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‘City Loses $500K in Kensington Park Foreclosure’—Or Did It?

A recent Finance & Commerce article states the city is losing $500,000, however, developer Colleen Carey says the article is full of inaccuracies.

It’s no secret the . However, a recent city memo and Finance & Commerce article have stirred up debate on whether this has resulted in a financial loss for the city of Richfield.

Truth be told, the city won’t know if it has suffered financially on the project until the end of the tax increment financing (TIF) district in 2026.

However, there is no reason to think the city won’t recoup the $1.1 million it invested as TIF to facilitate the development, according to Director John Stark and property developer Colleen Carey.

“The repayment of the loan is from the TIF received by the project; no matter who owns the property,” Carey said. “The city has been receiving that money and will continue to receive it. … and [the city doesn’t] expect that there will be any shortfall.”

The Finance & Commerce article, published Tuesday, stated the city “is losing its $500,000 security interest” as a result of the foreclosure.

“The city holds a $500,000 mortgage on the $31 million Kensington Park mixed-used project at 7600 Lyndale Ave. S., which received a $1.1 million loan from the Richfield Housing and Redevelopment Authority,” the article reads. “Last year, the commercial property went into foreclosure, resulting in a cancellation of the certificate of title and the removal all subordinate liens—including the HRA’s $500,000 mortgage—from the property records, according to a city memo.”

It’s true, the recent memo (dated May 25) says the $500,000 will be “extinguished” due to the foreclosure. However, Carey said the mortgage was essentially a “back-up plan” the city included in the agreement in case the tax revenue wasn’t sufficient at the end of the tax district. In short, Carey said the $500,000 was not an additional sum of money the city invested or actually physically lost, which the article and the city’s memo didn’t make clear. Stark agreed with Carey’s explanation in an e-mail to Patch Wednesday.

Another memo, written by and dated July 25, 2011, also states: “The $500,000 portion of the financing was part of the $1,100,000 interfund loan and all of those funds were targeted for repayment to the City through future TIF proceeds generated by the project. I understand the most recent TIF analysis shows that there will be ample TIF revenue to payoff the outstanding bonds and repay the $1.1 million to the HRA.”

All in all, the city did lose its “insurance policy” worth $500,000. But at this point, as long as the tax revenue keeps rolling in, the city has no reason to think it won’t make back its full investment. As far as Carey’s intentions to develop the former site, she said plans are still moving forward.

Four city memos—beginning with the first news of the Kensington Park foreclosure in 2011 to the most recent news—have been attached to this article as PDFs.

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Brian Johnson June 14, 2012 at 03:18 PM
Caitlin, I wrote the story you're referring to. The story never said the city would lose $500,000. It made it very clear that the $500,000 mortgage was insurance in case the TIF revenue is insufficient. The story was balanced and accurate.

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