Thursday, June 21, 2007

Heers Building: The Money Pit?

I realize that this is all "water under the bridge" now, but I found it very interesting and it never hurts to refresh our collective memories about how the City of Springfield has gotten into the position and circumstance in which they find themselves regarding the Heers Building.

This link takes you to the October 16, 2006 City Council Meeting Minutes.

See under "MDFB loan" how Vaughn Prost had been approved by Great Southern Bank for a loan extension and how Bank of America had issued two letters of commitment to Vaughn Prost. At least one of those letters of commitment was for nearly $20 million. The Great Southern Bank loan extension was contingent upon the City of Springfield's approval. The City refused to approve it.

While Carlson abstained from the vote...:

"Mayor Carlson noted that he would not be voting on the proposed bill, as he had a connection to Great Southern Bank."

...he did not abstain from commenting:

"Mr. Prost responded the amount owed to Great Southern Bank was $2,840,000. Mayor Carlson suggested Mr. Prost could pay the loan, noting that he would then own the building. Mayor Carlson remarked that Mr. Prost had been given two extensions on the project."

I wonder why Carlson was so catty? I mean, look at the summary above...Prost can pay the loan, then he'd own the building? Prost claimed he had two letters of commitment from Bank of America which implies he could have soon paid off the loan. He couldn't have paid off the loan that night but surely he would be able to shortly, that is, if the letters of commitment from Bank of America were reliable. Prost even gave a copy of one of the letters of commitment to the City Clerk that night.

I can't help but think Carlson, or the City "powers that be," wanted this vote to go through that night because he/they didn't want Prost to pay off the loan and become full owner of the building. I suspect Carlson/the City wanted the City to own and control the building. Why?

"Council Bill 2006-371. Special Ordinance 25077 was approved by the following vote: Ayes: Griggs, Jones, Wylie, Manley, Whayne, and Collette. Nays: None. Abstain: Wright and Carlson. Absent: Deaver."

Today, the consensus seems to be that the City was between a rock and a hard place and that they had no other option but to pass Council Bill 2006-371 to keep the Heers Building from going into foreclosure. The minutes from this October 16, 2006 meeting seem to suggest that they had other options but chose not to consider them.

If the City had agreed to the Great Southern Bank's extension of the loan to Vaughn Prost and the letters of commitment issued to him by Bank of America had been honored, Vaughn Prost could have conceivably paid off the Great Southern Bank note, would be the full owner of the Heers Building and would have continued to develop it.

The City's approval of an extension seems like an option that should have been given more consideration than it was given. As Carlson, himself, said, the loan had been extended twice to Vaughn Prost...was there some sort of limit to how many times it could be extended? Doubtful. Apparently the City felt confident enough in Vaughn Prost's ability to pay the loan to associate with him in the first place and to extend the loan twice. Why couldn't they have considered extending it one more time?

Great Southern approved it. The City didn't.


The Libertarian Guy (tm) said...

You'll note I'm not being nearly as diplomatic. ;)

Jacke M. said...

Woo hoo! I'm your good friend! ;)

Anonymous said...

Many of us still wonder why the City of Springfield is in the real estate market. The Police/Fire pension could be satisfied if they sold these properties instead of spending millions to refurbish and lease (say to M.S.U) for $1.00/yr. Carlson owns his fair share of real estate in this city too.

Carry on Jacke, we have a Darth Vader in City Hall.