Should City Be Worried About Other LLC Agreements?

The owners of the former Burton-Katzman development company that the City of Dearborn is suing for not completing a multi-million dollar downtown residential-retail complex are now asking a Wayne County Circuit Court to dismiss the lawsuit.

Developer Burton-Katzman finished the first phase of the West Village Commons but failed to build the commercial/residential building it promised.

The request is the latest twist in what is shaping up to be a messy court fight between Dearborn and the Bingham Farms based Burton-Katzman company. Burton claims Dearborn entered into an agreement with a limited liability company that Burton owns and created especially for the development called West Village Commons LLC, which dissolved last year.

Dearborn Mayor John B. O’Reilly, Jr. told the Dearborn Press & Guide that the city entered into an agreement with Burton-Katzman, the development company, not West Village Commons LLC, which oversaw the project along Michigan Avenue called West Village Commons.

“LLCs (limited liability companies) don’t have any assets,” O’Reilly told the Press and Guide. “We entered into an agreement with Burton-Katzman because they had the financial wherewithal. They’re saying (Burton-Katzman) took the steps to transfer things to an LLC, but they didn’t.”

A judge will sort this one out. At stake is more than $16.7 million, an amount Dearborn is seeking from Burton-Katzman for its failure to deliver its end of a development agreement. For a copy of the original DeepSaidWhat post and copy of the lawsuit, click HERE.

If a judge should rule that Dearborn did enter into an agreement with an LLC and not Burton-Katzman one has to wonder if city officials, in these tough economic times, should be concerned about the Wards development at Michigan and Schaefer. The group overseeing the project also is a limited liability company called REDICO Holding, LLC, which is owned by the REDICO Development Company.  That project is worth more than $37 million.

At Dearborn Mayor John B. O’Reilly, Jr.’s State of the City earlier this month, a video compilation of the highlights from the city in 2008 were played for the audience. As many may not have had a chance to view it yet, we thought it would be a good idea to post it here.

The entire video runs about 11 minutes and on a chilly day like today it’s a good way to spend some time. The video is nicely done and really captures a great deal of what took place in Dearborn in 2008 . . . and that’s a lot. Kudos to the CDTV team that produced this video!  A lot of hard work went into it and it shows.

If there was ever any doubt about the positive impact that Dearborn’s Operation Eyesore and Neighborhood Stabilization programs are having on city neighborhoods one need not look any further than these photos. 

A new home on Parker after Operation Eyesore.

Operation Eyesore, which started in 1960 was developed so Dearborn could acquire and remove buildings and then sell the land to private developers so new buildings can take their place. Operation Eyesore continues to work with owners of substandard homes and, in some cases, commercial properties in Dearborn.

Since Operation Eyesore was initiated, 1,288 buildings have been removed and 585 new dwellings have been constructed by private developers.

“The goal of the program is to keep the neighborhood at a higher level,” said John Nagy, Dearborn City Planner. “The importance of this is that there is a new interest in the neighborhood and it encourages improvements in existing homes.”

Dearborn’s Neighborhood Stabilization Program was launched by Mayor John B. O’Reilly, Jr., in May 2008 and since then the city has been buying marginal or undervalued foreclosed homes with the intention of reusing the property in ways that bolster the surrounding area. To add even more strength to the program, Dearborn will receive $2.4 million in federal neighborhood stabilization funding in 2009.

The home on Parker Street before demolition.

“We’ve earned those dollars because we earned the trust and respect of local, state and federal officials with our vision, our progress, and our fiscal responsibility,” O’Reilly said. “We’ve made great strides, quickly becoming a respected and innovative leader in this area. We’ll continue to buy marginal homes and clear the land to assemble larger, more desirable lots for resale or split them to combine with adjoining homes.”

O’Reilly said the city is looking at renovating and reselling some of the better houses it purchases as a way to give the city a chance to welcome more first-time home buyers in Dearborn.

Some quick facts:

– Dearborn in 2008 purchased 67 properties through the Neighborhood Stabilization Program, Operation Eyesore and a special HUD program.

– Dearborn purchased all of the parcels for just 17 percent of their total value.

– Through Operation Eyesore, 22 marginal homes were demolished and nine modern ones built, including before and after photos here of a home on Parker Street.

