What should be done about Market Hall and about the funds the city has paid Red Barn?
In the current configuration, Market Hall as a business is flawed. An outdoor food court with a few “trinket” stores doesn’t work in communities like ours. The contract with Red Barn must be thoroughly reviewed and scrutinized to determine the city’s legal options. Should it be determined and the general consensus is that it will be; that Red Barn has violated the contract terms by not delivering its promised services and results, then the city should use all legal recourse to re-acquire the land and outstanding funds associated with the deal.
Has not responded to questionnaire as of May 6.
In the public perception, Red Barn has failed to deliver on the terms and conditions of their development agreement. The question is now one of the legal issues. The audit of Red Barn expenses should be completed and the City/ RDA should seek reimbursement for funds paid to Red Barn for expenses not covered by the Development and Disposition Agreement.
The City Council should direct the new City Attorney to undertake a review and initiate an investigation regarding all of our dealings with Red Barn to determine if there were violations of the terms and conditions of the Development and Disposition Agreement (DDA). Under what terms and conditions did the Redevelopment Agency agree to this transfer of ownership of the land?
The fact that title to the land now resides with Red Barn is problematic as without this parcel there is no future for development of New Town Center. Our attorney should research the transfer of ownership with the intent to recover title to the land by any legal means. We should, at minimum, write a demand letter to Red Barn now, to return title back to Hercules.
Our City in its grandiose attitude with the taxpayers’ money spent $11.5M for a gigantic lemonade-coffee stand initially meant to be phase 1 of the New Town Center. All the equipment, including the trailers, we see today is not even our property; we only reimbursed the outrageous Red Barn invoices. We were so generous (or stupid) that we gave them the land in 2009 and we even paid the lender fee ($95,000) when they mortgaged it a few months later to get cash.
So, here we are today with this dead corner lot in the most desirable location in town…Could we consider the title transfer as an illegal “gift of public funds” based on the DDA contract and its 2 “minor” amendments? Our attorney should investigate that option to try to return the title to the City. The attorney should also get the report on the audit of the invoices began months ago. Where is that report?
In the long term, this corner lot is meant to be a premium spot for business and high-density residential products. Hopefully Red Barn will sell it to another developer. I have no intention to negotiate further plan with Red Barn.
The city of Hercules has a contract in place with Red Barn that describes in detail what Red Barn is required to pay back to the city in the event that Red Barn cannot deliver a specific development on the Market Hall site. Therefore, if Red Barn cannot, in fact, build their project as defined in that agreement then Red Barn will be required to pay the city back as stated in the contract.
Like other development projects in the city, the New Town Center proposed by Red Barn is too expensive to build in the current real estate market. Market Hall was supposed to be a temporary use until the economy recovered but it has cost too much to operate. So, Market Hall has been closed. The city has requested Red Barn to submit alternate development proposals. There are several issues that could lead to litigation, such as the failure of Red Barn to build a high-density, mixed use project in exchange for the land. Most of the money already spent was for planning and design of the New Town Center, which will likely not be recoverable.
Red Barn had proven to be an unworthy and unreliable business partner. We could lose more if we continue to deal with this developer. Consequently, I will seek to minimize losses on the Market Town project. We should continue with the suspension of payments of all outstanding Red Barn invoices. We should continue to seek reimbursement of payments we made for their charges that were not associated with the project. We should pursue to collect the $5 million cost to Red Barn for failing to meet the density benchmarks. We should continue trying to obtain a position or a lien in the 6.6 acre property behind the current beneficiary.
Market Hall, funds paid to Red Barn and the future of the development on this parcel are all a problem for the city. Unfortunately the city entered into agreements with Red Barn that are unfavorable in many areas. These were approved by the City Council and/or by the city manager. The agreements and all amendments need to be reviewed fully by the city attorney to see what options are available to the city at this point.
Clearly, terminating the financial support for Market Hall was the correct decision for the city for many reasons. However, as the land is no longer owned by the city and has been utilized to secure a loan, the issue of the future of this project, although an IPDP has been approved, is not fully under the city’s control. With a full review and options provided, discussions and a decision about how to proceed with Red Barn and this development will be possible.