City Council’s Discounted Loan to Developer Called Illegal

July 8, 2013
Oversight Attorney Paula Crow

Oversight Board Attorney Paula Crow

It is illegal for the City Council to allow Bay Street Mall developer Madison Marquette to pay back just $12 million on an $18 million dollar loan, according to the attorney for Emeryville’s Oversight Board. The county-level board is charged with monitoring the city’s transition after the elimination of state redevelopment funds.

The City Council last week voted 3-2 to allow Washington DC-based Madison Marquette to repay just $12 million on a promissory note owed to the city’s former Redevelopment Agency for $18.345 million. The City Council majority (Ruth Atkin, Nora Davis, and Kurt Brinkman) supported the loan discount, while Council members Jac Asher and Jennifer West voted against it.

“Payoff of the promissory note for the discounted amount of $12 million is prohibited … The former redevelopment agency has no authority to modify any existing agreements with any entity, including forgiving all or part of any balance owed on a loan, or changing any term of a loan,” wrote Oversight Board Attorney Paula Crow, in a memo included in the Board agenda packet for its Tuesday, July 9, meeting.

City Attorney Mike Biddle (L) with former City Manager Patrick O'Keeffe

City Attorney Mike Biddle (L) with former City Manager Patrick O’Keeffe

The City Council thought it could forgive Madision Marquette $6.5 million of the loan based on information provided by Helen Bean, Emeryville’s Director of Economic Development and Housing. In an April 16 memo to the Council, Bean argued that the present value of the $18 million balance, at a 7 percent capitalization rate, equals the payoff amount of just $12 million. And City Attorney Mike Biddle advised the Council that this action was legal. (Biddle initially failed to include Ms. Crow’s latest memo in the Oversight Board packet for tomorrow’s (Tuesday) meeting and did not do so until she reviewed the the packet and complained that her memo was not included.) This is the second major screw-up by Biddle involving city redevelopment money. The first, brought to light by attorney Crow in May 2012,  was when he tried to execute a contract with the state for $21 million in redevelopment funds two days after state redevelopment was eliminated. The money was to be used for the planned Center of Community Life, a joint city-school district project creating a central campus for the city’s elementary and high school as well as a community center with playgrounds, “paths and plazas,” and space for social service providers.

“I’m amazed that the cockamamie rationale presented for this gift to Madison Marquette could make it through the City Council,” said Oversight Board Member Greg Harper, who is also president of the AC Transit Board. “The $18 million loan is rock-solid, secured by a lien on the property, which is probably bothersome to Madison Marquette for a sale or re-financing of Bay Street Mall. But that’s the deal the developer made and is no reason for the taxpayers to take a $6 million loss. My congratulations to Ms. Crow for calling this out.”

The Oversight Board meets 5:30 pm Tuesday, July 9 in City Council Chambers, Emeryville City Hall.

(To make a comment or to view the comments of others, click on the headline to go to the story page, then scroll to the bottom.)

10 Responses to City Council’s Discounted Loan to Developer Called Illegal

  1. shirley enomoto on July 8, 2013 at 4:13 pm

    cockamamie is right. I bet the oversight committee is now sorry they appointed ms. crow to the committee. another end run by patrick o’keeffe before leaving as city manager? and why didn’t atkin, brinkman and davis question the legality before approving this discounted payback?

    thank you ms. crow.

  2. Betsy Cooley on July 8, 2013 at 4:37 pm

    The Oversight Committee meeting is at 5:30 p.m. on Tuesday, July 9, 2013, according to the agenda packet (not Monday, July 8, as stated).

    • Tracy Schroth on July 8, 2013 at 5:33 pm

      Thanks, Betsy. Several readers pointed this out and I have corrected the story.

  3. Joe Cohen on July 8, 2013 at 4:51 pm

    Anybody with an ounce of compassion will sympathize with Madison
    Marquette’s craving to have more money. I propose that those of us care send them a few dollars to augment the six million dollar gift from the city council.

  4. Jonas Grumby on July 8, 2013 at 5:18 pm

    O’Keeffe, Davis, Atkin and Brinkman should be prosecuted and imprisoned. These crooks should be breaking rocks on a chain gang.

  5. ken bukowski on July 8, 2013 at 7:09 pm

    It seemed to me this was not legal. I asked questions about it in the beginning, and never got an answer The importance of proper legal advice is paramount to making proper decisions. The city just continues to pay Michael Biddle $5,000 per week in wages and benefits for biased information.

  6. Anonymous on July 9, 2013 at 4:24 am

    We need to recall Council Members Davis, Atkin, and Brinkman for this and other illegal/ unethical actions.

  7. Anonymous on July 9, 2013 at 4:27 am

    It appears that it is the same old same old when it comes to Biddle and O’Keeffe … the latter is gone, fortunately, but Biddle, with all his ineptness, excessive salary and perks all negotiated mutually with O’Keeffe, is still retained by the city. Remarkable to say the least.

  8. Brian Donahue on July 9, 2013 at 3:28 pm

    City Attorney Mike Biddle can present an argument saying this loan renegotiation is legal, even if the merits are dubious. The City Council certainly has received bad counsel from Mr Biddle many times in the past. But what points to Mr Biddle’s character here is the failure to include the memo from Ms Crow, the Oversight Board’s attorney, in the Board packet for their consideration. That’s a bridge too far. This Council unfortunately keeps sticking to Biddle, regardless of the quality of the services he provides. We are not getting good value for our money.

  9. Anonymous on July 9, 2013 at 6:25 pm

    Judging from the comments on Tracy’s article on the legality of discounting Madison Marquette’s loan, it’s time to impeach (sounds better than “remove”) Biddle and appoint Ms. Crow as city attorney.

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