Dearborn property owners who feel they may have a building that is not up to standards and would consider selling the property to Dearborn should contact the City Plan Department at 313-943-2170.

Dozens of you have written us over the last few days asking about the legitimacy of a telephone survey some residents have received in recent days.  Rest assured, the telephone survey is an official one.

The City of Dearborn has hired a company to conduct a phone survey of its residents to best determine what residents want and likely get an idea of what services it could scale back or cut altogether.

Dearborn Mayor John B. O’Reilly, Jr., mentioned the telephone survey in his State of the City speech Wednesday

Dearborn is conducting the phone survey to determine what services residents value most.

night, telling residents that the community survey was being conducted to help Dearborn better understand the priorities of its residents. The complete copy of that speech can be found at our earlier post on DeepSaidWhat by clicking HERE

“I know it’s hard to talk about pushing forward when facing such difficult conditions,” O’Reilly said in his speech. “But our brightest dreams are generally conceived in our darker hours. So now is a chance to dream and to plan and to position our city for a promising future.

“I want to make you an integral part of that process. That’s why we’re reaching out in a number of ways to get your input and feedback.”

The survey company, according to residents who have already received the calls, asks about city services and to rank them in order of importance.

Resident Mary Jo Durivage is reminding residents to not forgot the importance of keeping our libraries at the top of our minds, too. And, she is right.  Our libraries are even more important in these trying times.

“If you do receive a call, please tell them about the importance of keeping the libraries, including the branches (especially Bryant) open,” Durivage says. “During bad economic times, the library becomes even more important for a myriad of reasons — job searching, reading magazines we cannot afford to subscribe to, movies and music for some free entertainment, a place of respite, and computers. We all have our own reasons. Libraries are often the first to go on the chopping block.  Please express your support.”

“For a long time now I’ve felt that we haven’t been meeting our service goals with regard to our Building and Safety Department,” O’Reilly said.  “Despite our employees’ best efforts, they’ve been undermined by a structure that just didn’t work.”

The mayor said the reorganization will be built around residential customers and business customers.

“For too many years we’ve blended these groups together despite their distinct needs, frustrating everybody,” O’Reilly said.

So under the mayor’s new plan, a new Residential Services department will be created to offer current and new residents the services “they require to maintain and improve their properties,” he said. The leadership of the Dearborn Area Board of Realtors also provided valuable feedback to the city about the new system.

“Our goal is to give (residents) the time and attention they deserve using the tools and processes that will make it much more convenient to do business with us,” O’Reilly said. “We’ve already made a major improvement for those selling or buying a home in Dearborn. Through new technology, we’ve converted hard-to-read and often confusing inspection reports to reports that are clear, printed and produced on the spot.”

O’Reilly said the new technology in the Residential Services department will be linked to the city’s scheduling system to dispatch inspectors more efficiently. The technology also will be tied to the city’s record system so that the city will always have “complete and clear documents to eliminate confusion and misunderstanding. We won’t end up with missing or lost documents,” O’Reilly promised.

An important focus of the new Residential Services department will be on the city’s Neighborhood Stabilization program, which since May 2008 has been purchasing marginal or undervalued foreclosed homes with the intention of reusing the property in ways that bolster the surrounding area.  Dearborn will receive $2.4 million in federal neighborhood stabilization funding in 2009 to continue this work.

When a tanker truck loaded with 10,000 gallons of fuel overturned last Friday on Telegraph in Dearborn, many of us saw the flashing lights from police and fire crews but what we didn’t see is all of the other behind-the-scene work that took place to ensure residents remained safe.

We thought it would be worth mentioning all of the hard work that took place sight unseen. It’s a good example of teamwork and it shows how our tax dollars are put to good work for proper emergency response and our safety, too. The response teams that jumped into action involved numerous city departments, outside agencies and private firms hired by the City working together. It took a lot of pre-planning and practice to ensure all the right things would be done for such an accident.

 To that we say, well done. Here’s a rundown of who took part in the behind the scenes work:

• Dearborn police officers closed Telegraph and access points from nearby side streets to traffic, and also set up a safety perimeter around the area. The road was immediately closed to traffic. It was soon determined that the tanker was leaking fuel and that it appeared that the gas was entering nearby storm sewers. Homes in a four or five-block area were evacuated as a precaution. (Residents were able to return to their homes early the next morning.)

