Park Board Settles Lawsuit, Loses $900,000 at Ft. Snelling

On Wednesday, December 7, the Park Board voted to approve the negotiated settlement of a $1.8 million lawsuit filed against the Park Board by contractors who did work at the 201 Building at Ft. Snelling. The settlement requires the Park Board pay $900,000 to the plaintiffs. The lawsuit arose out of work performed but not paid for in a failed attempt to build a skatepark at Ft. Snelling.

The settlement was commented on by a number of writers to the Minneapolis Issues List:

Katie Simon-Dastych asks: “Where will the $900,000 come from?” (as posted on list)

Rick Kuhlman asks: “What in the heck are they going to do with the 201 building now? I drove by it this morning. It was all boarded up.” (list)

Ken Bradley answers: “Like all cases the government settles and the tax-payer pays the bill through higher taxes.” (list)

Park Board Commissioner Annie Young replies: “The Park Board has until Nov. 1, 2006 to settle this claim. In the meantime, we will be trying to sell the building or come up with the revenue from the building in one way or another that would get us this $900,000. By about next June we will be looking at all our options which as a last resort includes paying out of our self-insurance fund by the Nov. 1 deadline.” (list)

Shawne FitzGerald details the history of the $14.9 million and growing public expense at Ft. Snelling (list):

» The MPRB bought the 201 Building at Ft. Snelling Neiman intending to build a practice ice facility for the Minnesota Wild hockey team. MPRB staff was negotiating with MN Wild at the time – the purchase was made before the deal was finalized. The vision was that the facility would generate revenue for the MPRB. The cost of the building was $850,000. The MPRB hired Miller Dunwiddie to estimate the cost to rehab the building to an ice facility – that estimate was about $3.5 million. The MPRB moved a road and built a very nice parking lot, wired for lots of lights, adjacent to the building. The deal with the MN Wild did not happen – and the MPRB investment at the 201 building was over $1 million. The source of funds was bonds.

Next, the MPRB granted The Fort LLC a 30 year lease to develop and operate an indoor/outdoor skatepark at the 201 Building. There was no rfp for the project – no bids were taken. (The agreement also contained a no-bid contract to construct two skateparks elsewhere in the system.) This project was also supposed to make money for the MPRB. The Fort LLC abandoned the project leaving the contractors unpaid. The contractors filed liens against parkland and filed a lawsuit – this $900,000 is the proposed settlement of that lawsuit. The MPRB needs to sell this site for about $2 million just to break even! The alternative is to spend millions of dollars to rehab the 201 Building – a building that seems to serve no MPRB need – so selling at a loss to raise money to settle the lawsuit is an option worth considering.

Comm. Young suggests that, worst case, the $900,000 will be paid out of the MPRB self insurance fund. At the end of 2004, the balance of the self insurance fund was ($3,506,366). A negative number. I humbly suggest that the self insurance funds have to come from some source – and property taxes remains the MPRB’s largest and most reliable source of income.

The MPRB is on the hook for the $900,000 because it failed to require a performance and payment bond or any other surety from the developer. Requiring contract bonds is standard within government; MPRB staff have routinely done this for years. In a sense, requiring contract bonds is another element of community review – in this case, a specialized financial review, for developers demonstrate that they have the requisite financing, credit, suppliers, and experience to complete a project. Probably, The Fort LLC, a newly formed company with no development, construction, or skatepark operating experience and with no assets, would have been unable to secure contract bonds for the project. Personally, I believe that one or more folks at the MPRB did this developer a big favor and now, taxpayers are going to pay for that favor. Will those responsible be held accountable?

I’ve read almost all of the MPRB Board meeting minutes back through the 4th quarter of 2001. There is no mention of citizen advisory committees formed to review either the ice facility or skatepark facility at Ft. Snelling Neiman. I can’t recall a public hearing for either use.

The MN Wild do practice at the MPRB Parade Ice Complex. In 2004, when there was a hockey strike, the Parade Ice Complex lost $230,193.

Other Ft. Snelling Neiman Facts:

  • When the Ft. Snelling athletic complex began, initial project costs were $6,000,000 (ca. 2000). The project costs escalated to $14 million in 2001 and $14.9 million in 2005.
  • Taxpayers are paying for Ft. Snelling Neiman. Debt service on the $14 million bonds sold for the project is just over a million annually. Additionally, the park operates at a loss – this is projected to be $40,000-$45,000 in 2006. The annual cost of Ft. Snelling Neiman will be about $1.1 million. (The MPRB annual operating budget is about $50 million.)
  • A $1 surcharge on golf rounds doesn’t generate enough money to pay for Ft. Snelling Neiman. In 2004, about 280,000 rounds of golf were played at MPRB courses.
  • In 2001 when the MPRB requested the $8 million in additional bonds for Ft. Snelling, the staff recommendation said “At this point, our bonding request will be for enterprise fund supported bonding of $6 million dollars. An additional $2 million in bonding supported by external funding (such as the Minnesota Wild rent) will be finalized over the next 12 weeks.” The park operating enterprise fund consists of “golf courses, refectories, ice arenas, sports complexes and self-supporting recreational activities.” In 2004, these activities generated a net profit of $334,959.
  • The Ft. Snelling Neiman project was unusual in that it was the first time the MPRB decided to finance a new project with bonds independent of the CLIC process. (I think this is the right way to state this – David Brauer can correct me.) So, another mechanism of community review was lost. The next time the MPRB tried the same strategy, borrowing for the new Headquarters Building, the Mayor vetoed the request with City Council support.
  • Initially, the MPRB sold $6 million in bonds (through the City) for the athletic complex, the fields, at Ft. Snelling. Early on, the MPRB diverted the majority of funds, $4.1 million, to acquire land adjacent to the Ft. Snelling athletic fields that was leased to a new private corporation for 30 years. The private corporation built an indoor tennis facility on the parkland. At the end of 30 years, the corporation has pledged to donate the facility to the MPRB. To be fair, this is a non-profit corporation. Again, there is no record of a citizen’s advisory committee formed to consider whether or not the MPRB needed to borrow and spend $4.1 million on a $9 million tennis facility located outside of the city in return for getting a 30 year old building and use of it’s own land 30 years down the line.

    Another problem with the tennis facility is duplication of services. The MPRB has had a longtime relationship with another tennis non-profit, Inner City Tennis, based at 40th and Nicollet. Did the MPRB need a 2nd facility, another tennis/mentoring program? If yes, why are there two southside and none northside or eastside? These nonprofits use not only MPRB resources but they compete against each other for grants and with the current MPRB strategy to seek more grants, we need to ask how many grants will be given for youth athletics? For what sports or other recreational activities?

  • In 1998, Supt. Fisher estimated that quality athletic complexes could be built at Bryn Mawr, Ft. Snelling, and Northeast Park for $18 million. The MPRB’s goals were 1) to increase soccer fields, 2) to provide quality fields, and 3) to provide more rec opportunities especially for middle school students to divert them from gangs. Although the field improvements at Ft. Snelling cost about $7 million, total project cost is $14.9 million.

Shawne FitzGerald «

All of this expense could have been easily avoided by the commonly used instrument of a performance bond. Park Board attorney Brian Rice claims he never saw the contract between the Park Board and The Fort LLC. Why not? Does anyone write a multi-million dollar contract and 30-year lease without consulting a lawyer? Of course not. So why was the Park Board’s contract with The Fort LLC not reviewed by Brian Rice? Why was there no performance bond protecting the taxpayers from the private entity’s failure to perform?