subjects anticipated to be considered at the meeting, but this requirement shall not limit the ability of a governing body to consider additional subjects.

(2) If an executive session only will be held, the notice shall be given to the members of the governing body, to the general public and to news media which have requested notice, stating the specific provision of law authorizing the executive session.

(3) No special meeting shall be held without at least 24 hours’ notice to the members of the governing body, the news media which have requested notice and the general public. In case of an actual emergency, a meeting may be held upon such notice as is appropriate to the circumstances, but the minutes for such a meeting shall describe the emergency justifying less than 24 hours’ notice. [1973 c.172 §4; 1979 c.644 §3; 1981 c.182 §1]

192.660 Executive sessions permitted on certain matters; procedures; news media representatives’ attendance; limits.
(1) ORS 192.610 to 192.690 do not prevent the governing body of a public body from holding executive session during a regular, special or emergency meeting, after the presiding officer has identified the authorization under ORS 192.610 to 192.690 for holding the executive session.

(2) The governing body of a public body may hold an executive session:

(a) To consider the employment of a public officer, employee, staff member or individual agent.

(b) To consider the dismissal or disciplining of, or to hear complaints or charges brought against, a public officer, employee, staff member or individual agent who does not request an open hearing.

(c) To consider matters pertaining to the function of the medical staff of a public hospital licensed pursuant to ORS 441.015 to 441.063, 441.085, 441.087 and 441.990 (3) including, but not limited to, all clinical committees, executive, credentials, utilization review, peer review committees and all other matters relating to medical competency in the hospital.

(d) To conduct deliberations with persons designated by the governing body to carry on labor negotiations.

(e) To conduct deliberations with persons designated by the governing body to negotiate real property transactions.

(f) To consider information or records that are exempt by law from public inspection.

(g) To consider preliminary negotiations involving matters of trade or commerce in which the governing body is in competition with governing bodies in other states or nations.

(h) To consult with counsel concerning the legal rights and duties of a public body with regard to current litigation or litigation likely to be filed.
(NOTE: there are more reasons listed but the specific wording the City Council uses is usually "Executive Session pursuant to ORS 192.660 (2) (a through h)")

Now let's review how the City Council notices Executive Sessions--they use a single sentence in notices of Regular Sessions or BURA Sessions that reads as follows:
Executive Session pursuant to ORS 192.660 (2) (a through h)
They also hold Executive Sessions after Regular Sessions, but before the Regular Session is adjourned, with no written notice. I personally witnessed this at the last two Council sessions I attended.

The specific wording used by Mayor Abernethy to announce the Executive Session is "The Council will now go into Executive Session pursuant to ORS 192.660 (2) (a through h) to discuss real estate matters." And fifteen to twenty people march into the conference room just off the Council Chambers. You can walk around the building and see them all in there through the window. I've been tempted to snap a picture of the scene.

Is this all legal?

The source regarded as the golden guide is the Oregon Attorney General's Public Records and Meetings Manual. Regarding notice of Executive Sessions, this manual states on B-6, in its Checklist for Executive Session, that the Council must:
Provide notice of an executive session in the same manner you give notice of a public meeting. The notice must cite the specific statutory provision(s) authorizing the executive session.

(snip of the list of reasons)

Announce that you are going into executive session pursuant to ORS 192.660 and cite the specific reason(s) and statute(s) that authorize the executive session for each subject to be discussed. See sample script on p. B-9. (NOTE: Emphasis in original)

Additionally, on A-4 we read:
Q. Must a notice be provided for a meeting that is exclusively an executive session?

A. Yes. The notice requirements are the same and must include statutory authority for the executive session.

Q. Is a meeting without proper notice an illegal meeting?

A. A meeting without notice violates the Public Meetings Law. See discussion of Enforcement of the Law.

And on page F-6, we see:
Letter of Advice(OP-6376), May 18, 1990

A governing body may meet in executive session to "conduct deliberations with persons designated by the governing body to negotiate real property transactions." ORS 192.660(1)(e). The apparent policy underlying this provision is to permit public bodies to protect their negotiating position in real estate transactions by keeping certain information confidential. This provision does not permit a governing body to discuss long-term space needs or general lease site selection policies in executive session.

