They're a contractor's dream, all those bulldozers pushing dirt around on the blocks and blocks of bare earth stretching northward from the corner where Highway 55 heads west out of downtown Minneapolis. Over the next six years, these 73 acres are destined to become a vibrant new neighborhood, complete with arts-and crafts-style homes, walking paths, lakes, shops, a million-dollar view of the city's skyline, and an inviting boulevard that flows into south Minneapolis's sought-after lakes district.
The 900 homes that will be constructed here, and the upscale amenities designers hope will make them attractive to urban professionals and young families, are the result of the settlement of a controversial lawsuit, Hollman v. Cisneros. In 1992 public-housing residents, aided by Legal Aid and the Minneapolis NAACP, sued the City of Minneapolis and federal housing authorities, claiming that local and national officials had segregated poor minorities into the dilapidated projects on the city's north side. As a result of a settlement three years later, 770 units of crumbling public housing were demolished, and $117 million was earmarked for Minneapolis to build replacement housing throughout the metro area.
Though the settlement was initially seen as a victory for the plaintiffs, it has left plenty of controversy in its wake. Critics have blasted the city for everything from its failure to find homes for the people who used to live in the projects--including the lawsuit's namesake, Lucy Hollman--to the north-side redevelopment's escalating price tag. (The cost of construction, originally estimated at $135 million, has since been upped to $200 million--more than half of it to be paid from public funds, including nearly $60 million from the City of Minneapolis.)
But as construction commences, the most prominent element of the project has managed to escape public scrutiny: the enormous taxpayer subsidy. That's largely because Minneapolis officials, led by city council president Jackie Cherryhomes, opted to turn over the prime parcel of real estate--along with control over what gets built there and who builds it--to a private developer, St. Louis-based McCormack Baron & Associates. Moreover, the city appears to have structured the deal in a way that obscures the process from public view.
A look at the few documents that have been made public, along with interviews with Twin Cities-area contractors, suggests that the lion's share of the work--and the money--is going to a small, well-connected group.
Dozens of public-housing projects were torn down nationwide during the 1990s. Though they were touted not too long ago as the most progressive way to house poor families, virtually all of the nondescript cement high-rises and row houses owned by public-housing agencies had slowly deteriorated into crime- and roach-infested slums. Officials in most cities have rushed to replace the projects with the new state-of-the-art: so-called mixed-income developments. Part of a public-policy strategy spearheaded by the U.S. Department of Housing and Urban Development (HUD), the redevelopments are intended to revitalize impoverished areas by "deconcentrating poverty"--i.e., scattering poor residents throughout cities rather than crowding them together. Inside the new communities, the theory goes, the lives of the poor will improve as they live in proximity to those who are more successful. (And, presumably, vice versa.)
Eager to replace the projects on the city's north side with something that would reverse migration to the suburbs, in 1999 Minneapolis officials organized a visit to the most talked-about of these mixed-income developments, Murphy Park in St. Louis, Missouri, built by Richard Baron, whom the St. Louis Post-Dispatch has referred to as the "Tiger Woods of urban redevelopment." Baron's firm, McCormack Baron & Associates, has made a mission out of turning blighted urban landscapes into inner-city oases where the poor and the well-heeled live side by side.
In 1996 McCormack Baron began replacing St. Louis's notorious Vaughn public-housing complex with streets lined by red-brick townhouses. Residents, regardless of income, now enjoy wall-to-wall carpeting, dishwashers, and garbage disposals, as well as amenities more commonly associated with upscale developments, such as community swimming pools, daycare centers, and gated parking areas. Trees shade the streets, many of which are broad boulevards broken up by medians filled with marigolds and petunias. When it is completed in 2003, Murphy Park will include 402 townhouses and apartments, just over half of which are reserved for low-income tenants.
But it's not enough just to build affordable housing, Baron has often told the media; if the new neighborhood is to succeed, the surrounding community must be improved as well. To that end, in addition to constructing housing, Baron pushed the St. Louis school district to revitalize the neighborhood's elementary school. He convinced local business leaders and philanthropic organizations to put millions into the flagging school to buy computers and textbooks and to better train teachers and raise students' test scores.
