Request for Public Review of East Lansing DDA Budget

Since I want to be as accurate as possible in reviewing the East Lansing budget, I wrote City Council requesting more detailed information about the DDA budget and calling for a review of its budget as required under its bylaws. Here is Staton's typically contemptuous reply. The April 19 budget session did not list the DDA as an agenda item for budget discussion. Read Ted Staton's reply below.


BEGIN QUOTE:

Dear Mr. Singer:

After several public discussions about the entire $70 million city budget, the City Council is scheduled to take action on the fiscal year 2012 budget on Tuesday May 17, 2011. There have been public opportunities to examine the budget and to offer comment/testimony. A formal public hearing was held on Tuesday April 19, 2011. Numerous citizens attended the hearing to offer testimony. The record of that testimony is available to the public.

City Council will hold a final work session on the budget on Tuesday May 10, 2011 at 7 PM. Public comment is invited at that meeting as well. We welcome your public testimony.

Your letter requests much information. I assume we are to consider it a request under the Michigan Freedom of Information Act. We will begin to assemble the information for your review subject to all the provisions of the Act. We will provide you an estimate of the cost associated with the request as well an any estimated amount of deposit required from you.

Due to the amount of information requested in your request and the amount of time necessary to compile it we are requesting the extension of 10 days provided under the act to comply with this request.

Sincerely,

Theodore J. Staton
City Manager
City of East Lansing
(517) 319-6920
END QUOTE



>>> Eliot Singer 5/3/2011 3:47 PM >>>
To East Lansing City Council

From Eliot Singer, Concerned Citizen (who knows his way around a spreadsheet)

The bylaws of the Downtown Development Authority call for its budget to be approved by City Council. With the $350,000 remainder of the loan from MEGA and the $5.5 million bond refinancing for the Evergreen properties coming due in FY2012, and with substantial cuts to public services, East Lansing citizens have a right to a detailed, public review of and accounting for how the Downtown Development Authority is spending OUR taxes. The FY2012 preliminary budget and the FY2010 financial report lack the necessary detail to evaluate the DDA’s finances, so I have come up with a list of questions in search of the necessary detail.

Whether East Lansing officials want to admit it or not, development authorities are deservedly under fire, locally, in Michigan, and throughout the country, from across the political spectrum, for their lack of accountability, for their exemption from basic democratic principles, and for their reckless, wasteful, and special-interest spending, so any lack of transparency will only contribute to grassroots momentum to abolish them altogether and prevent future issuing of bonds for development projects without voter approval. A Michigan ballot initiative would undoubtedly pass with the same kind of majority as the anti-eminent domain initiative.

The public does not like developers, and one of the most shameful stories, which makes for great national copy, however reluctant the local press may be to tell it, concerns East Lansing government’s willingness to risk tens of millions of dollars and the city’s solvency on Strathmore Development Company, a developer with a well-documented history of properties lost to foreclosure, tax delinquencies resulting in foreclosure notifications, lis pendens for contractor liens, suits against guarantors to recover money owed on mortgages, existing debt that far exceeds any remaining assets, and so on, amounting to a 0 for 11 track record on its development projects in Michigan and Florida and massive losses to National City and other banks, to lender-speculators, and to the state employee pension plan for its Broadway Village investment, that will take the FBI’s forensic accountants to calculate and evaluate for possible wrongdoing.




1) Tax documents show the DDA paying property taxes on its City Center II properties (the Evergreen properties and 303 Abbott), plus about $1300 in personal property taxes for the so-called Technology Innovation Center.
a) How are these taxes allocated (to East Lansing Operating Fund, Ingham County, CATA, etc.)? (It would help to see this on a property-by-property basis.)
b) Since these properties are in the DDA TIF district, does that mean the DDA receives tax increment revenues from itself?
c) Where is the tax payment accounted for in the DDA budget? Under operating costs for the properties? Elsewhere?
d) Does the personal property tax on the DDA for the TIC go to the Local Development Financing Authority (which then gives money to the DDA)?

2) What is detailed, property-by-property, breakdown for the rents and operating expenses for the Evergreen properties (for FY2011 and projected for FY21012)? This is vital information for citizens to know in considering our options, given that the Bond Anticipation Notes used to purchase these properties come due on April 1, 2012, for almost 4x their current market value (they were purchased for over 3x market value, including one in which a DDA insider had a half interest). I should point out the narrative portion of the preliminary FY2012 budget only mentioned that the Evergreen houses are being rented out, although the commercial 314 Evergreen building is being rented out as well.

3) What are the details for rental income and operating expenses for the TIC, both those that fall within the DDA budget and those within the Local Development Financing Authority budget? (I can make no sense of how either the rental income or the operating expenses could be so high, given the square footage.)

4) What are the details of the DDA lease agreement with Christman for the TIC and The Hatch?
a) How much is the current rent?
b) Is the current rent locked in for the duration of the lease agreement or is there a built in increase, and if so what?
c) Is the DDA paying for utilities, janitorial services, other expenses?
d) How many years is the lease agreement for, and is there any escape clause?
e) Is the entire 3rd floor being leased by the DDA from Christman then sublet to the MSU entities, or does the DDA just lease the space for the TIC and Hatch, with MSU leasing directly from Christman?

5) Please explain the DDA debt service. I can identify the 2008 B and 2009 B series bonds and the 2005 refinancing bond (from the FY2010 annual report), but the debt service is too high for just those three, so there must be additional debt. (The CC II BANs are listed separately, so that information is clear.)

6) What is the detailed breakdown for the general operating costs for the DDA? a) for FY2011; b) as projected for FY2012. What is being cut with a reduction of over $100,000 for FY2012? (The cuts are meaningless if the real costs are being shifted to the city’s operating budget.)

7) For whose time are the DDA and LDFA paying “personnel services,” since all employees are under city departments? (What is important to know is whether there are specific city employees whose full-time job is working for the DDA or the LDFA or whether there are several city employees with part time assignments; also whether the DDA is reimbursing the operating fund for time spent on its behalf by senior administrative staff.)

8) From which properties is the LDFA receiving “tax capture”? Why has the FY2012 “tax capture” for the LDFA decreased significantly more than for other properties?

9) Where in the budget is Metroscene now hidden? How much did it cost taxpayers in FY2011? What is budgeted for FY2012? (Its last known location was as part of the city’s operating budget in FY2010 at the cost of around $20,000.)