So let's posit a few specific questions and I'll answer them as I read the relevant law:
1) Can the Council legally give such a broad statutory reason as "ORS 192.660 (2) (a through h)"?

NO. It must give a specific statute for each specific item discussed.

2) Can the Council not say what the specific items discussed are-can it legally state the broad line "real estate issues" when it announces it is going into Executive Session?

NO. The only "real estate issue" that can legally be discussed in executive session is specifically to "conduct deliberations with persons designated by the governing body to negotiate real property transactions". Presumably this limits discussions regarding anything else, including zoning, funding, DDA's, etc., with persons (like Ray Garzini or Juniper Ridge Partners) designated as such.

Also, all items discussed must be specifically enumerated, both in the public notice and in the announcement of going into Executive Session.

I will clear these questions up with a call to the Oregon Government Standards and Practices Commission. In fact, I'll review this entire blog entry with them and publish their answers to these questions.

And if the Council is disregarding the law, there are Enforcement provisions, including some that hold them personally liable and subject to financial penalties. That section is covered in ORS 192.680 to 192.695, which we will review as necessary. Right now I wish to clarify these points with the OGSP Commission and educate our councilors on the finer points of the laws they operate under.

And perhaps, with the help of my readers, shine a whole lot more sunlight on the whole Juniper Ridge process.

Wednesday, December 19, 2007

City Charging Ahead, Another $37-40M for Cooley/97 Interchange For JR Access

Picture this--your company sales are down 30%, you are going to lose $10M this year, your reserves are starting to look a bit low, and your major market has seen its sales drop by 2/3's, and all signs point to sales getting far worse before they get better. And your second major line is starting to see inventory pile up rather heavily as well.

You've been planning a great new addition to your product lines, but have run into problems here and there and now it's late. Plus the regulators told you just recently that you have to fix some "issues" they are concerned about before you can take your new product to market. And it's going to be a very expensive fix, like a $37 to $40 million dollar fix if all goes as planned.

And throw into the mix that your first big sale in this new product line, to a high-profile buyer who managed to force through a sweetheart deal on faith, still hasn't followed through and that buyers' promise expires in less than two weeks.

What would you do?

Personally, I would batten down the hatches, keep the product development percolating at a low-level, cut back expenses as far as I possible could, especially any expenses directly related to the promise my "buyer" made and plan to cut them even more if the sale falls through, and live to win another day. Wait it out. Let the cycle come back around, in my favor. Realize that I had a hell of a run and I better tighten everything up fast before I let it all get away on me and end up worse off than ever.

Taking my time and making sure I'm ready when the cycle inevitably goes up again. It could be two or seven years, who knows. But I would run lean at all costs, ferociously preserving my reserves, and eking out value from every penny going out while maximizing every dwindling penny coming it. Making my existing customers damned happy. I would want to make sure I'm still here, I survived, and I'm ready for the next big ride.

But is that what our fine City Council and it's ever-the-optimist Special Projects Manager R. Garzini are planning to do?

Hell, no. They are forging ahead as if it's 2004, and the bubble called Bend Real Estate is just hitting the booster rockets.

Build it and they will come. It works great, in a movie. In the real world, if the time is right, the price is right, and the place looks nice, they might come with a little persuasion.

One out of three ain't bad, if you're an optimist.

I just wish the Council saw the realism that close to two hundred of our local residents are seeing as their homes are getting foreclosed on in this beautiful Christmas season.