Baron, who began his career as a Legal Aid attorney working with public-housing tenants in St. Louis, has repeatedly explained his development approach as "the right thing to do" to ensure that all people, regardless of income, enjoy a quality place to live. That philosophy has translated into business success: In recent years McCormack Baron has been tapped to head up dozens of similar projects in Atlanta, Pittsburgh, Kansas City, and San Francisco, among others.
In May of 1999 Minneapolis City Council members chose McCormack Baron to lead the redevelopment of the Hollman site. A year later the company and the city had ironed out a 100-plus-page "Master Plan." Under its terms, the city was to construct roads, sewers, and other infrastructure for the new neighborhood. The developer would build 900 units of new housing.
McCormack Baron took on a local partner, Legacy Management and Development Corp. The Edina-based company was a savvy selection. Owned by Archie Givens Jr., Legacy Management (formerly known as Rainbow Development) was founded by Givens's father, Archie Sr., a prominent Minneapolis businessman who was the state's first black millionaire and the city's first black housing commissioner, as well as a noted philanthropist. The Givens Foundation, which he also founded, donates money to a variety of educational and cultural programs and established one of the nation's best-known collections of black literature, housed at the University of Minnesota.
In 1974 the senior Givens died suddenly of a heart attack. His daughter Roxanne Givens took over the family business and, over the next 27 years, turned the small company into a multimillion-dollar concern. In 1997 Roxanne Givens gave the reins to her brother.
In addition to the family foundation's support of local causes, the Givenses are major players in local politics. Campaign contribution records show that they and employees of Legacy Management are consistent donors to the campaigns of both Minneapolis Mayor Sharon Sayles Belton and Sayles Belton's friend and close ally, city council president Jackie Cherryhomes. Roxanne Givens and her husband Richard Copeland spent their first date at Sayles Belton's inaugural celebration in 1994; Givens was a high-enough roller to rate her own table.
This past December, after five years of politicking, financial wrangling, and bitter debate over the exact mix of housing that would replace the bulldozed tenements, it appeared as if Minneapolis was at last within months of breaking ground for the Hollman redevelopment. McCormack Baron and Legacy Management called a meeting at the Phyllis Wheatley Community Center in north Minneapolis to discuss how to submit bids for contracts, and how the hiring process would work.
Eager contractors, craftsmen, and community members seeking jobs packed the bleachers in the center's gymnasium. Developers' representatives and city council president Cherryhomes addressed the group from the gym floor, promising that the huge project would generate plenty of work--not just for the Twin Cities' big-name firms, but for small and struggling businesses too. But first a general contractor would have to be selected for each of the project's four phases; that company, in turn, would hand out the smaller jobs during each phase.
In March of this year, McCormack Baron/Legacy Management invited ten contractors to bid for the first general contractor's job. The chosen general contractor would be responsible for building 232 units of rental housing--105 of which would be public housing, 79 market rate, and 48 subsidized by tax credits. Bids--complex documents laying out everything from the price of pipes and lumber to a company's track record and proposed subcontractors--were due by mid-April.
In May Archie Givens delivered an update to the members of the Near Northside Implementation Committee, the city panel overseeing the development. Givens told the committee members that two bids had been received and were under review. The bidders were Shaw-Lundquist Associates, Inc., an Eagan-based construction firm, and Weis Builders Inc., headquartered in Rochester.
In late June Givens announced that Weis had been given the nod. Critics were quick to condemn the decision to hire a Rochester-based company instead of a local, minority-owned firm with a long history of work on public projects. (Shaw-Lundquist president Fred Shaw is Chinese.) Rumors quickly spread that Weis must have somehow had an in with the developer.
As it turns out, one of the subcontractors Weis proposed using, Thor Construction, is well known to Givens. Thor is owned by Richard Copeland, the husband of Archie Givens's sister Roxanne, Legacy Management's former CEO.
When losing bidder Fred Shaw learned of this, he was livid. He wrote a letter to McCormack Baron, which he copied to Givens at Legacy Management, to HUD administrators, and to a host of Minneapolis officials, including the mayor and Cora McCorvey, executive director of the Minneapolis Public Housing Authority. In the July 10 missive, Shaw asserted that his company had met or exceeded the requirements set down by McCormack Baron and Legacy Management, which were based on a point system for scoring proposals: The contractor's ability to stay within the $26 million budget was worth 40 points; the submission of a plan for meeting the minority hiring goals was worth 20 points; and experience building wood-frame housing was worth 15 points. (Other small requirements were worth a handful of points.) Shaw closed his letter by asking for reimbursement of the $67,050 his company spent preparing its bid.