• The Dearborn Fire Department served as the lead response agency. Battalion Chief John Hay acted as incident commander and issued the calls for all of the resources needed to deal with the incident. 

• Firefighters arriving at the scene attended to the tanker driver’s medical needs, helping the driver at the vehicle despite the extreme hazard of leaking fuel.

• Firefighters sprayed special foam from fire department apparatus to help suppress gasoline vapors.

• The Department of Public Works (DPW) provided road salt and street barricades, and its Water Division provided maps of area sewer lines, so that the flow of fuel that made it into the sewers could be tracked.

• The Dearborn Recreation Department and the City’s emergency management coordinator opened the Ford Community & Performing Arts Center as a shelter in the event any evacuating residents did not have family or friends to stay with.

• Representatives of other City departments stood ready to use Dearborn’s reverse 9-1-1 system if it were needed to quickly advise residents of any public safety messages. A second, Wayne County-wide information system was also on standby if needed. (Neither were.)

• The Wayne County Hazardous Materials Response Team was called to the scene. Dearborn helps fund the team and contributes firefighters as team members. The team conducted monitoring of the air and sewers in the area, identified the five leak points on the tanker, plugged them and created the tap needed to pump the tanker’s fuel into another tanker for transport away from the scene.

• The Wayne County Airport Authority (which operates Detroit Metro Airport) brought one of their specialized vehicles to the scene. The vehicle carries high-volume expansion foam, which would have been available to suppress any fuel fire that might have occurred.

• State Farm Insurance agent Bob Zakar volunteered the all-night use of his Telegraph Road office to help first responders.

• The Salvation Army provided food and other support to response personnel.

• Representatives of the U.S. Coast Guard monitored the situation, in the event that leaking fuel had made it from the sewers into the Rouge, and from there to the Detroit River.

• Representatives of the Michigan Department of Environmental Quality were also alerted, and monitored the response.

• Also alerted and ready to respond were a variety of other agencies such as Wayne County roads and water system officials, the Detroit Water and Sewerage Department and the Michigan State Police.

• The City also contracted with private firms to provide assistance:  VacAll Service of Taylor cleaned up the spilled fuel and J&M Towing of Dearborn righted the overturned tanker and towed it away, allowing Telegraph Road to reopen to traffic.

• City officials also acknowledged the cooperation of the owner of the company that owned the overturned tanker – Fuels Transportation, Inc., of Woodhaven – indicating that the owner stayed at the scene until the incident was resolved.

The City of Dearborn is suspending the parking rules for Public Service Days until the week of April 6-10.

That means residents will not be required to remove their parked vehicles from the street on their designated Public Service Days until the week of April 6-10.

The parking rules are being suspended because of the season’s heavy snowfall, which has made it difficult for residents to find alternative places to park on their Public Service Days.  For instance, residents who usually park in nearby alleys may not be able to do so because snow has piled up in those alleys.

The parking rules are suspended for Public Service Days that occur the week of Feb. 2-6, the week of Feb. 16-20, the week of March 2-6 and the week of March 16-20. 

Parking enforcement will begin again the week of April 6-10.

Residents are still encouraged to remove their parked vehicles from the street if possible on those weeks. Removing parked vehicles allows city crews to perform services, such as supplemental snow plowing, more efficiently, because crews can reach curb to curb.

By now, many of us have either read in the Dearborn Press & Guide, Dearborn Times Herald or the Detroit News about the City of Dearborn’s lawsuit against developer Burton-Katzman.

Dearborn filed the suit last Friday in Wayne County against the Bingham Farms, Michigan, company for failing to live up to a contract it signed with the city in 2003 to build a new hotel, complete a 48-unit residential condo project and for failing to inform city officials that the very company the city had a signed contract with for the actual development was being dissolved.

Click below for a copy of the lawsuit:

city-of-dearborn-vs-burton-katzman-development-company-inc

In all, Dearborn city leaders are asking a Wayne County Circuit judge to order developer Burton-Katzman to complete its projects and pay the city some $349,000 in unpaid taxes and water bills, along with penalties, as well as damages of $16.4 million to cover the city’s costs for two parking decks.

