City council delays on RDA loan/grant arrangement

By VERNON ROBISON

The Progress

The Mesquite City Council decided to hit pause on a previously approved Redevelopment Authority (RDA) agreement at a meeting held on Tuesday, May 9. The agreement had been forged to help a downtown property owner demolish a condemned motel building which had been deemed a public hazard in Mesquite.

Local businessman Mathew John, who is the owner of the building located at 151 E. Mesquite Blvd, was not in attendance at last week’s meeting. City Attorney Brian Pack was also absent. So was Mayor Al Litman who had helped Pack negotiate the agreement with John. In his place, Mayor Pro Tem Wes Boger was presiding at the meeting.

Council members, who still had reservations about the substance of the agreement, finally decided to table the matter until the next Council meeting.

On May 2, the council, sitting as the RDA Board, had approved the concept of this unorthodox agreement.

Trying to encourage and assist John in voluntarily taking action on the property, the agreement had offered an RDA grant of not more than $75,000 which equated to 75 percent of the estimated demolition costs. This is similar to other grants made by the RDA for improvements in the downtown central business district.

Usually, the property owner is required to come up with the other 25 percent; either through cash on hand or via a bank loan.

But since John had admitted having difficulty obtaining approval for a loan on the dilapidated property, the agreement also had the RDA offer a loan to John in an amount not to exceed $25,000 to pay for his 25 percent requirement.

After the demolition, the intent was for John to seek bank financing to repay the loan. If he repaid the loan by a certain time, the interest would be adjusted to zero. If not, interest of around 9 percent would be charged to encourage financing elsewhere.

The agreement also was to hold John to a very strict timeline on performing the demolition. If he did not perform to the timeline, the city would proceed to demolish the building and assert a lien on the property for the cost of demolition, the agreement states.

At the RDA meeting on May 2, council members had expressed concerns about the RDA acting as a bank of last resort for property owners who could not qualify for financing elsewhere.

But Pack assured the council that the City’s legal position would be stronger if there was a voluntary agreement with the property owner as opposed to a unilateral action by the government. This assurance convinced the council members bringing a unanimous vote of the RDA in favor of the agreement.

However, in last week’s council meeting, the same concerns arose.

“I originally thought this was going to be a loan for the entire thing as opposed to a grant,” said Boger. “That way, if he (John) flips it, the taxpayers aren’t out that money.”

City Manager Peter Jankowski said that a loan was also his initial understanding. But he explained that the negotiations had moved toward this hybrid grant/loan approach because of the difficulties that John was having in procuring financing for the project.

“I know Mr. John is having financial difficulties raising the funds,” Jankowski said. “So to speed the project along, this was one of the mechanisms that was recommended we take. The other mechanism is essentially for the city to exercise its right, do the work and issue a lien on the property. We can always go back to that if we have to.”

Councilwoman Karen Fielding was astonished that John was not in attendance at the meeting.

“The city doesn’t very often do this: put a deed of trust on a property this way,” Fielding said. “And he isn’t even here to discuss it.”
Fielding said that, if the city just acted to demolish the building and place a lien on the property, at least it would have some surety to recover the funds at the sale of the property.

“I’m not sure what direction to go here, but I’m thinking we need to clean up that corner sooner than later,” Fielding said.

Jankowski admitted that he also would have preferred a more straight forward demolition of the building by the city; which is a more common approach.

“I do think the City Attorney was trying to find a middle ground to speed things along and try to make all the parties buy into the project,” Jankowski said. “But (Mr. John) not being here tonight may show you some level of his commitment to the project. So I’m not sure it is going to be the best avenue with this particular individual.”

Councilman Brian Wursten made a motion to postpone the item for two weeks and pick it up again at the next Council meeting. The vote to approve the motion was unanimous.