In his comment to Mary Souza’s post titled Commercial Corridor, “kageman” raised some excellent points about the appraisal of the Commercial Corridor property. Here is a little more information about the appraisal.
The Appraisal Report of DeArmond Millsite Property prepared by Ed Morse and provided to OpenCdA.com was dated August 26, 2008, and bore file number 08009. Remember that when the Report was completed in August 2008, there had been no City Planning Commission hearing or City Council meeting to annex and rezone the property. The Planning Commission meeting in which four of six Commissioners recommended rezoning to C-17 didn’t happen until eight months later in May 2009. Yet to arrive at a prospective market value of $13,250,000 in his August 2008 appraisal report, Morse assumed the property’s annexation into the City, rezoning to C-17, cleaning and clearing the site, and gain in site size. The appraisal was based on the assumption that, “…the two parcels in the county, (including the log yard and waterfront sites) will be annexed into the City, the entire property will be re-zoned C-17; and the City Streets and alleys (including Hubbard and Smylie Street) projecting into the site will be vacated and/or abandoned.”
It is not too much of a stretch to conclude that even if the Planning Commission had done the unthinkable in May 2009 and recommended against the C-17 zoning necessary for the NIC Foundation to get the loan, the City Council would have quickly overruled the Planning Commission’s recommendation. Readers can come to their own conclusions about whether the City had assured the NIC Foundation and its prospective lender before the formal public annexation and rezoning hearings that regardless of the recommendation from the Planning Commission hearing in July 2009, the City Council would approve annexation and rezoning.
The annexation was reasonable.
The rezoning was unnecessary except to make the land appraise at a higher value. Commercially zoned land has higher value than residential land. The existing North Idaho College campus has a residential zoning, R-17. NIC has been able to do everything it needed to do to provide vocational training and education on its Coeur d’Alene campus under R-17 zoning. But according to NIC Foundation President David Wold, that wasn’t good enough. No, this project needed to be zoned C-17, the most unrestrictive zoning, to give the NIC trustees “flexibility” they would supposedly not have without it. Wold was never pressed by Commissioners or Council members to explain why such “flexibility” was so important now and why the required “flexibility” couldn’t be provided selectively and specifically by special use permits when need was demonstrated as the campus evolved.
According to Mayor Bloem, the project has been under consideration for years and was included in the City Comprehensive Plan. Yet in the appraisal, the appraiser notes:
The designation of the property as an educational site in the Comp Plan by the City is disregarded, because highest and best use, the basis for an estimate of market value, is predicated upon private economic uses, not public uses.
Also, the appraisal report contains many warnings that its contents are not to be revealed to the public. For example:
Neither all nor any part of the contents of this report (specially any conclusions as to value, the identity of the appraisers or the firm which they are connected, or any reference to the Appraisal Institute or any other professional appraisal organization or designation) shall be disseminated to the public through advertising media, public relations media, news media, sales media or any public means of communication, without the prior consent and approval of the appraisers.
This report is the intellectual property of Morse and Company and is subject to copyright by the author. It cannot be copied, excerpted, quoted, or otherwise be used beyond its intended use, by the intended user, without the express written permission of the firm of Morse and Company, and the appraiser. Even with permission, its use is limited to the intended use and intended user as specified in this appraisal report.
And who were the intended users, the only people who were supposed to see the appraisal before the deal was etched in stone? North Idaho College, its Board of Trustees, Foundation, and attorney.
Notice that the intended users included “attorney.” That’s singular. It is noteworthy that both North Idaho College and the North Idaho College Foundation were represented by the same attorney, Marc Lyons. That is not just my assumption. Here is attorney Marc Lyons in his own words identifying himself to speak about the millsite annexation and rezoning during the City Council meeting on June 16, 2009. Notice in this audio excerpt that attorney Lyons said he represented both the College and the Foundation, but “…particularly the Foundation, NIC Foundation, with respect to this annexation request and the zoning issue.” Yet according to Morse’s appraisal under the major heading “Client” on page 19, the only client is “Marc Lyons, Ramsden & Lyons, legal counsel for North Idaho College.” Should there be a falling out between NIC and its Foundation over the lease agreement, it will be interesting to see which side Mr. Lyons represents.
More importantly in my view, who was representing the taxpayers to ensure public money was spent properly and wisely? Why was this never put to a public vote as required by the Idaho Constitution or submitted to the statutorily defined judicial confirmation process? Who was ensuring that the entire lease-to-buy scheme agreed to and carried out by North Idaho College and the North Idaho College Foundation was not a violation of law? Who was representing the interests of the people of Kootenai County and the State of Idaho?
What can be done after the fact?
Comment by citizen — August 15, 2009 @ 10:50 pm
Citizen,
It isn’t after the fact yet.
