The Saga Of The King Street Parking Lot - And Response

Sunday, August 12, 2018

In July 2016, Mayor Berke’s staff asked City Council to declare "surplus" a heavily used city employee parking lot on King Street. Council then was asked to transfer title to the Chattanooga Downtown Redevelopment Corporation (CDRC), a city entity.

In their presentation to Council, City staff said that they had been talking for a several years to the developer of the adjacent property and that the City wanted to facilitate development of this property. It was acquired in 2014 by Rivermont King Street LLC (Hiren Desai), who planned to redevelop the brick warehouse building for commercial use on the ground level and apartments above.

City Council was not asked to adopt findings explaining why they believed this property was surplus and where city employees would park and if the City would have to pay.

In February 2017 the CDRC issued a request for proposals (not a bid) to sell the parcel. Two corporations responded to the RFP. The CDRC was prepared to sell to their preferred proposer (Seaford Investments LLC/Hiren Desai, who owns the Moxy Hotel site at 1220 King Street) at a price much less than the city had paid for it in 2007 and well below its current market value. The public got wind of this plan, an appraisal was done, and the price more than doubled.

In April 2017, the CDRC Board accepted Seaford’s proposal but added a provision that the purchase price would be based on the results of a new appraisal ($360,000).

On June 8, 2017, a general contractor (Chazler, Inc) sent a letter to a member of Dew LLC (Jimmy White), a corporation involved in the conversion of the warehouse building next to the parking lot. The letter attributed the flooding in the basement of their building to drainage issues related to the parking lot. The CDRC Board was not made aware of the existence of this letter until April 2018 when they were informed by the City’s Deputy Administrator for Economic Development (Charita Allen).

On June 19, 2017, City Finance Director/CDRC President Daisy Madison reported to the CDRC Board that the vendor had agreed to pay the $360,000 new appraisal amount.

In January 2018, Ms. Madison reported to the Board that the recommended buyer (Seaford/Desai) had rescinded his offer. She gave no explanation. The Board approved a resolution authorizing the president to withdraw the RFP for the sale of the property.

In April 2018, the City Deputy Administrator for Economic Development, Charita Allen, informed the Board that the City had learned in January of 2018 that the parking lot is causing flooding in the warehouse building on adjacent property owned by the LLC that had been interested in buying the parking lot.

Ms. Allen reported that a permanent fix (grading, paving) is estimated to cost $350,000 to $400,000. She distributed the June 8, 2017 letter from a construction contractor to the owners of the warehouse building. It attributed the cause of the flooding to the city parking lot.

On May 8, 2018 the CDRC considered a resolution to execute a right of entry on the city parking lot relative to construction work at the adjacent warehouse building. During a five-week period, the city parking spaces that share a property line with the adjacent property would be unavailable. The displacement would result in a cost to the city of about $8,000.

During public comment, ATM founder Helen Burns Sharp noted that there is no mention of financial consideration in the agreement. Board member David Dalton raised this issue with developer Desai, who agreed to pay the city’s out of pocket costs or provide parking close by. The board approved the resolution with this amendment.

During public comment, ATM suggested that the CDRC might want to explore the concept of cost sharing with Mr. Desai, since his nearby properties would benefit from the long-term fix, estimated at $400,000. He indicated he might be willing to go 50-50, provided he could also share in the revenues from the lot.

May 10, 2018 was a continuation of the May 8 meeting. The board decided not to transfer ownership of the lot to the IDB, a strategy which apparently city staff considered to skirt the city bidding process. City Public Works staff gave timetable for an RFP for a "Stage 1" fix to begin in July. It could be followed by the complete project and finished by end of year.

CDRC member (and Council Chair) Ken Smith asked if the city had legal liability relative to water on the adjoining property. A key question in common law drainage is whether the property owner (here, the City) has done anything to change the water flow since the adjoining property owner (here, Rivermont King Street LLC/Desai) bought their parcel in 2014. The drainage on the city parking lot today is believed to be the same as in 2014. (It has likely been that way since and before the City bought the parcel in 2007.)

The Board voted unanimously to move for the "full fix" and to get Stage 1 completed as quickly as possible. No one brought up the topic of negotiating with Mr. Desai to cost share both the construction costs and the revenues.

On Monday, the CDRC will be asked to pass a resolution authorizing the President to negotiate a design-build contact with Thomas Brothers Construction for $440,000, with a contingency amount of $40,000, for a total amount not to exceed $480,000.

Helen Burns Sharp 

* * * 

Ms. Sharp, 

You said Mr. Desai and those appointed to oversee city business want taxpayers to pay up to $480,000 to correct a water drainage problem, even though the city has made no changes to its property or parking lot since 2007? Why do the words "taxpayer rip-off" leap to mind? 

Normally I am impressed by your detailed reporting, but this time you omitted a few details. You forgot to mention campaign contributions (totaling several thousand dollars) from Desai family members made to key individuals involved in this matter. Documents indicate Mayor Berke and Nick Wilkinson, (then, Berke's administrator for Economic Development), both received substantial campaign donations from Mr. Desai between June 2016 and January 2017. [Note: Mr. Wilkinson was previously a candidate for office too.] 

Let's recap. The mayor and his Economic Development administrator accepted campaign donations from a donor while initiating, directing or facilitating the attempted sale of a heavily used employee parking lot at a price below the city's original purchase price using a no-bid transaction which was at one time headed for sale to the same donor. Even if the donations are legal, it seems unethical. It's another example of poor government judgement. 

Why is poor judgement never in short supply when it comes to government decisions? And, why stop at selling one city office building when administration can initiate the sale of three public buildings? Why would anyone live in a home they already own free and clear of a mortgage, when they could sell the house for a song and rent another place and spend more money every month on rent? It only makes sense if they are spending someone else's money.  

Taxpayers have just learned Mayor Berke wants to sell two additional city buildings that currently serve as the offices of many city employees and several departments. Is the mayor eliminating the departments and terminating the employees housed at those properties? Doubtful! If any City Council member is conscious at the next council meeting, one of them should demand a cost benefit analysis (inclusive of employee parking costs), if the city plans to retain the employees and rent them new office space.  Let's have the report done by an outside source with good judgement who cannot accept campaign donations or gifts, but can add and subtract.

Deborah Scott

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