“The lawsuit was filed only after more than 18 months of pro-active discussions with Burton-Katzman to find suitable alternatives that were reasonable given the changing economic climate,” said Dearborn Mayor John B. O’Reilly, Jr. “But it became apparent a lawsuit was our only avenue. That has become even more clear after we discovered that the parties weren’t honest with us.”

The lawsuit really shouldn’t come as a surprise to anyone considering how long this project has taken to get to where it is today. As a general rule, cities don’t typically like to be in court, but Dearborn officials really didn’t have any remaining options. The 20-page lawsuit, along with a packet of exhibits, including letters exchanged between the two parties, provides some interesting details.

The actual contract signed between Dearborn and Burton-Katzman clearly states that construction on the property between the two parking decks for the hotel was to occur not later than 60 days after “substantial completion” of the retail components, according to the lawsuit. The grand opening of the West Village Commons retail section occurred in June 2006. So Burton-Katzman, the city states, was in default.

Dearborn also is suing Burton-Katzman for failing to inform city leaders that the company the city had entered into a contract agreement for the development was being dissolved even while it tried to renegotiate elements of the contract with Dearborn.

“This misleading information constitutes silent fraud,” the city of Dearborn states in the lawsuit.

In fact, on March 28, 2008, the same date Burton-Katzman filed papers with the state to dissolve its operations, both Peter Burton, president of Burton-Katzman, and Charles DiMaggio, vice president of project management for Burton-Katzman, attended a breakfast meeting with city officials at the Dearborn Inn and neither mentioned what was going to take place, the suit alleges. In as many as five subsequent meetings between Burton-Katzman officials and city leaders, the “dissolution of Burton-Katzman remained concealed,” the suit states.

Whether any circuit judge will order Burton-Katzman to construct a hotel during these tough economic times or finish building the remaining 12 condo units of a promised 48 condo project is anyone’s guess. However, the contract between the city and Burton-Katzman also states that “economic conditions are not recognized as a “Permitted Delay” or an “Unavoidable Delay” that would allow construction to be postponed.”

A judge might order the developer to reimburse the city for lost taxes on the estimated value of the buildings that were never constructed and maybe even the $16.4 million the city paid to build the two parking decks.

In letters to Dearborn city officials, Burton-Katzman did cite economic conditions as among the reasons it could not live up to its contact obligations. Burton-Katzman even tried to sell the parcel of land “without the city’s consent” for a hotel that “would not have met projections and obligations under the Development Agreement,” the lawsuit states.

In one letter, Charles DiMaggio, senior vice president of project management for Burton-Katzman, blames the city for his company’s failure to finish the project.

“ . . . the West Village Commons project experienced nearly 2 years of delay as the City initially chose to work with another development company,” DiMaggio writes in a letter to City Attorney Debra Walling dated July 31, 2007. “Had the City initially selected Burton-Katzman, the time for construction on Parcel C (the land between the two parking decks) would have occurred two years earlier,  that is March 2004 in lieu of March 2006. Since economic conditions in March 2004 were far superior to those encountered today (July 2007), it is reasonable to anticipate the project may have now been completed.

“Second, it will be recalled Burton-Katzman added second floor office space to the West Village Commons project at the urging of the City. Today (July 2007) not a single square foot (37,000 feet in all) has been leased, and as a result the project’s financial drain on Burton-Katzman can be said to rival that of the parking decks on the City.”

In that same July 31, 2007 letter, DiMaggio lists the work Burton-Katzman was doing to get the vacant land between the parking decks developed, none of which materialized. The list of ideas from Burton-Katzman in the letter include:

• “Numerous meetings and discussions have been held with the Fourmidable Group and Hakim Fakhoury. It was understood from the City the group may have a development proposal it wished to pursue on Parcel C (the land between the two parking decks).  Despite our meetings and discussions no proposal has been made to Burton-Katzman or to our knowledge the City, and it would appear any interest this group may have had, has waned . . .” 
• “Options for senior housing have been and continue to be explored. We have presented the site to Sunrise Development . . . Sunrise has indicated independent senior living would not be considered for this site, but assisted living is possible . . . We have also partnered with a development entity from St. Louis, HPD Cambridge, Inc., the purpose of which is to develop moderate sized, 50-60 unit, urban senior projects (www.urbansenior.com) . . .”
• “A third area of residential exploration may be student housing related to University of Michigan-Dearborn . . .” 
• “The property is being presented to a national hotel chain looking for an opportunity to enter the Dearborn market. . .” 

