City government may have invented a mind-bending new way of conducting business: Time travel.
The city's Loan Board of Review - a committee of city staff that watches over city loans - managed the feat earlier this year when it voted in July, but took action a month earlier, according to city records.
The board's quantum leap involved a low-income apartment building and a controversial loan agreement between the city and Racine developer Jim Spodick.
Reviewing city minutes shows the Loan Board of Review voted unanimously June 18 to "accept a final payoff of the loan on 255 N. Memorial Drive in the amount of $635,000." Spodick owned the building in question - the Wilmanor Apartments - and asked the city to reduce the amount of the payoff loan on the low-income property by $200,000. (More on the significance and back story of the vote below.)
The vote appears to be straight forward until you look at minutes from the board's July 16 meeting. There you see three things:
1. The board took up Spodick's request again (even though it seemingly dealt with it in June).
2. The board voted on the item by email, which is illegal under state open meetings laws. (All government votes have to take place at a public meeting.)
On June 30, via an electronic poll, the Loan Board of Review recommended that no discount on the loan amount be given based on the relative value of the property to the loan, and that there be a $40,000 discount on the loan to $635,000, based on the early payoff.3. The board actually voted to defer action on Spodick's request in June (meaning it didn't actually vote on the item, as the June minutes suggest.) From the minutes:
Recommendation of the Loan Board on 6-18-09: To defer this item to allow for additional analysis with the option of polling the board for a decision.So what really happened? Here's the non-altered timeline of events:
June 18 - The Loan Board of Review votes to defer action on Spodick's request until it can get an accounting report on the proposal. It appears to be a procedural move. Board members who attended that meeting included: Finance Director Dave Braun, interim Public Health Administrator Marcia Fernholz, City Development Director Brian O'Connell and Chief Building Inspector Rick Heller. City Attorney Rob Weber, who also sits on the board, was excused from the June meeting.
June 30 - O'Connell secretly "polls" board members by email and they vote to deny Spodick's request to reduce the amount of the loan payoff. It's unclear if the board reviewed the accounting report on Spodick's request. This same day, Spodick is scheduled to close on the sale of the property. He has to put off the sale.
July 7 - The City Council votes unanimously to approve the board's action, even though the board never officially voted to send the item to the council.
July 16 - The Loan Board of Review takes up Spodick's request again, despite it already being approved by the City Council. This time the board votes to affirm its June 30 "electronic poll" and then votes to change history by altering the minutes of the June 18 meeting to suggest the board actually voted then to deny Spodick's request, instead of deferring the request. All five loan board members attended this meeting.
(Interestingly, one thing not reflected in the July 16 meeting is the board's decision to alter its June minutes to reflect a new reality. We only know that occurred because former Alderman Pete Karas attended the meeting and observed the changes to the minutes. Here's another mystery: The city's official online records have two separate sets of minutes for one meeting. One set mentions the "electronic poll". One does not.)
Confused? So are we, because the board's actions don't make sense. It's clearly illegal under state law to vote by email, and it's highly questionable to re-write minutes to reflect actions the board didn't take. The issue gets murkier when the reason for the vote is considered.
The vote itself centers around a deal Spodick made with the city in 2006 to take over the Wilmanor Apartments at 255 N. Memorial Drive.
The city got involved with the apartments in 1993 when it contributed $675,000 in community development block grant funds to a $3 million rehab project to create low-income apartments. City officials knew it was unlikely they would see the money paid back and gave the money as a one-time, balloon payment loan due 18 years later. (The city likely wouldn't be repaid because two companies that had put in about $2.3 million were ahead of the city to be paid first on any sale of the property, which is valued at less than $1 million.)
Spodick got involved in 2006 when the Wilmanor Apartments were close to becoming the first WHEDA property to get foreclosed on. The building had fallen into disrepair and had few tenants.
Former Mayor Becker called Spodick because Spodick had success in redeveloping homes on West Sixth Street. Spodick agreed to take over the property - and keep it out of foreclosure - if two banks that had lent money for the project agreed to dismiss $2 million in loans on the property. The banks agreed because Spodick would preserve their low-income housing credits, which would have to be paid back to the federal government if the building went into foreclosure.
Spodick and his wife took over the building and rejuvenated the apartments (taking a huge hit in assessed property value in the process. Property taxes on the building jumped from $3,500 a year in 2006 to $28,000 in 2008). After a couple of years, they decided to sell the building to a company that manages low-income properties. As part of the deal, Spodick said he reached an agreement with Becker and O'Connell to knock $200,000 off of the $675,000 balloon payment set in 1993. The deal seemed reasonable because if the building had gone into foreclosure the city would have received none of its money back, Spodick said.
All was going well until Becker got arrested and resigned from office. Spodick said he still had a deal with O'Connell and proceeded with the sale as if he would only have to pay back the city $475,000. Things fell apart as he moved to close the sale.
On the scheduled closing date, June 30 of this year, Spodick learned from his title company that the city only agreed to a $40,000 reduction in the balloon payment. The decision left Spodick in a bind because he was under contract to sell the building. He proceeded with the sale at a personal loss.
Spodick is now trying to understand why the city reneged, and he's not getting much cooperation. Requests for emails and other documents have been delayed or stonewalled. He's now paying $735 to acquire emails - which are public records - to research why, in his opinion, there was an abrupt change in the city's stance on the balloon loan payment.
Spodick filed a $650,000 complaint against the city on Wednesday accusing officials of backing out of the agreement. Spodick said the complaint came from frustration over the city's reluctance to provide public documents.
"I really didn't want to do this, but they wouldn't provide the information," Spodick said.
The city has 120 days to respond to - and likely deny - Spodick's claim. Given the complexity and money involved, it's a safe bet this issue will end up in court.