Public Purpose and City Hall's Purchase of 808 E Danaher

[XLFD]

City Hall's Purchase of 808 E Danaher

This property has been discussed in detail in this previous article, Eminent Domain Ludington-Style, which concluded with these points: 

1)  The property between 2009 and 2012, during a time when property values went down dramatically, and during a time when the City Manager declared the property an "eyesore", its property taxes more than doubled.  The house next door at 802 E Danaher, had its taxes go down over 10% in that period.  The house across the street went down a lot more.

2)  The house was built in 1910, the 'Danaher water tower' was built in 1962.  The house's location, over 100 ft. away from the fence around the tower, was not an issue when the tower was constructed.  It's proximity has not been an issue with last year's painting, or in the record of any other paintings/maintenance on the tower. 

3)  The property, under control of the county, has no potentially continuing code enforcement problems.  Shay mentioned to councilors that it could improve the sledding facility at the water tower. Without major land-leveling alterations, this is likely not to be implemented and hasn't been mentioned since.

4)  Shay mentions the neighbor at 802 Danaher is interested in buying the adjacent half of the property to expand their holdings.

 

It is asked:   "We will lose a residential house, lose the property taxes and John Shay can't enumerate an authentic public use (for the land at 808 E Dowland), so is there really any public gain to be had by its public purchase?"   Here is the meeting on July 22, 2013 where the deal was made:

 

 

 

  At about 12:50 in Mayor candidate Wally Taranko in his role as Finance Committee  Chairman says:  "The property (808 E Foster) is composed of two lots.  The next door neighbor has expressed an interest in acquiring the lot closest to their property in return for paying half the acquisition and demolition costs.  The City would retain the lot closest to the water tower, and I so move."  In his preamble starting at about 12:00 minutes in, there is no mention of any public use being made of this property, nor is there in the official minutes.  And it passed unanimously without any discussion other than by the City Attorney, who wasn't listening and obsessed about potential grass-cutting fees. 

 

Was the advantage the public received from this purchase delineated anywhere else that day?  Nope, not even in the memo from the City Manager to his willing chorus:

 

 

 

With that approval the money was exchanged and the property passed into the City's hands in early August; here is the title deed which the new County Treasurer signed over the property to the City. 

 

 

and is signed, notarized on page two by the parties involved.  Notice that this deed is given pursuant to the law MCL 211.78m which contains much of the legalese in the above document, but that document above leaves out the second sentence in that particular law, namely:  "If this state elects not to purchase the property under its right of first refusal, a city, village, or township may purchase for a public purpose any property located within that city, village, or township set forth in the judgment and subject to sale under this section by payment to the foreclosing governmental unit of the minimum bid."  

 

Thus, for the City of Ludington to be able to get their special consideration of ownership and purchase this property at minimal bid (explained in that law's link), consisting of two lots, they must show that they do so for a public purpose.  Let's check out what a public purpose is, and then check out what the City claimed its purpose was to buy these lots, and see whether they are one and the same.

Public Purpose

 

The Michigan Municipal League (MML) since its founding in 1899, has brought together city and village officials to exchange information, to learn from one another, to develop unified policies on matters of municipal concern and to speak as a collective voice on those matters including, most importantly, home rule for local government.  In its General Law for Villages and Cities Handbook published in 2006 it makes comments on municipal expenditures in Michigan and the concept of public purpose:

 

"Generally, a municipal body is empowered to spend monies only through a specific delegation of power by the Michigan Constitution or state statute. The home rule acts also provide limited authority to cities and villages for spending.  Regardless of the spending authority, however, it is generally agreed that  municipalities have the power to expend funds only for a public purpose."

 

What is a public purpose?   In Hays v City of Kalamazoo, 316 Mich 443, 453-454 (1947), the Michigan Supreme Court defined the objective of a public purpose:  Generally a public purpose has for its objective the promotion of the public health, safety, morals, general welfare, security, prosperity, and contentment of all the inhabitants or residents within the municipal corporation, the sovereign powers of which are used to promote such public purpose. . . . The right of the public to receive and enjoy the benefit of the use determines whether the use is public or private.

 

The Michigan Supreme Court has ruled that a city cannot give away funds or other  property even for a public purpose without express statutory authority. Sinas v City of Lansing, 382 Mich 407 (1969)...