Sunday, December 16, 2007

Huge Increase in Deschutes County Foreclosures

To our fine City Councilor's--please think long and hard about these numbers before committing our general fund to repayment of millions more in municipal bonds for Juniper Ridge:

Notice of Default and Intention to Sell Recordings

Month Number
12/05 17
01/06 21
02/06 18
03/06 20
04/06 17
05/06 20
06/06 14
07/06 13
08/06 19
09/06 17
10/06 18
11/06 19
12/06 25
01/07 26
02/07 24
03/07 38
04/07 33
05/07 30
06/07 41
07/07 56
08/07 52
09/07 56
10/07 76
11/07 80
12/07 39 through 12/14


Username: anybody
Password: anything

There's a serious meltdown happening here. There are almost as many foreclosures as there are sales right now. And it's only going to get worse next winter after all next summer's subprime mortgage resets.

Put this in the context of our present budget shortfall, which will get even worse as the RE market continues to tank, and you are putting the City in serious risk of bankruptcy if you continue to pile on debt at the rate you have been.

Please be responsible and take your fiduciary duties seriously.

Saturday, December 15, 2007

City Funding BURA at JR

A little noticed item on the coming Monday's BURA meeting before the City Council meeting will fully commit the City of Bend to paying BURA costs, with the hope that in the future BURA will be able to repay the city general fund.

From the Issue Summary:
On December 5, 2007, City Council approved a resolution to issue full faith and credit obligations of up to $5 million. A portion of these obligations ($3.725 million) will be used to finance Cooley road and other infrastructure improvements for the Juniper Ridge Urban Renewal Area. This debt is expected to be issued in January 2008.

Tax increment revenues from the Juniper Ridge Urban Renewal Area will be used to repay the $3.725 million in full faith and credit obligations. Current tax increment revenues total approximately $150,000. With the addition of Les Schwab, the increment revenues are expected to total $300,000.

Because tax increment revenues from the Juniper Ridge area are currently not sufficient to allow the Agency to issue its own tax increment debt, the Agency has to rely on City issued full faith and credit debt for the Juniper Ridge Urban Renewal Area for now. In the future, when increment revenues are adequate, the Agency will be able to issue its own tax increment debt for infrastructure improvements.

The attached Intergovernmental Agreement provides a pledge of tax increment revenues by the Agency for repayment of the $3.725 million City full faith and credit debt and future City full faith and credit obligations up to $10 million.

This just days after announcing that current budget shortfalls are going to force cuts in many other services, including police and fire services. And now we're going to dig an even deeper hole?

What is it going to take to force our Council to deal with the reality of our city's financial situation?

And can someone tell me why the BURA board is the City Council? How did that ever come about? You look at this stuff and it looks like two groups working with each other, and then you realize is is the exact same people wearing two hats!

And you look at the Intergovernmental Agreement itself, and you see its signatories are two city employees, John Russell and Eric King. WTF?

Wednesday, December 12, 2007

The Garzini Letter

Cue ominous tones. A little lightening and thunder. And send "The Letter" to Juniper Ridge Partners. The one that said the City has a spine. No more amateur hour, put up or take a hike.

It's here And I wish this letter had been sent months earlier, for it actually addresses some of the concerns with Juniper Ridge Partners("JRP") and the Disposition and Development Agreement("DDA") the City has been negotiating with them.

To many it seems as JRP has been trying their damndest to get a sweetheart deal covering the next 25 years. Case in point: the only binding part of the Memorandum of Understanding" signed between JRP and the City back on Sept. 6, 2006 is the part that guarantees JRP at least $2.5 million.

