City-Funded Development a Necessary Failure

Minneapolis City Hall has recieved a partial repayment of loans made to a failed developer for a failed downtown retail project. The $29.4 million was:

a far cry from the more than $66 million the city once expected to collect in principal and interest on the three loans. Brookfield defaulted in 2002 on two loans involving the first phase of Gaviidae that included Saks, and the city took over the Saks property.

"This is an example where the public-private partnership has created something positive," said David Sternberg, who heads Brookfield's Minneapolis office.

“Positive” must have a different meaning in the subsidized development world:

The city and Brookfield are moving toward getting appraisals on the Saks portion of the Gaviidae complex and could offer it for sale. The city recently estimated a market value of about $15 million on that property, of which the city share would be in the $3 million to $4.5 million range, according to a staff report. Brookfield offered the city at least $5 million up front for the property after the developer defaulted, with the balance of that property's $15.5 million in loans to be paid over 10 years.

The city once expected more than the almost $39 million it has gotten with Monday's payment, plus annual interest on the third loan for the Neiman Marcus, or second phase, of Gaviidae, which also included the Dain RBC office tower. It also expected $28.9 million on $15.5 million in earlier loans on the Saks phase of Gaviidae.

I am positive that the people of Minneapolis were victimized by elected officials playing at development.

The loans were made in an era when "there certainly was a view that to keep downtown healthy... the city had to be involved," said Steve Cramer, a council member at the time and later the development agency's head.

Of course the view from City Hall was that the government had to be involved. It’s O.K. now because every election scours the foolishness out of government. Or not:

"Instead of making investments that benefit the lucky few, we make investments that benefit the many," Rybak said.

Please send my check asap, R.T.