Born Feng Hsiao in China's Shaanxi Province in 1919, Fred Shaw grew up working alongside his father, stepmother, and nine siblings in the fields of the family farm. Though his family had little money, his parents pushed all of their children to get an education and in 1942 Shaw graduated from Wu-Han National University with a bachelor's degree in civil engineering. Three years later he left China to pursue a master's degree at the Massachusetts Institute of Technology in Boston. While there, he was awarded a research assistantship to study at the University of Minnesota. In 1950, while finishing up his studies there, Shaw began working in the construction industry as a part-time estimator.
With more than 50 years of experience in the construction trade, Fred Shaw is not easily rattled. He is used to competition and he knows what it's like to lose out on a big project. But this loss really irked him. So, after much thought, he decided to speak out.
Givens and Richard Baron had said repeatedly that it was important for the first phase of the project to stay within its $26 million budget. According to city records, Weis's original bid was $37 million, Shaw's $30 million. Public records also reveal that in May, Weis submitted a flurry of new paperwork outlining new subcontractors, new proposals for meeting minority hiring goals, and a new overall bid of $32 million.
On May 23, during Shaw-Lundquist's second interview with officials from McCormack Baron and Legacy Management, the contracting firm was confronted with a problem they'd seldom encountered: They were informed that their bid was too low.
"They were pretty concerned and basically seemed to want us to increase our price in a couple of areas," says Paul Nelson, who, as the Shaw-Lundquist staffer who'd put the bid together, was present at the interview. "They weren't going to let it go. They just kept insisting that they had the experience to know that our numbers were too low. We told them that we figured these numbers and we thought they were right, but we finally did send a letter saying that we would raise costs in some areas, at their urging. We ended up raising our proposal by $1.7 million--but we still felt like it could be done for $30 million."
Richard Baron refuses to discuss Shaw's allegation that Weis was allowed to re-bid. "I can't respond to this; I really wouldn't even want to," he says. "We have a very complicated project to build. We have been negotiating in good faith. We do these private projects all over the U.S."
After he submitted his initial bid, Shaw says, some of the subcontractors he had listed called to report that they'd received phone calls from people who claimed to be working for Weis. Shaw says the callers said they were helping the company to refigure a bid and wanted to know specifics about how the subcontractors had arrived at their proposed prices for doing particular jobs.
It looked to Shaw as though Weis was re-bidding the project well after the deadline and, to add insult to injury, as if his competitor was somehow using Shaw-Lundquist's (presumably confidential) subcontractor lists and price breakdowns to do so. "Our loyal subcontractors called to warn us that this was going on," Shaw alleges. "They told us that they did not tell Weis what price they had given us for our bid. But how would Weis have known to call them if they did not already see part of our proposal? That's not right. That is supposed to be private." (The subcontractors Shaw says were contacted declined to be interviewed by City Pages.)
Nelson and Shaw say they did not tell their interviewers about the alleged calls to the company's subcontractors. But they did refer to the matter obliquely: They asked for the opportunity to re-price their proposal if Weis was being allowed to do the same. "We felt like they were just trying to get us to raise our price to be closer to Weis's," Nelson concludes.
"I've been in business more than a half-century and this is the first time I've really felt like something was really wrong with the hiring," says Shaw. "I believe we were treated unfairly."
If Hollman were a public project, it would be easier for Fred Shaw to determine whether he'd been treated fairly. The umbrella agreement between McCormack Baron and the city does spell out the mix of housing that is to be built and the city's goals for the amount of work that should go to minority- and women-owned businesses, and to residents who were displaced from the projects. But most of the specifics of how the work is to be completed are McCormack Baron's to decide.
Minneapolis has granted the firm "private-development rights." That means that even though the city owns the land on which the development is being built, during the time when construction is taking place the developer will control most of what's done there. After construction is complete, the city will give McCormack Baron a 62-year lease on the land.