The important part, you know.
11.5 For a period of the greater of (a) one year after the date of this MOD or (b) six months after the expansion of the UGB and end of any appeal periods, the parties agree to exclusively negotiate, in good faith, terms and conditions for the disposition and development of the Property (the "Exclusive Negotiation Agreement"). The City and the Agency agree not to solicit any other proposals or negotiate with any other private developer regarding the Property during the Exclusive Negotiation Agreement. At the end of the Exclusive Negotiating Agreement, if a DDA is not executed, the City Council will vote to either (a) extend the Exclusive Negotiating Agreement for a mutually agreeable period, or (b) terminate the Exclusive Negotiating Agreement. If Developer negotiates in good faith but a DDA is not executed and the Exclusive Negotiating Agreement is terminated, the City will reimburse Developer and Investor 75% of their master planning, design, legal, marketing and related expenses, up to a maximum reimbursement of $2,500,000. By separately initialing this paragraph 11.5, the parties further agree that this, and only this, paragraph 11.5 of the MOD shall be binding on the parties. The remaining provisions of this MOD are non-binding and shall be given no force and effect, pursuant to paragraph 11.2. If this paragraph is not separately initialed,
there shall be DO binding exclusive negotiation obligations on any of the parties.
So, it doesn't guarantee them $2.5M, it says 75% of expenses up to $2.5M. Big difference. Yet, $2.5M is the amount listed on the "Detail of Juniper Ridge Costs Through FY07-08".

When I read this memo from Garzini, I was struck by how many of the issues he raised should have been raised long ago. Like this one:
At certain junctures throughout the twenty-five year term, the City needs to be able to evaluate the project, including the performance of the developer and the investor, to determine whether the City wishes to continue the arrangement. We need to modify the term and add provisions to provide for scheduled review and potential termination (and related remedies if the City elects to terminate the DDA because such termination is in the public interest or is pursuing termination because of developer or investor default).
Now put this into the context of this part of the MOU:
The parties acknowledge and agree that Developer was selected by City to develop the Project because of Developer's unique qualifications and proposal for development. Because of the scope and nature of the Project and the relationship between the City, the Agency and the Developer, the qualifications, key personnel and identity of the Developer are and 'will continue to be of particular concern and importance to the Bend community and its City representatives. For these reasons, the parties agree that subject to the terms of the DDA, the Developer) by and through Ray Kuratek and Jeff Holzman, will be involved in the Project through the build-out period.
I mean does any sane organization commit to 25 years of the same crew, with no performance guarantees?

Yet our City's negotiators, whether staff or council members, seem to have wanted to. Why? That's one of my big questions.

I have an open records request in for all communications between Garzini and JRP, as well as any payments to JRP. To be continued...

Sunday, December 9, 2007

ATTN: For those along Mt. Bachelor Road

Tetherow Destination Resort Public Meeting, December 17, 2007

"The Community Development Department, Deschutes County has scheduled a Public Meeting on Monday, December 17, 2007 at 10:00 AM before the Deschutes County Board of Commissioners to hear applicant's (Arrowood Development) request for an amendment to the WCDA (Westside Consortium Development Agreement) to renew the now expired WCDA for an additional 7 years to December 28, 2012. The Public Hearing wiil take place at the Deschutes County Administrative Services Building, 1300 NW Wall Street. The parties to the WCDA are Deschutes County, City of Bend and Cascade Highlands currently known as Tetherow. The purpose of the now expired WCDA was to provide the City of Bend with system-wide transportation improvements related to Cascade Highlands, now known as Tetherow Destination Resort. All interested persons may appear, be heard, be represented by council or send written signed testimony; written replies must be received prior to the hearing date or submitted at the hearing. The file, MC-07-08, may be seen at the Deschutes County Planning Division, adjacent to the Deschutes County Services building, 1300 NW Wall Street or questions may be directed to Anthony Raguine, Senior Planner at (541) 617-4739."

The actual application is here.

It wants to extend the period during which the developer does not have to pay for traffic mitigation to Dec. 28, 2012, based on the original deal back in 2000 and the fact that the developer did not receive final approval until Dec. 28, 2005.

It does not address why everyone else should put up with the unmitigated traffic or force them to pay for the mitigation expenses instead of the developer, other than stating that this is a negotiated benefit for the previous owner and should be carried over.

