When the $25,265,000 for the Lotto 1 bond was announced, with only $24,389,518 going to pay for the $33,000 per space parking structure and other infrastructure, it didn’t make a lot of sense. Typically, the city pays the bond broker 1%, and this is to do the paperwork/bookkeeping and to sell the bonds on the open market. In this case, it was a private placement deal, so the origination (broker) fee should have been less, since there was no need to sell on the open market.
Now we know why the difference was so high. Not only was there a 1% fee, which is going to Scottsdale Capital, in addition to it receiving interest on the bonds and a promise to refund in 2020, there were large additional fees piggybacked on the bond in secret.
$353,250 to the developer’s lawyer!!!
Baird, which usually is the city’s bond broker, is being called the developer’s financial advisor and paid $115,000, on top of the $243,895 origination fee to Scottsdale.
The City’s bond attorney, Miller Canfield was paid $155,000, and reportedly would not have been paid if the bond did not get approved. At $300 per hour this would be more than 500 hours, about 13 40-hour work weeks.
Again, these fees, which are not normal for bond issuance, were added in secret. There was no public discussion by the BRA, who nominally issued the bond, or by Council. These fees were not in the paperwork for the BRA meeting when the bond was approved.
Meadows said he was “absolutely” comfortable. Nobody else on Council or BRA seems to have a clue or care.
With this in mind, it is appropriate to quote Meadows on the story that rightfully is preoccupying everyone (not just in East Lansing/MSU):
Meadows insists the Board of Trustees “should resign; every one of them. No exceptions.” He explains that, “Like a City Manager [hired by City Council], a University President is an employee of the Board that hires that person. It is convenient to say the buck stops at the President. It actually stops with the Trustees. They failed the victims, the public that elected them and the University they were sworn to support….”
http://eastlansinginfo.org/content/meadows-and-altmann-call-msu-trustees-resign
Meadows, and everyone else on Council, needs to answer how, when the city is in dire financial straights and they are desperately seeking support for new taxes (any hope of support from MSU is obviously now gone) he can justify $155,000 for the city’s bond attorney and $353,250 the the developer’s attorney, on top of all the other expenditures for Lotto 1?
Again, East Lansing officials secretly added to the bond $353,250 to pay the developer’s attorney and $155,000 to pay the city’s bond attorney when the city is broke and pleading with homeowners to give it new taxes.
Eliot Singer