Such public/private partnerships are not unusual. For one thing, the arrangements allow cities to pass on much of the legal responsibility for a development to a private company (which charges a hefty fee for the service). In addition, both government and developer are freed from much of the bureaucracy and paperwork associated with public jobs--voluminous municipal and/or federal regulations that govern everything from construction materials to bidding processes.
There's a downside, though. Typically, when taxpayer money is being spent on, say, a road-building project or a city council member's salary, the public is entitled to see every detail of every transaction. States and cities--indeed all government agencies--in the United States are bound by strict laws requiring this kind of openness. These rules, sometimes referred to as sunshine laws, are supposed to protect the public from unscrupulous officials who hand out cushy contracts to relatives and friends, who base deals on political patronage, or who are simply inept.
In public/private partnerships, however, it's not always clear how much information is open for public scrutiny. And in the case of Minneapolis's contract with McCormack Baron, city officials maintain that most of the paperwork is private.
Minnesota's sunshine law, called the Data Practices Act, specifies that all government transactions are public, with a few narrow exceptions (such as individuals' personnel files). "If a government entity enters into a contract with a private person to perform any of its functions," the law states, "the government entity shall include in the contract terms that make it clear that all of the data created, collected, received, stored, used, maintained, or disseminated by the private person in performing those functions is subject to the requirements of this chapter and that private person must comply with those requirements as if it were a government entity."
But Ruben Acosta, an attorney for the Minneapolis Community Development Agency (MCDA), one of several local bureaucracies involved in the redevelopment, says the statute doesn't apply to Hollman, because McCormack Baron and the city have yet to sign a formal contract. The two entities did sign a Master Development Agreement last year, but that is not a contract, Acosta argues; it's simply an agreement to agree on more detailed things later.
"As with any private development project, like Block E, for example, they don't have to comply with data practices," says Acosta. "They don't need to show us everything. They need to show us evidence that what they did was run a fair and competitive hiring process." If anyone involved in the project has a complaint, Acosta adds, they're welcome to bring it to the city's attention. But the ultimate legal responsibility is McCormack Baron's. "They [complainants] can't come after us," he asserts. "We're not putting out the bid."
City officials have not seen the bids in their entirety, he says, nor do they have the right to review them or to compel McCormack Baron to make any information public. City officials have made public the few documents they have; most pertain to federal and city minority and small-business hiring goals.
Chuck Lutz, deputy director of special initiatives for the MCDA, adds that once the final deal has been inked, the contracts between McCormack Baron and its contractors will be open to the public. But the bidding process that led to those contracts will always remain the private property of the developer. He says MCDA administrators are well aware of the state's open-records laws but believe that HUD regulations permit the city to bypass the statute.
In the opinion of Don Gemberling, the director of the Minnesota Department of Administration's Information Policy Analysis Division, Lutz is at the top of a slippery slope. "It seems to me that this is the exact situation that the Legislature was trying to cover with this statute on privatization," says Gemberling. "They meant that if these agencies were going to contract out with some private person, then the statute would have to cover them. They felt like people have a right to know what their money is being used for.
"If the city is saying they don't care whether they have the information," Gemberling goes on, "then that tells you something about the orientations of our municipal government on the subject of openness and accountability."
As he was writing his July 10 letter, Fred Shaw repeatedly reviewed the bidding process in his mind. One memory in particular kept coming back to him: There'd been an odd little meeting back in March, which hadn't seemed at all pivotal at the time. He'd received a call, Shaw recalls, from Donald Crowther, owner of TCM Construction, Inc., who requested a meeting at Shaw's Eagan office. Shaw says Crowther told him that Anton Beasley and Carl Kent of Anton Construction would also come along, though a third member of the "group," Richard Copeland, owner of Thor Construction Inc., was on vacation and couldn't make it.
All of these men were familiar to Fred Shaw, who as a longtime member of the National Association of Minority Contractors has often worked with and attended meetings with each of them. (One, Donald Crowther, enjoyed a certain degree of notoriety. In July 1995 Crowther pleaded guilty in U.S. District Court to paying $150,000 in bribes to a former official of the Veterans Administration so that his company could receive $4.6 million worth of contracts for four construction jobs at the Minneapolis Veterans Medical Center. Crowther was sentenced to 21 months in prison and fined more than $425,000.)