I strongly recommend taking action. NOW.
Just added the countdown timer at the top, showing how long before the Purchase and Sale Agreement between the City and Les Schwab expires as provided for in Para 3.3:
3.3 Contingency Removal Notice. If Buyer desires to close the acquisition of Phase 1, Buyer shall give to Seller written notice of its intention to do so (the "Contingency Removal Notice") on or before the final day of the Contingency Period. At the election of Buyer, in its sole discretion, the Contingency Removal Notice may specify the acquisition of both Phases at the time of the Phase 1 Closing. If no such Contingency Removal Notice is given, this Agreement shall automatically terminate and Buyer shall be entitled to the return of the Deposit with no further obligations on the part of either party, except for Buyer's indemnity of Seller contained in Paragraph 3.2 above. Buyer's decision to proceed shall be at its absolute and sole discretion.

The Contingency Period is defined in the Summary Sheet:
3.3 Contingency Period: The period from the Effective Date through and including December 31, 2007.

What happens of Les Schwab backs out?

That's the $12 million and counting question.

Friday, December 7, 2007

What is the price Les Schwab is paying?

This question continues to puzzle me. I look at the various documents and things just don't add up.

Let's start with the relevant information information gleaned from the "Discussion of Juniper Ridge Costs and Financings Needed Issue Summary":
Juniper Ridge Costs to Date
The Juniper Ridge fund has incurred $12.6 million to date as follows (see attached
Detail of Juniper Ridge Costs Through FY 07-08):
FY05-06 thru FY07-08
Construction of infrastructure (Cooley impvs, pump station,
utilities & Les Schwab SDCs ) $ 8,291,388
Payment to Juniper Ridge Partners (per MOU sect 11.5) 2,500,000
Legal and consulting 923,463
Personnel and overhead costs 917,033
Total incurred and required $12,631,884

Note the bolded part: Les Schwab SDCs. We'll come back to that.

We also get this:
(1) The Les Schwab property sale is expected to close within the next few months with proceeds of $3 M to $3.2M.

If we look at the related document, "Detail of Juniper Ridge Costs Through FY07-08", we see the exact amount of the Les Schwab SDCs being paid by the city taxpayers: $474,120

So we know that the expected proceeds from the first sale are $3M to $3.2M, and that the SDCs are being waived, i.e. the city is paying them, not Les Schwab.

Now lets take this and see how it relates to the actual "Agreement of Purchase and Sale". First we see:
Purchase Price:
The Purchase Price of Phase 1 is the product of the number of
square feet contained in Phase 1 as determined by the Survey
(see Paragraph 5) multiplied by $7.00; provided, Seller has the
right to elect the Alternate Phase 1 Purchase Price as discussed
in Paragraph 1.2. The Purchase Price for Phase 2 is the product
of the number of square feet contained in Phase 2 as
determined by the Survey multiplied by $7.00; provided if the
Phase 2 Closing Date designated by Buyer is after the first
anniversary of the Phase 1 Closing Date, then the Purchase
Price of Phase 2

Hmmm, what is this "Alternate Phase 1 Purchase Price"??
1.2 Alternate Phase 1 Purchase Price. Seller has the right, by written notice given no later than the earlier of March 31, 2007 or ten (10) days following the date the Contingency Removal Notice is given, to require that the Purchase Price for Phase 1 shall be $6.00 per square foot of Phase 1 as shown on the Survey (the "Alternate Phase 1 Purchase Price") rather than $7.00 per square foot. If Seller timely elects the Alternate Phase 1 Purchase Price, then Paragraph 4.7.2 below shall be applicable.