Comment by Bill — August 16, 2009 @ 6:12 am
The appraisal was not done for the purpose of validating a purchase price although that is how it was used. It was a prospective study using proposed changes for the purpose of an investment decision. This “what if” study was not for the public. It was for the stakeholders. Even at that when one considers the extreme drop in property values since it was done on the day the deal was actually completed the fanciful value stated was long since history. The appraisals ideal circumstances required that property values remain high and in demand. Look no further than Riverstone to see the reality of todays real estate residential and commercial markets.
It should also be noted that the same appraisal firm and the same appraiser, Morse, does most, if not all, of the property valuations for the LCDC. They come in ‘high’ or ‘low’ as suits the purpose of the particular transaction.
Comment by Wallypog — August 16, 2009 @ 6:17 am
Readers might want to review pages 232-235 of the University Place Management Review, AKA: the Prince Report. Topic 8. Distinction Between a Loan and an Investment discusses the point Wallypog made.
Wallypog, maybe you can address citizen’s question: What can be done after the fact? What action could Kootenai County residents take to bring the Commercial Corridor transaction under closer scrutiny?
Comment by Bill — August 16, 2009 @ 6:53 am
The complaint filed in the University Place situation originated at the State Board of Education when it learned of undisclosed expenditures outside of , but party to, the proposed projects. A special Attorney General was appointed to investigate and the whole mess was dissected exposing all its unsavory details. A number of illegal and unethical practices were identified.
The juncture when that red flag was raised and the investigation begun was much further into the proposed project than what we have here. But similar elements do seem to be taking place. But, who or what agency important enough to initiate a formal investigation into our situation will take that step? Would the State Board of Education (SBOE) also not be interested in how our local elected officials and civil entities are conducting this business? The SBOE certainly must value its reputation with Idaho’s citizens and it own duties in being a legally operating entity. We know for a fact that the Foundation straw buyer tactic was purposely arranged to sidestep state law. That is stated practically verbatim in the NIC lease option contract. I would think that fact aloe should trigger concern at the state level. Has the SBOE been staying on top of NIC actions in this matter? Who is the contact person at the SBOE?
Comment by Wallypog — August 16, 2009 @ 8:53 am
How could citizens trigger “discovery”?
Would a civil lawsuit be prohibitly expensive?
I have long believed that Kootenai County Government should take action as tax money is being drained away from vital services to pay for private interest in a bait and switch scheme.
Has anyone entered into conversations with the county officials on this matter?
Perhaps a petition by the citizens would help put pressure on the County.
Any ideas on these two thoughts. 1. Civil action 2. Kootenai County Action
Comment by citizen — August 16, 2009 @ 9:21 am
Has anyone read the original document or documents relative to the hiring of Morse to appraise the property? Specifically, what were his exact instructions?
Comment by Susie Snedaker — August 16, 2009 @ 9:45 am
Bill, concerning the so-called ED/Commercial Corridor there seems to
be a alot of questions and not enough answers.
IMO,it doesn’t seem like standard procedure or even ethical to:do an appraisal of the DeArmond Mill site
BEFORE all environmental assessments are completed and turned in to the DEQ and the remediation work of the Mill site is done.Also, if the appraisal was done before the rezoning to C-17,shouldn’t there be another appraisal done?It seems as if there was a big push to get the appraisal done before the real estate lost any of it’s value.
Great thread, BTW.
Comment by kageman — August 16, 2009 @ 11:29 am
Susie,
To my knowledge, we do not have and have not seen the solicitation documents and hiring agreement between NIC and Morse. Or between the NIC Foundation and Morse. Or between anyone else and Morse. For that matter, we don’t even know such documents exist. Logically, there should have been a contract between Morse and whoever hired him. My guess is that Morse was technically hired by Lyons and not NIC.
As those who have watched this closely can attest, NIC and its Foundation have not exactly been forthcoming with timely, truthful, and complete information. The watchword has been “obfuscate.”
Kageman,
Thanks. The entire transaction has been conceived, conducted, and concluded by insiders. The public has been fed carefully selected press release propaganda by much-less-than-inquisitive news media, specifically the Coeur d’Alene Press and KVNI. It may take legal action (civil, criminal, or both) to get the full story out to the public who will have its pocket picked to fund this debacle.
Comment by Bill — August 16, 2009 @ 12:28 pm
I guess the question is who or what agency might initiate some civil and/or criminal action? Perhaps, a group effort of interested forces might be put together if there was a desire to share the work and expense. The town of Post Falls, the County and the State Board of Education should be thinking in these terms.
Comment by citizen — August 16, 2009 @ 2:03 pm
Citizen,
We’ll just have to wait and see what happens.