Accounts of the late March meeting's purpose vary, depending on who's doing the explaining. Fred Shaw and Paul Nelson recall that Crowther, Beasley, and Kent proposed that for a flat fee--three percent of Shaw-Lundquist's total bid--they would ensure that Shaw's proposal met all the developer's requirements. According to Shaw, the men said the same offer would be extended to their competitor, Weis.
Shaw and Nelson say they were speechless, and tried for a few minutes to get the men to elaborate on the offer: What exactly were they promising? Their questions did little to flesh out the proposed deal, which the two men describe as "vague." The following week, Shaw says, he called Crowther to say his company was going to pass. Two weeks later Shaw-Lundquist submitted its proposal to McCormack Baron and Legacy Management. A couple of weeks passed without word from the developer. And then Shaw's subcontractors began telling him about the alleged phone calls from Weis.
Shaw and Nelson thought back over what had happened so far. Had the group gone to Weis with its proposal? If so, had Weis taken them up on it? How important was that meeting back in March? Nelson had worked with Richard Copeland in the past and decided that he would give him a call. If anything, the phone call only made things worse, Nelson says. "I asked him [Copeland], 'So, do we have to work with you to get this job?' He basically said, 'Yes.'" Nelson claims that Copeland told him that Thor Construction would be "working on the job one way or another," and assured him, "This was the best phone call you could have made."
How could Copeland be so sure he'd have work on the project? Nelson wondered. Shaw-Lundquist hadn't included them in its proposal; they must be on the one submitted by Weis.
On Friday, June 22, Nelson got a call from Archie Givens at Legacy Management. The conversation was brief. Givens said Shaw had lost the bid to Weis. The deciding factor, Nelson was told, was Weis's larger amount of experience with residential building. He was floored. He knew the bidding process was no sure thing, but he never imagined Shaw-Lundquist would be downgraded for a lack of residential experience. Weis had more housing experience, to be sure, but Shaw-Lundquist could hardly be described as lacking in that area. The firm does plenty of work involving wood-frame housing, comfortably in excess of what the developer listed as a requirement for the job: 500 units in the past five years.
Before Givens hung up, he invited Shaw-Lundquist to compete for the general contractor job for the next three phases of the project. "I thought, 'Oh yeah, right,'" recalls Nelson, laughing. "We're not interested in doing this again unless the developer changes."
Richard Copeland of Thor Construction did not return repeated phone calls requesting comment for this story. The men who called the March meeting say Shaw's version of events is that of a sore loser. Anthony Beasley, owner of Anton Construction, says Shaw is confused. Beasley says he never identified his company as being involved in any way with TCM or Thor. Further, he says he scheduled the meeting to discuss the possibility of his company entering into a joint partnership with Shaw-Lundquist for the Hollman project. When he arrived at Shaw's office, he adds, he was surprised to see Donald Crowther already sitting there. No sum of money was ever discussed, Beasley says. "What we wanted to know was, 'Do you have any interest in working with us [Anton] on the project?'" he asserts. "Fred Shaw wasn't interested, so that was that."
Crowther, owner of TCM Construction, tells a different story. He did call Shaw to arrange a meeting for all three contractors in March, he confirms. And the three companies--his TCM, Beasley's Anton, and Copeland's Thor Construction--were working together.
Crowther says the visit to Shaw-Lundquist was one of several that he and his colleagues made to contractors they thought might be in line for the general contractor's job on the Hollman site. The group thought it could offer a range of services to the winning bidder, he says, especially when it came to helping the contractor fulfill the city's minority-hiring goals. "We saw a project that had strong minority goals and we could meet all the minority goals with just our three firms," Crowther asserts. "There may have been a monetary figure discussed. What I remember as a possibility was that we were offering assistance to other contractors on the job."
None of the contractors the men contacted seemed interested, Crowther says. "We really tried to talk to many contractors," he emphasizes. "We were trying to sell a service that didn't work. That's all it was."
According to Crowther, he, TCM, Anton, and Thor did indeed approach Weis with the same pitch, and got turned down. But other ideas were floated, he says, including the possibility that all three companies might enter into a joint partnership with Weis on the project. He declines to elaborate on the details of those discussions.