So the City has the right to decide whether to charge $6 or $7 per square foot. Why would it charge less? Well, looking further we see:
4.7.1 Generally. It is the intent of the parties that, except only as provided in Section 4.7.2 below, Buyer will not be required to pay any additional amounts for off-site infrastructure, will not be required to pay any amount regarding any present or future local improvement districts, and will not otherwise be asked to pay any amount for present or future development of Juniper Ridge or other properties. Buyer will be responsible for all the cost of all service connections and customary connection charges for utilities. Except as provided in Section 4.7.2 below, Seller, not Buyer, shall pay all such amounts that would otherwise be payable by Buyer, including all System Development Charges (SDC's) applicable to the Property and its development or use, within ten (l0) days of request by Buyer. If any such additional amounts are requested from or charged to Buyer or are assessed against any part of the Property, Seller shall pay the same within ten (10) days of request by Buyer. The Purchase Price for the Property has been negotiated on the basis that Buyer shall not be responsible for any such amount and that Seller shall pay all such amounts. However, it is understood that Buyer, not Seller, shall pay, on the same basis as do other owners, typical land use application fees, building permit fees and the cost, if any, of special inspections. Buyer, not Seller, is responsible to obtain required land use and building permits and for the cost of any appeals of such permits.

4.7.2 Payments for Phase 1. If Seller timely elects use of the Alternate Phase 1 Purchase Price, then, notwithstanding Paragraph 4.7.1 above, Buyer shall pay up to $525,000 of SDC's applicable to Phase 1 and Seller shall pay all SDC's, if any, applicable to Phase 1 above $525,000.

So this difference in price is related to the SDC issue.

Let's summarize: If $6, Les Schwab pays up to $525,000 in SDCs; if $7, the City pays all SDCs.

Read this through and it looks like the city pays for everything but the building itself and the related landscaping. Sweet deal! And one I'm sure every future potential tenant of Juniper Ridge will be asking for.

OK, now let's do a little math. From the Annexation Map we know that the first parcel is 524,610 sq. ft. So what are the potential proceeds?
524,610 * $6 = $3,147,660

524,610 * $7 = $3,672,270

So, since the city is expecting $3 to $3.2 million, it must be $6 per square foot, right? Meaning the city has elected to use the Alternate Purchase Price.

But if so, Les Schwab is responsible for paying the SDCs, up to $525,000.

Yet, the city has budgeted for paying $475,000 in SDCs.

That is what puzzles me.

I calculated the estimated SDCs on a 120,000 sq. ft. office building using the current SDC rates and came up with roughly $475,000, which matches what the city is budgeting.

Which makes it even more puzzling.

Thursday, December 6, 2007

CC discussion on additional debt for JR

Short answer: there was zero discussion.

Sonia Andrews read the long title of the resolution:

And the council members kind of laughed at its length, and then promptly passed it 5-0. The title reading took longer than the vote. Just like that, another $3.725 million for the Les Schwab driveway.

The only other mention of it the entire night was my own rather muddled statement imploring the Council to delay this funding measure until Les Schwab actually delivers that Contingency Removal Notice and we know they are going to actually buy the land. It fell on deaf ears.

Of course, since I broke my lower partial eating Thanksgiving dinner, I am feeling pretty shy in public and look pretty stupid. Hopefully I'll have that corrected by Christmas.

I also had a couple of discussions with Bend City Attorney Pete Schannauer about the validity of bloggers as members of the press. He basically thought it was a joke when I tried to get into the Executive Session with my Press Pass. He also approached me after the Regular Meeting, just as they were going back into Executive Session, and talked about how I wasn't being picked on because their had been someone on the Chamber of Commerce that had a "little newsletter" that was also refused entry as media into Executive Sessions. His take was that the number of readers has a direct effect on whether he considers someone legitimate media or not. Still, he seems like a nice enough guy.

I looked up the law and it says:
"...person connected with, employed by or engaged in any medium of communication to the public.."
I am researching it further. Pete gave me his number if I wanted to discuss it further, and stated that a couple of days notice would be nice. It's something to work on.

City Council Meeting: City Layoffs, $10.5M Budget Shortfall, $5M More Debt

Report from 12/05/07 Bend City Council Meeting

Biggest news: the City is laying off 10 employees as of March 31 and another 35 jobs will be "affected" by current revenue shortfalls. I discussed the revenue shortfalls in detail in the BendBubble2 comments earlier today. Year-to-date overall revenues are off $10.5 million or 11% through the end of October. Much more detail is at the end of this post.