 

Expending public funds for a private purpose under Michigan law is illegal. For over a century, the Michigan Supreme Court has considered the limitations on expending public funds and has been consistent in its rulings." 

http://www.mml.org/pdf/glv/chapter21.pdf

Is This a Public Purpose or a Private Purpose?

Last year, the City had at least tried to vocalize a public purpose for getting this property they appear to have wanted by the hard-handed tactics they used on the previous owners.  They likely realized that the purposes they originally invoked were rather ridiculous, and failed to meet the criterion of being used as a public purpose. 

 

The City was clear in why they wanted this property on the day they voted to buy it, July 22, 2013.  To afford the next door neighbor the ability to pick up the one lot for a bargain price under $10,000.  No public purpose is ever mentioned; just that they were going to demolish the house using public funds, and then make a 'profit' for City Hall by 'selling' one of the lots to a private landowner.  That private landowner runs an inflatable business, and so this could be the beginning of a lucrative 'partnership' between the City-- who likes to throw events that use inflatables-- and the beneficiaries of this property exchange.

 

The unsold lot at 808 East Danaher with the soon to be demolished house, has no public purpose that has ever been stated.  It will fall out of the tax rolls and more than likely sit vacant and require regular maintenance  much like the property at 428 E Dowland has.  But at least the Dowland property was brought at one time in the dream that it would serve a public purpose and house the new fire station. 

[Willy]

Good job X. I drove by that house and did not find it to be in a blighted condition. This property could have been purchased and continued to be used as a single family dwelling. The loss of property tax that would have been collected over the next 30 years is enormous. Something is fishy about this deal. I feel sorry for the person who lost the property because it definitely is worth more than $9000.

X, doesn't a Councilor live on that street?

[XLFD]

Councilor Gary is right across from the water tower, and it's rather surprising he has remained publicly mum about the whole process.  He's chairing the Public Utilities Committee and is a member of the Finance Committee, both who would have likely dealt with this issue in some way in committee. 

I hope we can someday get the previous landowners to get more information out about what really happened here.  If anyone knows how to contact the Garlicks, let them know I'd like to find out more.

[Willy]

Here's the scenario I see as played out. The house becomes vacant. The Councilor checks on it after foreclosure notices are posted or he found out about the dwellings situation beforehand. Not wanting the house purchased and used as a rental he contacts his friend the inflatable guy to see if he would be willing to "make a deal". The Councilor then contacts Shay to get the ball rolling. None of this would be happening if insiders with the City didn't initiate it because who knows about the laws regarding tax forecloses better than City officials. The fix was in so that no private citizen would  purchase the dwelling in order to allow  City officials and friends to benefit from another persons loss. I see no other reason for this to happen especially since there was no reason for the City to get involved with this property.

[XLFD]

The lack of a public purpose when acquiring this with their special privilege, the sloppy real estate deal between the City and the neighbors leads a lot of credence to such speculation as yours, Willy. 

I'm going to begin the process of trying to get this annulled via the County channels, so we can save this building, save the integrity of the law, and save the taxpayers some money in a needless acquisition and demolition. 

[Willy]

The more I think about this deal the more rotten it smells. Why would any municipality give up $90,000 in taxes over the next 30 years while dishing out $10,000 of taxpayers money to do so instead of taking the logical and fiscally responsible action of getting this property back on the tax rolls a.s.a.p. This type of decision by those in charge shows the citizens of Ludington just how potentially corrupt those elected to serve appear to be. Where the h_ll are the Councilors who are suppose to question what is going on and who are elected to look out for the public's interest because someone is going to have to make up that loss of $90,000. I guess Ludingtons taxpayers can afford to finance the potentially corrupt whims of Ludingtons elected elite.

[XLFD]

I brought that issue up at tonight's meeting, though I was cut down by the Mayor before I could get to the full point.  Five minutes just ain't enough time to get into everything the City does that's unethical or unlawful.  

And many of the citizens I talk with are disgusted but they are intimidated big time by the power these people are wielding, the audacity they're showing, often against the detriment of society, to confront them for fear of losing their jobs, being blacklisted or attacked by the local paper.  It's a reasonable fear, but it shouldn't exist in our society.