Dearborn Council President Pro-Tem Nancy Hubbard had this to say about the situation the city is faced with: “I’m surprised that they would show bad faith after the City had tried so hard to be patient and find a solution that was best for everyone.”

Just to pick up where we last left off following some changes that are almost completed here at DeepSaidWhat.com, the recount for the 19th District Court is over, the request by Candyce Abbatt withdrawn after just 28 of the city’s 58 precincts were recounted.

This of course means the outcome of the election for the district judge seat remains unchanged and goes into the record books as incumbent Judge Mark Somers as the winner with 17,077 to Abbatt’s 16,849 votes, same as on election night.

But guess who is now being asked to pay for the recount? You guessed it, the City of Dearborn.

Abbatt paid Wayne County the required $10 per precinct charge for a recount up front, totaling $580, but what is less clear is who will finally pay the people charges to actually get the recount machine up and running. Also does Abbatt get a refund of $300 for the 30 precincts that were never counted?

Consider this, the recount, according to City of Dearborn officials in the clerk’s office, required 27 people and looked like this:

– 20 state canvassers (2 people sitting at 10 different tables getting paid between $12 and $18 per hour)
– 2 Wayne County workers
– 1 corporate counsel person (Upwards of $120 per hour)
– 3 State of Michigan workers to oversee the counting
– 1 City of Dearborn worker

Dearborn City Clerk Kathy Buda says when she asked the State of Michigan employee in charge of the recount who would be picking up the tab for the work, the State worker’s response was that Wayne County would be paying.

But Buda says Wayne County will likely flip the bill back to Dearborn. That would mean one day pay for the group of workers for the first day of counting and two hours of pay the second day for showing up to do the remaining count only to learn the recount had been withdrawn by Abbatt the previous evening. The precincts counted in the district judge race included precincts 1, 2 (both McDonald School), 4, 5 (both Oakman School) 8 (Maples School), 20 (Salina School), 39 (Divine Child elementary); absentee boards 951 and 956. We requested a list of the 28 precincts counted but that wasn’t readily available.

“I have no doubt that the county will send Dearborn a bill,” Buda told DeepSaidWhat.com. “We recently received a bill from them for a recount resulting from the Aug. 5, 2008 Primary for State Representative – District 11. Three of our precincts were involved plus one absentee board. My deputy took our supplies downtown and the process took 1.2 hours. They want us to pay them $671.88. I am refusing to pay (with support of Council & Administration).”

It sounds like another bill from Wayne County will soon be on its way to Dearborn. Stay tuned.

Candyce Ewing Abbatt missed unseating Dearborn’s 19th District Court Judge Mark Somers by just a couple hundred votes. So it’s no surprise she has filed petitions with the Secretary of State seeking a recount.

In a front page story in Sunday’s Dearborn Press & Guide, Abbatt tells the paper that while she doesn’t believe the outcome of the election will change, she owes it to her supporters to address what she says are “concerns about the outcome of the election.”

“After evaluating the election data by precinct and speaking with those who have expertise on these matters, I requested a recount based upon statistical aberrations in some of the results,” Abbatt tells the Press & Guide. “While I am not counting on a change in the outcome, I felt that I owed it to my community and my supporters to address concerns about the outcome of the election, given that it was so close.”

Somers defeated Abbatt by 228 votes, 17,077-16,849.

Abbatt, who was seeking her first public office, told the Press & Guide that even with a highly-competent city clerk and staff, computer error is still possible. Abbatt said a recount will put all doubts to rest about the outcome, so both sides should be pleased with the request.

While final campaign expense figures aren’t due until Dec. 4, records through Oct. 21 reveal that the race for this judge seat was an expensive one. Quoting an amended pre-general election campaign finance summary page, the Press & Guide said Abbatt received $161,055 in total contributions for her campaign from April 15, 2008, to Oct. 21, 2008. Abbatt spent $126,779.11 on her election bid, leaving the campaign with an ending balance of $34,275.89, according to the report.

Somers, meanwhile, received $41,204 and spent $32,135.32 on his re-election bid, leaving his campaign with $9,069.38, according to pre-election figures the paper quoted.
For the Press & Guide story, click HERE.