Comment by Bill — August 16, 2009 @ 4:02 pm
Bill, Thanks for the reply. I had a hunch that Morse was hired by someone other than trustees.
Comment by Susie Snedaker — August 16, 2009 @ 8:32 pm
OK! So what kind of person (set of skills) would be necessary to start running with this and get the issue in front of the right institution(s)? I assume it would be a lawyer type, but a very special lawyer. Isn’t there one who is sympathetic to the Ed/Com Corridor resistance cause who isn’t afraid to buck the City and NIC? I realize any local professional throwing in with this group might be cutting his/her throat so to speak.
Comment by CdACanuck — August 16, 2009 @ 9:14 pm
It was the State Attorney Generals office that did University Place investigation and it should be them here as well. But it was the State Board of Education who got the Attorney Generals office to proceed. The SBOE saw a lot of their money going places they did not expect or plan on. Our situation is small potatoes compared to the Boise case where 100’s of millions were involved with the project.
One thing missing from that investigation was subpoena power and they dearly wished they had it. If something is done here we need to make certain that the power to subpoena and question people under oath is part of the deal.
What was important to the SBOE then was that the employees who worked for them not only followed the letter of the law but also supported the spirit of the law. Our higher education faculties and officials are front line role models for Idaho’s youth. They must be held to the highest of standards. Yet, Dr Bell, et al, are downright proud of the fact that they wormed their way around state laws in how this deal had to be transacted. NIC could not legally encumber this type of debt directly so they did it through a house of cards and are patting themselves on their own backs. What a marvelous example for our youth.
The right way to have done this would have been to conduct an intense alumni fundraising campaign. The negotiations for the property should have been just as intense. Then Dr. Bell could hold her head erect and proud. What she did was shameful and at the very least she needs to be removed.
There is plenty of obvious grist for the SBOE to ask the AG to investigate the corridor transaction.
Comment by Wallypog — August 17, 2009 @ 6:33 am
CdACanuck,
If I were choosing an attorney to first look at the merits of this, I’d choose one from Washington who is also admitted to practice in Idaho. I’d prefer one who is well-schooled in the Idaho Constitution and who has won Constitutional cases in front of the Idaho Supreme Court. I’d also want one who is very familiar with Idaho public financing law. The attorney and those who engage him/her will be viciously attacked by the 3-D Cabal (Demonize, Deny, Deceive) who are financially, emotionally, and politically invested in what they have euphemistically marketed as the Education Corridor to the people in Kootenai County.
Comment by Bill — August 17, 2009 @ 6:50 am
Wallypog,
While the SBOE has some influence with state-run colleges and universities like U of I, LCSC, ISU, and BSU, I’m not exactly sure how much it has over community colleges like NIC. However, I’d certainly agree that SBOE should be an interested party since its state-run colleges and universities reputations stand to be adversely affected if they are found to be a party to an illegal action. Schemes like this have been tried around Idaho before, and they have been stopped cold by the courts.
Comment by Bill — August 17, 2009 @ 7:01 am
Bill,
Given the recent University Place fiasco it would ideally be the SBOE who would bring this to the AG. Even if they are only tangentially impacted they see the similarities and understand the fiscal impact on the community. Plus they are keenly tuned into ethics. If nothing else a recommendation for an AG investigation from the SBOE would carry some weight. Has anyone contacted the SBOE about the Corridor transaction?
Comment by Wallypog — August 17, 2009 @ 8:11 am
Wallypog,
I don’t know if anyone has contacted the SBOE, but here’s a Press article by Maureen Dolan that might help.
Comment by Bill — August 17, 2009 @ 8:34 am
The SBOE fully supported University Place also. But the SBOE knows that there is a correct way to get these types of campus expansions accomplished and that is what they expect. Few people deny that the Corridor was a good option for NIC. The debate is on the ‘how’ not the ‘why’. There was a good reason why the SBOE pulled back from being part of this deal. But will they act as an advocate for Kootenai County citizens and assist in getting this ironed out?
Comment by Wallypog — August 17, 2009 @ 8:40 am
Excellent thread! Just a thought for an attorney is Scott Reed who doesn’t bend to the officials favor nor is beholden to any. He fought hard against the jail sales tax and locally the judiciary helped the county at every juncture. He appealed to the Idaho Supreme Court and obtained a unanimous decision that stopped it.
Scott’s work was terrific and he didn’t miss a beat. Kathy Sims and Tom Macy could tell you more. Aside from Scott a good idea is to go out of State or South out of this County.
Comment by Appalled — August 17, 2009 @ 10:14 am
Wallypog, the Idaho Attorney General has already looked at the constitutional funding issue and punted. In a letter dated February 23, 2009, a division chief for Contract and Administrative Law said, “…it appears that the parties have negotiated a transaction which their attorneys are willing to defend.” The letter also says, “The Office of the Attorney General has no supervisory authority over these entities or their legal counsel in circumstances such as those which provide the basis for your inquiry.” It goes on to recommend discussing the matter with a private attorney.