At any rate, in Weis's initial bid for the project, the company proposed that the three firms would perform pre-construction "management and estimating": Anton would be paid $1.1 million, while TCM and Thor would receive $900,000 each. The general contractor's final bid lists four different companies as providing this service, at a hugely reduced total cost: $58,000. Thor, Anton, and TCM do appear elsewhere on the final proposal. Thor will be doing concrete work, at an estimated cost of $3.1 million. The portions of the proposal available for public review aren't specific about the role the other two companies are slated to play; Anton and TCM will be supplying carpenters, but it's unclear how much they'll be paid.
Representatives of McCormack Baron and Legacy Management decline to divulge specifics of the contracts, or the bidding process. Richard Baron says Weis is working on a joint-venture agreement with another firm or firms, but he won't mention any names. He also dismisses concerns that Archie Givens's relationship to Copeland might constitute a conflict of interest. Baron says it was he, and not Givens, who made the ultimate decision to hire Weis, and that he made the decision for the reasons Givens has stated.
"We have a very complicated project to build," says Baron. "What we are trying to ascertain is that these people have building experience. There was a good deal of conversation about each group, and there wasn't even a question that the Weis firm had had the most experience in the kind of building we'd have on that site."
Weis vice president Randy Ehalt says his company cannot share details about its bid or comment on its negotiations with McCormack Baron and Legacy Management, because talks are still ongoing and a final contract cementing the deal has yet to be signed.
Public and private bidding processes are very different, explains Daniel Kleinberger, a professor who specializes in contract law at William Mitchell College of Law. While public projects are bound by strict guidelines, private developers have more latitude. The only thing the law mandates is that they make their requirements clear.
The request for bids on the first phase of the Hollman project states that the developer will select the "lowest cost and most responsible and responsive proposal." In other words, says Kleinberger, "The promise they made was that they would exercise their discretion within the confines of normal business practices. That leaves a lot of room for interpretation beyond just the point system they said they were scoring on."
Having structured a hands-off deal, are city officials actually staying out of the nitty-gritty details of how construction proceeds? As with everything else concerning Hollman, it's not clear.
The development is being built in Jackie Cherryhomes's Fifth Ward. Cherryhomes sits on the committee that oversees the project. Another panel, the Community Oversight Committee, is responsible for making sure the city keeps its promise to give priority for Hollman construction jobs to applicants who were displaced during the demolition. Four of that committee's ten members hosted a fundraiser for the council president this past spring: Bobby Jo Champion, former Minnesota assistant attorney general; former state lawmaker Richard Jefferson; Minneapolis Public Housing Authority board member Carol Batsell Benner; and local businessman Bill English.
There is also evidence that if Cherryhomes wasn't involved in negotiating the contracts, she was certainly kept in the loop by the major players. According to city phone records, on Thursday, May 31, the council president got a call from Archie Givens asking whether she had any further comments or concerns regarding the hiring process. "We would like to make a decision by Monday," the log reads. "Please direct me."
The next afternoon, Donald Crowther called. The log entry reads: "Can you call me regarding the Northside Housing Project?"
Two hours later Richard Copeland of Thor Construction called. "We have some concerns about the project," his message reads. "We are beginning to slip through the grease on deal [sic] and something needs to be done right away before it goes too far. Your immediate attention is requested and we will give you the particulars."
A phone message left by Copeland the following Monday afternoon reads: "I have an update: Things appear to be put back in regards to the project. I am proceeding on faith."
Cherryhomes says there was nothing irregular about the calls. "We've all been concerned that we need to have enough minority contractors on the site, and [Copeland] was probably calling about that," she says. "I don't know, but I did not call him back. I'm not interested in being involved in the project on that level."
Nor does Cherryhomes believe that Thor Construction had any pull in the hiring process owing to the fact that its owner is Archie Givens's brother-in-law. "I believe that the decision was always being made by the folks in St. Louis," she says. "I trust that [Richard Baron] is going to hire the best contractor he can to build the project."
