The following is my address to the CH city council on Monday, November 19, 2012:
I believe council is trying to wear too many hats, on too many projects. And that the various roles are at cross purposes to one another. It seems to me that the responsibilities and duties council was elected for are:
- Representation
- Leadership
- Trustee of the citizens' assets
...which are taking a backseat to these activities:
- Developer
- Promoter
- Banker Of Last Resort
- Urban Renewal Planner
...and that council isn't really set up to do those things.
I will focus on "Banking" tonight. Council lends $, and offers tax abatements. That's banking. But as far as I can tell, and I have asked for a lot of documents, you guys don't have any Underwriting process or Risk Management standards. It's all “make it work on the fly” kind of stuff.
As I have been pointing out twice a month for almost four months now, the Lee-Meadowbrook parcels have not been independently appraised. Yet, council is selling them for a mere $125,000. That's a discount of $1 million from the cost of the property, and it's anybody's guess how much discount from the actual market value. Project principal David Orlean's own glowing words at the July 17 BOE presentation, that Cedar-Lee is unique and well situated, does *not* support a cut price deal for the developers. Plus giving them the $4 million tax abatement.
No Dunn & Bradstreet, Trans Union, Experion, or Equifax credit reports have been requested for any of the principles of the Lee-Meadowbrook project. No one at the city knew of the financial difficulties that led to Ken Lurie, identified by the Sun Press as a “principal” of the project, to end up on Cuyahoga County's property tax delinquent Dirty Dozen list, with a tax bill of $447,000. Or that the CH tax abated Bluestone project on Mayfield is, according to Orlean Company Chief Operating Officer Ken Lurie, in “Survival” mode.
The State of Ohio required tax abatement application that was submitted is a sick joke. The applicant name of “TBD” is unacceptable. All other paperwork, including council's resolution to the school board, says The Orlean Company. Is the application different because of Mr. Lurie's property tax situation? Based on my conversations with law director Gibbon, the answer is obvious to me.
The financials submitted have holes big enough to drive trucks through - which I have. $50 lunches, anyone? At least the purported “benefits” have been restated from $53 MILLION down to $2.3 MILLION – which is still way too high.
Because...the required rents of $1,000 - $2,000 are unsupported by anything other than hopes and dreams. This *not* good enough for any investment lender, and *not* good enough for our city.
I've seen or read about the loan agreements for Medusa, Burgers & Beer, and the diners. Essentially, the collateral is non-existent (2nd position on used restaurant equipment), or has no market value (Medusa's building and the diners).
There is no system of checks and balances at work here. Council is acting as salesperson, promoter, and banker of last resort.
That's a volatile situation, just asking for troubles. If there is anyone looking things over, they have a vested interest, primarily in keeping their bosses happy.
And there's no feedback loop. Multiple council people and city employees have defended the Lee-Meadowbrook project by telling me how great a project Bluestone (the same developers) has been. Except Bluestone hasn't been a success by any measure. Only 37 of the promised 110 units have been built in 7 years. Council members should have that information, but they don't.
Please, stop this Lee-Meadowbrook project now. As presently described by the developer, it has no chance of accomplishing what it promises.
Studio (0 Bedrooms, 513 - 545 sq. ft.): $950 - $1,035 per month 1 Bedroom (657 sq. ft.): $1,183 - $1,233 1 Bedroom Plus (727 - 787 sq. ft.) $1,286 - $1,352 2 Bedroom (880 - 1,138 sq. ft.) $1,586 - $1,980 That approaches $2 per square foot per month. From page 2 of the revised EIS, here's how the developer "explains" the rents: "With respect to the rental rates, please note there are no directly comparable properties to which the developer can look to for history. Other buildings that somewhat approximate the conditions and type of this proposed development were analyzed and extrapolated to calculate the rental rates for this property. However, until Meadowbrook-Lee is built there is no way to know what we can actually get in terms of rental rates."