Comment by Gary Ingram — August 17, 2009 @ 11:35 am
It is the role of the Attorney General to represent the elected officials in the state.
It is not until an elected official or prosecuting attorney asks for intervention that they become involved. Correct?
Gary, are you saying that avenue has already been tried?
Comment by citizen — August 17, 2009 @ 6:43 pm
Gary,
If the AG has supposedly ruled that lease-to-buy is legal, then why did the legislature even consider HJR001. If what they propose is already legal, then an amendment to the Idaho Constitution to affirm its legality would be superfluous.
Comment by Bill — August 17, 2009 @ 7:17 pm
Citizen, yes, that avenue has been traveled as I have already pointed out above. The Attorney General was asked if the scheme for funding was legal. He was asked if the scheme represented a long term indebtedness that requires an approval by vote of the public.
Bill, the legislature didn’t really consider HJR001. It was introduced by Representative Wood of Burley, Idaho who is the Medical Director of the Cassia Regional Center. The hospital lobby is worried about the Frazier decision because it may put limits on their ability to finance hospital facilities. So the Resolution was introduced and sent to the Revenue and Taxation Committee where it was never taken up. The AG didn’t rule that lease to buy was legal or not. His deputy in response to the inquiry said what I said. They sidestepped, punted or what ever you want to call it.
I just wanted to set the record straight because the comments on this thread were speculating on if the AG would get involved.
Comment by Gary Ingram — August 17, 2009 @ 8:14 pm
Do you believe our attorney general is under political pressure to let this abuse of taxpayers continue?
Comment by citizen — August 18, 2009 @ 7:50 am
Frankly I do not understand exactly what the AG does. Unless they fully investigate how will they know all the particulars and make the determination that there has been no conflict of interest in conducting this business? I know that a lease option contract is legal. I know that these entities can legally construct the contract they have in order to sidestep the laws. But can they have an appraisal done by an appraiser who is clearly not objective? Can a state chartered bank lend funds based on a stale dated appraisal and not breech its fiduciary duties to it owners and depositors? There are many fuzzy relationships and issues. Are they not of concern or under the jurisdiction of the AG of our state?
Comment by Wallypog — August 18, 2009 @ 8:57 am
Priceless.
Comment by Dan — August 18, 2009 @ 11:30 am
It is my understanding that they do not initiate investigations unless at the request of law enforcement or elected officials.
It is my understanding that individual citizens are sort of suck.
Please prove me wrong.
Comment by citizen — August 18, 2009 @ 12:52 pm
Citizen…. It does require a member of the legislature to request an investigation by the AG.
Comment by Wallypog — August 18, 2009 @ 1:07 pm
AG works for the powerful and the citizen is left in the cold. We can see the wrong doing, the schemes, the tricks, the deception and remain powerless to get our AG to function. Do you hear me Mr. Attorney General?
Comment by citizen — August 18, 2009 @ 4:12 pm
Citizen,
It is likely your pleas to the AG have been obscured by the deafening rustle of campaign contributions from the Association of Idaho Cities.
Comment by Bill — August 18, 2009 @ 6:57 pm
Another sell out?
Comment by citizen — August 18, 2009 @ 8:29 pm
Citizen,
Well, Wasden and von Tagen talk a good talk, but occasionally their disdain for private citizen efforts surfaces. Von Tagen was the spearhead behind S 1142 that passed during the last legislative session. S 1142 effectively neutered the Idaho Open Meeting Law and made it nearly impossible for a private citizen to exercise it. Others participating in the emasculation were Spokesman-Review reporter Betsy Russell and the Association of Idaho Cities. Voting for the law to limit citizen access to the law were Senators Goedde and Jorgenson and Representatives Chadderdon, Hart, and Sayler. Voting to support citizen access to the law were Representatives Clark, Henderson, and Nonini.
Comment by Bill — August 19, 2009 @ 8:04 am
I am slowly becoming an Independent Conservative.
Recent state events are pushing me that way.
Comment by citizen — August 19, 2009 @ 9:55 am
Citizen…. I completely agree. While there may be nothing wrong with associating certain candidates with the tenor of they party they espouse, they all need to be advised to perform in a prudent manner or lose your position of power. Government arrogance seems to have evolved into an assured insidious character.
Comment by Wallypog — August 19, 2009 @ 10:43 am
Problem politicans should be weeded out in the primaries and both parties would benefit. Unless the parties clean house of the special interest rascals we will be saddled with this self interest club. Sarah Palin did a preety good job of this in Alaska.
Comment by citizen — August 19, 2009 @ 4:14 pm