Crowther, Copeland, the Givens family, and some of their employees are all longtime contributors to Cherryhomes's campaigns. But it's hard to tell exactly how much support they've given: Under state law, city candidates need only file reports showing who contributed to their campaigns during election years, when the maximum donation is $300. (Crowther, Copeland, the Givens siblings, and some of their employees all made donations during election years.) Candidates need not report donors' names in non-election years, when there is a $100 limit on contributions. Cherryhomes's annual campaign finance report for 2000 shows a total of $25,600 in contributions; no donors are listed. In 1999 she reported receiving $25,000, again not itemized. Her 1998 report shows a total of $8,800.
Over the next six years, the process of soliciting and sorting through bids will be repeated three more times. Each time, McCormack Baron and Legacy Management will hire a general contractor, who will solicit work from additional subcontractors. In all likelihood, the bidding process in each instance will proceed just like the first one, with little city oversight, and no public scrutiny.
The Hollman project's staunchest supporters within city hall have not challenged the way the hiring process has been handled. It is McCormack Baron's project, they say; the city is not responsible. The more prominent critics of the redevelopment, meanwhile, say they had little idea the deal would be so hard to evaluate. Tenth Ward city council member Lisa McDonald, for one, says she's shocked to learn the details of the deal's structure.
"People like [Minneapolis Community Development Agency executive director Steve] Cramer will say that we as commissioners should have known that this was the way the deal was structured when we agreed to it," says McDonald, a longtime critic of the city's development practices. "I want the public to know that we don't get these kinds of details when these things come before us. They don't tell us that what they have set up hides the facts or we wouldn't have agreed to it.
"It seems to me when you spend government money, whether it's federal or state, there is a responsibility level for openness that goes with that," McDonald continues. "The public has a right to know how their money is being spent. If our city leaders structured a deal to hide details from the public, then that's unacceptable and they should be called on that."
Cherryhomes insists that she had no idea the deal was private. "This was very informative to me," she says. "I was not aware that mixed-finance agreements meant documents would be private."
But she isn't sure whether the deal can or should be restructured. "At this point I don't know, but we need to be clear about what this kind of agreement means in the future."
City officials may not have known that they were agreeing to a deal they wouldn't be able to scrutinize, affirms the MCDA's Chuck Lutz. But this kind of transaction is common at the MCDA, he says, so no one there was surprised. "Way back during the master planning phase, we told the city council that this would be a mixed-finance deal," he explains. "I think that Jackie [Cherryhomes] understands that mixed-finance means private ownership of public units. But whether she understood that these kinds of documents would then be private, I can't say."
In any case, the fact that so much of this construction process is not open even to city officials does not concern Lutz. "The point here is that we select a developer and we have every confidence that they will do a good job on our part," he says. "I think that this is the best way to do these deals to achieve the product we all want."
It's clear, however, that at least some of those involved in the planning process saw clouds looming on the horizon more than a year ago. In July 2000, Legal Aid attorney Tom Streitz, one of a handful of Hollman critics with any power to change the process, posed some tough questions at that month's meeting of the city panel overseeing the redevelopment, the Near Northside Implementation Committee. Streitz, who represented the individuals who sued to have the projects torn down, asked a McCormack Baron official whether the developer would be evaluating contractors' proposals on its own.
Cherryhomes responded by suggesting that a special committee be set up specifically to assist with the selection of the contractor. "She added that given the public nature of this private deal, there should be representation from the community involved with the selection process," according to the minutes of the meeting.
The oversight Streitz and Cherryhomes spoke of never materialized. Cherryhomes did establish a committee after that July meeting, but its members were only asked to review minority-hiring goals. City officials say they aren't yet sure whether the rest of the details concerning how McCormack Baron and Legacy Management spends the $200 million will remain private forever.
None of this makes Fred Shaw feel any better. On August 2 he received a reply to his letter to McCormack Baron from the developer's Missouri law firm, Bryan Cave, rejecting his demand for the return of the money he spent preparing his bid. "We are in receipt of your letter dated July 10, 2001 protesting the selection of Weis Builders, Inc. for the above-referenced project and demanding reimbursement for proposal preparation costs in the amount of $67,050.00," the letter says. "Your protest and demand are both unwarranted."
At this point, Shaw isn't sure what more he might do. "A lawsuit is expensive, so we hate to do that," he muses. "But we believe we have been treated unfairly. We just wanted an answer to our question about why we didn't get the job. There's still something about this process that we don't understand."
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