The Unlawfully Secret Real Estate Deal of Ludington Lawmakers Exposed

[XLFD]

The Ludington City Council, some city officers and even the county treasurer filed out of the council chambers after the council voted unanimously on May 18 to reconvene in closed session down in the nether regions of city hall ironically called the Community Room.  The purpose of that closed session was to deliberate over the potential purchase of real property, a property where they took great pains to cover up the identity of, as if it was hiding from other underworld figures.

This can be readily verified by the minutes of the May 18 meeting which confirms these statements and the fact that this reporter urged them to review their legal basis for going into that session and at the least tell the public what property was under consideration.  They never would.

The 82-minute closed session raised a number of red flags at the time, simply because of their secrecy on the issue (which is mostly expected in a corrupt city hall that is keeling away from transparent actions) and the introduction of the county treasurer at a time of year before when tax foreclosure real estate sales are normally held.  This would point at the city considering real estate whose property value would already be set by statute.  MCL 211.78m subsection 1 and 16(c) sets the cost for a city exercising its first refusal powers by paying the foreclosing governmental unit (the county treasurer) the greater of the minimum bid or the fair market value of the property.  The "minimum bid" as defined, is considerably less than the fair market value in most cases so that would likely be the set cost of the property, fluctuating when the housing market changes.

The subterfuge by all city officials in getting to this point led this reporter to make an educated guess that the property involved would be overly controversial and potentially costly to taxpayers, and so it was not surprising that when I fought for a meaningful FOIA response from the county and the city for a request for written materials they used at this closed session, I was first rewarded by finding out the address was my first guess: the block and a half of property where Foster School and its playground is at.  The NOTICE OF ELECTION TO EXERCISE RIGHT OF FIRST REFUSAL Agreement between the City of Ludington (COL) and the Treasurer (seller) shows this and indicates in already highlighted letters that the price was already set by statute.

What this means is that the purpose for the closed session as exercised by the city council was improper, the action itself illegal in the opinion of legendary Michigan Attorney General Frank Kelly, an opinion yet to be challenged in court.  Foster Swift, the largest law firm in Lansing, relates the attorney general opinion that goes through the legislative history of this particular open meeting exemption and states that:

"The principal reason that public bodies are permitted to discuss the purchase of property at a closed session is to avoid giving prospective sellers of real property an unfair advantage in negotiating for the sale of their property. If sellers are permitted to attend sessions during which the acquisition of their property is being discussed, they will be able to determine the best strategy for obtaining the highest possible price." (Emphasis added)

The record shows that legislators made the distinction for purchasing property over the selling of property because in the latter case, it is advantageous to the public interest to disclose all information concerning the proposed sale so that other prospective purchasers may have an opportunity to present additional offers.

On May 18th, the seller (Kmetz) was invited into the closed session by the prospective buyer, a scenario never envisioned by state legislators, Attorney General Kelly, or anyone since other than our city officials as a valid purpose to enter closed session.  Normally, this would give the seller a distinct advantage at getting a favorable price, but the treasurer is limited by statute to offer the fair market value (much larger than the "minimum bid") as the sale price whatever the 82 minutes of deliberation was all about.  

Absent a permissible purpose, the closed session was a slap in the face of Ludington citizens who expect their elected representatives to be as transparent as possible in their dealings, especially with the fair market value of the 1.5 blocks being $591,000 according to the records provided by the COL and an estimated $500,000+ of demolition costs facing any buyer making this money pit over a million dollars just to get to square one.  The COL also has to improve it for a "public purpose" they just can't flip the property over to a developer at a major loss (or even profit) to the taxpayers.

Hamlin Township faced a similar dilemma about a tax foreclosed property on May 21st.  It was put on their board's agenda, supportive documentation about it was in the packet, and the trustees discussed the merits of buying it and whether they could find a "public purpose" for the land, as we related in this article written just after I received records from the county treasurer:

"A motion was made to buy a tax foreclosed parcel on the corner of Beech and Tamarack, but after some discussion, trustees couldn't figure out any public purpose they could use it for so defeated the motion unanimously.  This was all done in open session, the board wisely deciding not to do what the City of Ludington would do on May 18th, inviting the seller into closed session to discuss purchasing the Foster School property."

The cost of the Hamlin parcel to their taxpayers would be a pittance compared to what the COL would be shelling out for the Foster School property, and yet they want to discuss it only in private, so that they can come out of closed session, make a simple motion and have the taxpayers fund their flight of whimsy and not have to deal with the inevitable grief they would otherwise get for assuming such a potential liability.  And from the Crayola notes within the records, they plan on going unlawfully into closed session once again on June 8th to consider the purchase of a property where the sales price is already fixed: 

Each and every one of our councilors and other city officials should be deeply ashamed for trying to keep the deliberations about this purchase away from the ears of the public and for keeping the records I received only through a FOIA request out of their packets where it should have been.  But these people have not the humility to suffer any shame at all, intentionally denying the call to open up about what property they have an interest in and share all the details with the public, because doing so will in no way affect the price that they will pay-- with our money-- while looking ahead at looming budget deficits they should not be ignoring.  

Committing acts like this, including making a sham of any sane competitive bidding practice in all other matters, is what makes those approaching deficits only get worse than expected.