Port Authority dealings hold twists, turns

It begins March 2005, when Port Authority members start creating the Greater Red Wing Development Corp.

The port director is busy writing bylaws and deciding on board members. They decide they can draw off the Port’s professional funds to support the corporation’s financial needs. They also request that the Port Authority appoint its own members to this newly formed private corporation’s board.

In July 2005, Great Red Wing Development Corp. officially registers as a nonprofit with the Minnesota Secretary of State.

The port director keeps his staff busy putting together the first real-estate deal for this corporation, which lists the Port Authority as its address and its registered agent as the port director. Staff work for months on the taxpayer funding to get this private corporation up and operating.

In the public record, the Port Board states its has no interest in ownership of first property deal. Port director, however, makes a land purchase with a simple $10 bill and a promissory note, the $2 million balance of which is due no later than June 30, 2006.

Staff secure tenants for this purchase.

The prospective tenants become nervous as time closes in on the relocation commitment, so the Port Authority provides a three-year tax abatement. This allows for remodels, contractors, cleaning, electrical and plumbing, and new A/C.

As June 30, 2006, nears and loans must be acquired, the Port Authority pulls out all stops and provides a $750,000 loan as an equity, with interest-only the first 36 months. This equity loan is necessary to acquire the $2.1 million loan to complete the deal.

During this process, the lender requires the Port Authority not only subordinate this loan, but to act as guarantor to the Greater Red Wing Development Corp.

On top of this guarantee, the Port Authority finds it necessary to provide a full guarantee on the third-party tenants lease agreement. Liability on the lease agreement alone tallied $1,204,140.

Three years later, this private corporation — as registered, housed and advertised at our Port Authority address — was unable to pay its tax debt to the city for 2009, so back to the checkbook it goes. We as taxpayers, provide a $65,000 loan over seven years to pay late property taxes and penalty.

All of the above comes from official records online.

While reading five years of Port and City Council minutes, packets, agendas and resolutions, I find no official recognition, only an acceptance of this private corporation being partnered into the tax-funded Port Authority.

What I also find is apparent conflict of interest, breach of trust and self-serving. One hand writes the loans, the other hand receives those loans.

The Port Authority director all too often appears to represent his interests in this private corporation over the interests of the public.

I find many comments on the record, such as, “The corporation allocates state funds that are tax free,” “Port staff worked to create this corporation,” “The corporation is a group of businesses seeking to expand,” and “The corporation is a group of bankers and investors.”

It appears that the only investing is the taxpayers’ monies.

A councilman tells me that this is a private corporation, its own entity.

The Port Authority president states this is part of the Port Authority and acts as an “asset holder” for the port (while he also sits on the corporation’s board).

If this is so, should there be language to return this $2.7 million asset back to the Port? Should there be a legal description clearly stating limitations and guidelines?

By all reasonable expectations, there should be somewhere in the City Council minutes a discussion, a motion, a vote and a resolution.

They can create ordinances from parking to pet pigs, yet they cannot cover their own omissions of responsibility.

In five years, why has no city official challenged the legality of this corporation working within the Port Authority offices?

I retrieved all possible documentation from the Secretary of State’s Office, the Goodhue County legal office, and began printing out the many months and years of official city and port minutes. I asked questions.

No one understands this as an issue of concern. No one appears to realize that the Red Wing City Charter has a clause stating they are “City Officers, not to be interested in contracts.”

No one to date within the city will acknowledge the slightest potential of wrongdoing.

On Monday, the council will vote whether to approve a Port Authority $325,000 tax levy and to give another $200,000 in a general fund transfer, and next month council members vote on the city budget.

If only our city leaders were capable to look into the behavior itself. Instead of exposing and correcting possible breaches, they play a game of shifting debt liability onto the taxpayers and between departments as continuing to grease the old broken engine.

As we wear our worn-out shoes of despair, crying out for change within the city’s economic development model, they are ignoring us. The oaths taken are forgotten.

I ask you, are the mechanics of our city broken? What are we to do?

Tags: port authority, opinion, commentaries, oelkers