A judge issued a partial summary judgment, saying the city was correct in ending a special tax increase financial district that had been used to pay environmental clean-up costs for the site redevelopment.
The decision is a blow to Moorhead Holiday Associates and developer Richard Jordahl.
A developer attorney said ending the Hazardous Substances sub-district could cost its clients more than a million dollars. The HSS ended in 2018 when city officials determined that all remediation obligations and a loan were repaid.
In early September, Seventh Judicial District Court judge Jade Rosenfeldt granted partial summary judgment to the city after taking about three months to weigh the issues in the case.
City manager Dan Mahli said the ruling proves the city acted legally and honorably.
“What this tells me is that the town of Moorhead has followed the law and our agreements and the court agrees,” Mahli said Tuesday (September 21st).
“This is a statement that Moorhead has kept its word, as we do with all of our development partners, so we are delighted,” said Mahli. “We can’t wait to put this behind us. “
Mahli said all debts associated with the environmental remediation on the Holiday Mall have been paid off and no costs are left overdue.
“This project was closed correctly. It’s done, ”said Mahli.
Igor Lenzner, lawyer for Holiday Mall Associates and Jordahl, said he and another lawyer are weighing the decision and legal options.
“Obviously we weren’t happy with the decision. It was not what we were looking for. This is a partial summary judgment, so it doesn’t settle the whole case, ”Lenzner said. “What we are doing now is reviewing where we are with regard to this matter in the future.”
Lenzner said a partial summary judgment is generally not appealable until the case is fully resolved. If the ruling stands, Lenzner said it could cost his clients more than $ 1 million in lost revenue.
Rosenfeldt has scheduled an Oct. 5 conference for the case.
“I think at that point we will have a discussion with the tribunal ‘on the remaining issues,” Lenzner said. “Right now it’s a bit up in the air in that regard; is holding.
The main district for funding tax increases remains in place and will end in the late 2020s, Lenzner said.
According to court documents:
In 2001, the city established a Tax Increase Funding (TIF) headquarters to help develop the aging mall in the northeast quadrant of the intersection of Eighth Street South and Interstate 94. The redevelopment included the demolition of dilapidated buildings, the installation of new infrastructure and then the development of a hotel and conference center, a big box retail store and an office park.
In addition, the city has implemented an RSS to help cover the costs of cleaning up contamination at the project site.
To finance the initial costs of the project, nearly $ 10.2 million in general bonds were issued; an interfund loan of $ 1 million added in 2003 by the City from the general fund; and EDA provided $ 2 million in pay-as-you-go funding.
About $ 1.6 million of the bonds were allocated to HHS, and the loan funds were also spent on remediation.
In 2009, the two sides were in conflict, with developers disputing the amount of money generated by the TIF district and applied to the project’s debt. Meanwhile, the city and the EDA have argued that the developer hasn’t done enough to redevelop the site.
As part of a 2009 agreement, the city repaid two sets of bonds, which included HHS bonds. The repayment generated savings which were applied to the debt on the project and provided an immediate payment of $ 1,125,000 to the developer.
Both sides agreed that further tax increases would be applied first to annual debt service on bonds, then to loan and finally to project debt.
In 2018, when the final payments were made on the RSS and interfund loans, the RSS was removed by the city. The plaintiffs called this a breach of contract, while the city and the EDA said the HSS had been properly terminated.
The judge’s ruling pointed out that under Minnesota law, HSS tax increases cannot be applied to remaining general development costs. He also indicated that the HSS bonds were directly linked to the contamination costs linked to the development intervention plan. And that the financial aid and the costs were agreed in the contract.
A 2003 agreement that added the interfund loan to help pay for remediation costs also indicated that both sides acknowledged that development cost overruns “are entirely and solely the responsibility of the developer.”
“This Court cannot find a glimmer of language in the contracts between the parties that would suggest that this was a breach of contract,” Rosenfeldt wrote.
The judge also ruled out other claims made by the complainants.
“Under the plain language of the agreement (and the Minnesota statutes), the HSS was legally terminated because the costs of environmental remediation were recouped. The city and the EDA have acted in accordance with the accord and Minnesota law, ”court documents said.