More on the Mayor

An editorial from today's Times Free Press:

Audit time for the mayor

Mayor Ron Littlefield and his chief of staff, Dan Johnson, persistently pursued six months of painstaking audit work in an unsuccessful attempt to find something wrong with RiverCity's management of the Corker administration's stunning 21st Century Waterfront initiative. The only thing worth noting out of that political exercise was that the city unwisely rejected RiverCity's proposal to fix the flaking cladding on the Market Street foundation, which would have allowed The Passage to reopen this spring.

Too bad that audit time wasn't spent on the sweetheart deal that Mayor Littlefield and Mr. Johnson handed the mayor's former campaign manager, Dale Mabee, for a block of prime land for ritzy condos near the Walnut Street Bridge.

A valuable chunk of that block was never appraised or put out for public bid. Instead, it quietly ended up in the domain of Mr. Mabee and his development partners under a no-cost option to purchase through an interest-free loan of $735,992 from the city to Mr. Mabee.

Such no-cost financing terms for prime south-shore real estate likely would have attracted great interest — if not an upfront purchase offer — from other developers had the sale of the optioned land been properly put up for bid through the normal request-for-proposal (RFP) process. Why that customary process was circumvented is a question the City Council needs to explore, after it exercises its long-neglected authority to hire its own independent auditor.

The land at issue fronts Walnut Street on the higher east side of the block and constitutes more than a third of the block bounded by Walnut, Cherry, Second and Third streets. In addition, the city handed the Mabee group, also free of charge, a strip of land across the center of the block for an access easement, or an alley. That strip has an estimated value of $96,000. That's another issue for the future City Council auditor to examine.

Mr. Mabee's group, Urban Renaissance LLC, offered $195,000 more for a portion of the block than a rival bidder for the land last year. The partnership purchased the land under a proposal to build 22 high-end condos, ranging from $600,000 to $1.1 million in price, on the bid property facing Cherry Street and Third Street.

But the partnership's bid, approved by the Chattanooga Downtown Redevelopment Board, made no reference to requiring financing from the CDRC for the purchase. Nor did the city's RFP mention that it would make the top portion of the block — enough land for 12 more condos on two-thirds of the block's length along Walnut Street from Second Street — available on option under an interest-free loan from the city to the purchaser.

In the closing, however, Mr. Mabee ended up with the city financing about 75 percent of its $1.07 million purchase of the entire block via that $735,992 cost-free loan, plus the $96,000 gift of the easement. The deed of trust contract does specify that Mr. Mabee must pay (a low) 2 percent annual interest on the loan if his construction schedule slips. His no-cost option to purchase extends four years, or longer, depending the time required to complete the last of the original 22 condo units. If he extends his option after 2010, the purchase price is just 5 percent higher than the original price, plus a 2 percent annual increase after 2010.

Mr. Littlefield's desultory justification for the deal is that promissory notes, such as the cost-free loan to Mr. Mabee, are "not that unusual" by cities to effect development that is in the public interest. Mr. Johnson justified it on the grounds that any developer would want to know what would happen to the rest of the property on the block, as if that logic couldn't be applied to all the adjacent blocks. The city hall view also makes light of the fact that RiverCity, the city's own downtown development agency, had wanted to preserve some of that block for public parking for visitors to the Walnut Street Bridge, riverfront and museum district.

In any case, the rationale offered by the mayor and Mr. Johnson is unpersuasive. Sweetheart deals given to a former campaign manager have an odor when they are so unusually sweet, unadvertised to competitors, and go down so quietly. The city's bid process, which Messrs. Littlefield and Johnson seek to enforce for others, requires procedures that they clearly did not follow in this case.

For the City Council, this makes the second accounting project — the mayor's Farmers Market purchase two years ago is the first — that begs a thorough examination. The council shouldn't waste any more time in posting its ad for an independent auditor.