Juniper Ridge news: Council authorized several things that will cost Bend taxpayers more money.
1) $100,000 for a traffic study in NE Bend, related to the Cooley Road Interchange
2) $5,000,000 in additional debt through municipal bond sales, of which $3,725,000 will be used for the Cooley Rd./18th Street improvements aka Les Schwab's new driveway. Details here.

This is part of the "Short Term Financing Plan for Juniper Ridge":
Costs incurred in the Juniper Ridge Construction and Operating Fund, not including the change order and additional development costs discussed above, total approximately $8.3 million to date since FY2005-06 ($5.8 million in construction and City engineering costs, and $2.5 million in consulting and operating costs since FY2005-06). The $8.3 million will be funded/financed by a bond issuance of $5 million (expected to be issued in December) and the $3 million of Les Schwab property sale proceeds (expected in November or December) and $300,000 of tax increment revenues. The $5 million bond issuance will be secured by the City’s full faith and credit and is expected to be repaid with Juniper Ridge tax increment revenues and property sales.

This additional short-term debt of $1,662,000 will also be secured by the City’s full faith and credit and is expected to be repaid with property sales.

This is one more step in that march to over $12.6 million and counting for the Juniper Ridge project, which has only one (tentative) tenant. As shown in the 11/19/07 "Juniper Ridge Costs And Financings Needed Issue Summary" the costs so far are:
The Juniper Ridge fund has incurred $12.6 million to date as follows (see attached Detail of Juniper Ridge Costs Through FY 07-08):

FY05-06 thru FY07-08

Construction of infrastructure (Cooley impvs, pump station, utilities & Les Schwab SDCs ) $8,291,388
Payment to Juniper Ridge Partners (per MOU sect 11.5) $2,500,000
Legal and consulting $923,463
Personnel and overhead costs $917,033

Total incurred and required $12,631,884

And for those of you who think there is some sort of firewall between Juniper Ridge and the City General Fund, note this:
Funding/Financing of Costs (assuming land sales Do Not occur within 2 years)

If land sale do not occur within 2 years, General Fund discretionary revenues or other revenue sources will be needed to repay the line of credit.

And if Les Schwab doesn't deliver that "Contingency Removal Notice" to the City by 12/31/07, all bets are off. Even if LS does buy all 20 acres, we still need the Cooley Road/Hwy 97 intersection fixed. I can't imagine that happening faster than in 18 months, and more likely 24-36 months. Which puts potential land sales a long way out.

And every single company that is looking to buy at Juniper Ridge is going to use the Les Schwab sweetheart deal as a basic price negotiating tool. I just can't see how this place is going to pay for itself, as it now stands.

But Bend taxpayers will still be on the hook. $12,631,884 spread over 77,780 people is $162 per person. Not counting interest on debt, services, maintenance, etc. To say nothing of the opportunity cost of putting the City into such a financial bind.

One other small thing that might affect me and my ability to continue to dig up docs from the city was buried in the City Fee Amendment Resolution":
"Section 6.9.07 – Change the description of the fee charged for Records Research to “Time Required to Respond to Public Records Request”."
I'll be able to tell pretty quick if there is any change, as I'm putting together a request for an listing of any and all payments to Juniper Ridge Partners and what department they were charged to. Have they been paid anything? Is the $2.5 million buyout in addition to the $60,000 per month agreement? Or did that $60,000 per month never start, because the DDU was never finalized? I still have lots of questions.

October, 2007 City Budget Details, as noted at the start of this post:
P. 31 Revenue Totals By Dept.

