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12/27/00 Neier to Ramlow/AnalysisIli City of Kalispell = Post Office Box 1997 - Kalispell. Montana 59903-1997 - Telephone (406)758-7700 Fax(406)758-7758 December 27, 2000 Jim Ramlow Kaufman, Vidal & Hileman 22 2nd Ave. West Kalispell, MT 59901 Re: South Field Park Dear Jim: This letter will confirm our telephone conversation of December 20, 2000 wherein your requested that I analyze the City files on the above referenced matter in response to the Kent Saxby of October 11, 2000. I begin the analysis with the commencement of legal publications in October of 1996. The City of Kalispell advertised the South Field Park site (Haven Field) three times commencing in October of 1996. The first publication required a response on November 19, 1996. (Exhibit "A"). Clerk notes from the work session of November 25 indicate the only bid received was non -responsive because the minimum value required in the advertisement was not met and the bid security (earnest money) required was not included. The property was re -advertised for a December 30, 1996 opening. (Exhibit "B"). Clerk notes from the December 30 work session indicates no bids were received. Upon the advice of Dorsey & Whitney, Missoula, the property was re - advertised for a January 30, 1997 submittal. (Exhibit "C"),I cannot respond the claim of Dasen that there were irregularities in the acceptance of the bid. However, the Dasen proposal was accepted at the February 18, 1997 Council Meeting. ramlow . wpd -1- Drafting the Development Agreement took place between February 18, 1997 and May 16, 1997. The City Attorney's office wrote the Agreement with input from the Community Development Department. (Exhibit "D"). I don't recall any face to face meetings with Mr. Dasen or his representatives, or the Crowley Firm. Larry Gallagher of Community Development negotiated on behalf of the City. As previously stated, negotiating and drafting the Development with the Dasen group took place over three months, not six as stated in Saxby's letter. To my knowledge Dasen was represented during this period by the Crowley Law Firm and Mary Dyer was handling the matter. On May 16, 1997, my secretary sent a FAX message to Dyer enclosing the "final product" of the negotiations. (Exhibit "E"). The message also requested input if any problems were noticed. It should be noted that as drafted the Agreement listed the parties as the City of Kalispell and the Outlaw Inn, a Montana Joint Venture, including Richard A. Dasen and Southgate Mall Associates. The Council approved the sale of Haven Field on June 16, 1997. (Exhibit "F"). On July 11, 1997 this office dispatch three executed copies of the Development Agreement to the Crowley Law Firm. (Exhibit "G"). Shortly thereafter, although I do not have a phone log of any conversations, it is my recollection that Dyer stated that the Development Agreement had been approved by the Dasen group, and in fact signed by Dasen, and execution by Southgate Mall Associates was ministerial. The City anticipating execution of the Development by Dasen and Southgage Mall Associates closed the sale of the property on or about July 15, 1997. (Exhibit "H") No objections to any of the provisions of the Development Agreement were received between May 16, 1997 and July 15, 1997. A protracted attempt to obtain an executed Agreement followed the closing. Dyer was absent from the Crowley Firm for a period of several months after July 15, 1997 for maternity leave. Numerous phone calls regarding the whereabouts of the Agreement were evasively returned. Sometime during the late Fall of 1997, Dan Johns indicated in a telephone conversation indicated that Dasen had objected to the payment -in -lieu of provision in the Agreement. I indicated that this was a surprise to the City because throughout the negotiations, at least, this office had not been appraised of any objection by the Dasen group to the payment the payment -in -lieu provision. (Exhibit "I"). During the months December, 1997 and January, 1998, this office and Crowley entered into discussions aimed at altering the Agreement eliminating Southgate Mall Associates as parties and making other changes necessary so that Richard Dasen would be personally liable for performance. The ramlow. wpd - 2 - payment -in -lieu provision however was not eliminated, and to my recollection elimination of the provision was never considered by the City. (Exhibit "J"). The more expensive storm drainage system was a necessitated by site conditions, and not an extraordinary requirement imposed by the City. Ground water elevations were above the storm water system resulting in a non-functioning system. Finally after some discussions with Jackola Engineering, the Public Works Department essentially washed its hands of the matter by determining the system to be private and therefore eliminating PWD concerns. (Exhibits "K" and "L"). Dasen in the offer to purchase Haven Field on January 30, 1997 indicted that the Dasen group expected assistance from the City presumably pursuant to the Urban Renewal Law. (Exhibit "M")' However, in a February 3, 1997 letter Dasen stated that "no additional costs to the City" would be incurred with regard to infrastructure items. (Exhibit "N"). To my recollection during the negotiations this office asked and was informed by Dan Johns that the Dasen group would not be expecting any tax increment assistance. Any agreement to provide tax increment assistance would have be part of the Development Agreement. This office is suspicious of the claim by Saxby that the subdivision approval took an inordinately long time. FRDO and Outlaw Inn representatives met and discussed of the development of Haven Field in July of 1997. (Exhibit "0"). However, FRDO files show that an Application for Preliminary Plat Approval was not made until January 8, 1998. A Pre -Application Meeting took place on February 17, 1998. (Exhibit "P"). FRDO received a subsequent Application for Minor Subdivision Preliminary Plate Approval on May 22, 1998. (Exhibit "Q"). Final Plat Approval was granted by the City Council on July 20, 1998. Saxby's assertion that plat approval took 13 months is, demonstrably, incorrect. Admittedly, Clarence Krepps, City Manager, did authorize the one year moratorium on the collection of payment -in -lieu under the Development Agreement. The reasons were obvious. Dasen did not sign the Development Agreement until February 11, 1998, a month and eleven days after the payment -in -lieu became effective. Second, the City did not intend to issue tax increment bonds in 1998, which was the underlying reason for securing an income stream. In retrospect the City's interest would have probably best been served by refusing to sell the property to the Dasen group without an ramlow . wpd - 3 - executed Development Agreement or demanding recission of the sale once Dasen failed to sign the Development Agreement. The City was not overly sophisticated in dealing with the Dasen group. From my perspective Dasen's claim of lack of consideration and subsequent modifications may be made from a legal position. However, the City did forbear collection of payment -in -lieu from January 1, 1998 to January 1, 1999 and did not demand recession of the sale. The basis of the bargain with the Dasen group was the payment of at least $124,000 annually. If Dasen did not perform, the consideration for the City selling the property failed. (Exhibit "R"). The representations made by Saxby that previous City Managers have indicated the correctness of Dasen's argument is unknown to this office. Neither Clarence Krepps or Al Thelen to may knowledge ever demanded any thing but performance from the Dasen group. Mr. Thelen wanted the payment -in -lieu to be calculated from January 1, 1998. (Exhibit "S"). He certainly did not admit that the City was dilatory in handing the sale of Haven Field, the Development Agreement, or in granting approvals necessary for the process. Finally, I question why Saxby includes Northwest Investment Partnership, LLP as a real party in interest in the dispute. A contract exists between Richard A. Dasen and the City of Kalispell. The City has not consented to a substitution or expansion of the parties to the Development Agreement and Northwest Investment Partnership, LLP has no standing in the matter. I hope that this memo provides you with at least some information regarding the reason why the City believes Dasen should pay in accordance with the Development Agreement. Please contact me when you have had an opportunity to digest the information contained herein, and we will arrange a meeting with the City to discuss your review. Sincerely, Glen Bier City Attorney pc: City Manager raml ow . wpd - 4 -