The Good
Tourism Fund +30% +$114,000 (they are still coming in throngs)
Stormwater Fund +38% +$215K (that new stormwater fee is working)
Downtown Parking Fund +64% +$216K (mostly "in-lieu of" fees)

The Bad
SDC Revenue -10% -$465K
Building Fund -12% -$235K

The Ugly
Planning Fund -43% -$639K
Affordable Housing Fund -39% -$237K
Trans Construction Fund -25% -$934K
Intra-Gov Services -23% -$3.32 Million

Overall Revs -11% -$10.5 Million

P. 32 Total Expenditures by Dept.
Overall Expenses
Budget $63,406,202
Actual $53,418,300
Cuts-Affordable Housing, cut 90%, Accessibility Construction, cut 71%
Intra-Gov Services, cut 40%, $6.2M

Other Requirements
Budget $8,814,960
Actual $6,651,025
Cuts-Future Construction/Facilities and Future Major Maintenance Reserves

Change in Working Capital
Budget -$14.6M
Actual -9.9M

Net Available Working Capital
Budget $24.1M
Actual $25.7M

So things aren't dire, yet. But we can't keep spending $10 to $15 million a year more than we take in, that's for sure.

Wednesday, December 5, 2007

Annexation Map for Juniper Ridge

At tonights City Council meeting, the packet shows that item 12(C) relates to the annexation of the first portion of Juniper Ridge into the Bend Metro Parks And Recreation District. This is so the Park District can assess SDC's.

Although the actual document attached to the packet purports to have an Appendix A that describes the property, it doesn't. So I filed another Open Records Request and received it, scanned it , and uploaded it. You can see it here.

It shows that the actual size of the first portion of JR is 623 acres, split into three parcels. Two of those parcels, totaling 19.9 acres, are the areas described in the Agreement of Purchase and Sale executed between the City of Bend and Les Schwab Tire Co. on Dec. 12, 2006.

Note that as of Nov. 26, 2007 LS had still not sent a Contingency Removal Notice to the City, as defined in this Agreement, so the actual purchase has not occurred. Although $7+ million of construction paid for by the taxpayers of Bend is underway. See BilboBend's post on the BendBubble Blog for pictures and more of the status as of Thanksgiving.

According to this contract:
3.3 Contingency Removal Notice.If Buyer desires to close the acquistion of Phase 1, Buyer shall give to Seller written notice of its intention to do so (the "Contingency Removal Notice") on or before the final day of the Contingency Period...If no such Contingency Removal Notice is given, this Agreement shall automatically terminate and the Buyer shall be entitled to the return of the Deposit...

The Contingency Period is "The period...through and including December 31, 2007." So the clock is ticking. If LS decides not to proceed, we get nothing but a big bill for a road to nowhere.

The City's fight continues with Kuratek

This is getting richer and richer (in more than one way, I'm sure we'll find out), from Tuesday morning's BULL, and behind the pay firewall online:


"Bend city councilors appeared guardedly optimistic Monday that the city would be able to sit down and talk again with the master developers for its 1,500-acre Juniper Ridge project, though they expressed concerns about the tone of a recent letter from the developer....In letters and recent interviews, Ray Kuratek, one of the master developers, has threatened to sue the city for negotiating in bad faith, somthing that could cost the city millions of dollars if it resulted in protracted litigation."

Cue some more dumbness from our councilors--someone with E-BULL access will have to cut and paste it all.A question for our councilors: Kuratek and Holzman were supposed to bring $30M to the table. If they can't, they are in a basic default position. They can't. Inform them that if they can't cure this default within a short time frame, like 90 days, that the absolute most they are going to get is the $2.5 million, if they give up the master plan.

Grow a fucking spine. Don't hang us citizen taxpayers out to dry yet again.I'm not hopeful any of our fine councilors has a spine. At least, those that are not in on the game somehow.

More richness from this article. I just have to add this idiocy from Councilor Linda Johnson:
"At this point the city could use some expert guidance."

Ya think? So who are they thinking about getting this guidance from? David Leland, a land use consultant from Portland that helped the City get into this mess in the first place:
"Before that, the city used Leland in 2005 to provide advice on how to proceed with Juniper Ridge before it picked a master developer. "

Yeah, that sounds like a smart choice.

City Council Meeting tonight. I need a Press Pass. Anyone out there want a freelancer?