Mayor Katz recently called on the city’s Chief Financial Officer and Chief Administrative Officer to determine if the now famous fire hall swap is a good deal for taxpayer or not. 

The Mayor is right that a review needs to occur, but it needs to be much larger in scope.

What the Mayor should do is something more along the lines of what councilor Jenny Gerbasi is calling for – an independent audit of the city’s real estate division.

Below are some reasons why that makes sense:

1)     The city built a fire hall on land it didn’t own and a couple years later, it is now trying to settle the deal. The review Mayor Katz is proposing won’t get at the problem - building on land you don’t own.

2)     A deputy fire chief negotiated a deal to trade city land with a developer without the knowledge of the city’s director of planning, property and development. The review Katz is proposing won’t get at the problem here either – a fire chief seemingly making land deals without approval of council. Why is a fire chief making land deals and what other unqualified staff are wheeling and dealing without officials knowing? No disrespect to the chief, he could be very good when it comes to fighting fires, but this type of transaction seems beyond the scope of his responsibilities and perhaps qualifications.

3)     For the second time in three years, real estate firm Shindico has listed city property for sale on its site prematurely. How does this keep happening? The optics are troubling, especially to the real estate community as the Mayor has business ties with Shindico. The review Mayor Katz is proposing won’t alleviate any concerns in the industry as to how this looks.

4)     The city is going to value the Mulvey land in question based on what it feels is “fair market value.” However, determining fair market value means you go out to the market and see what it will actually pay. The property in question is different from selling a 2010 Ford Escape – something someone could reasonably determine fair market value for as there are thousands of that type vehicle for sale right now. Land, on the other hand, is often unique and much harder to evaluate.

Just ask anyone who has listed a house for $250,000 and ended up receiving $300,000 for it. Alternatively, people have often lost large sums of money on real estate transactions as well. The city should be reexamining its fair market value approach all together when it comes to such deals. The Mayor’s review won’t get at this problem either.

5) Finally, the city’s CAO Phil Sheegl (the person being asked to do the review by the Mayor) was the city’s head of property, planning and development when this process started. How can you now ask him as CAO to review something that started under his watch? That’s not fair to him and certainly isn’t fair to those seeking a fair analysis.

Beyond the fire hall situation, people have been griping for years about the perception of Shindico and it’s relationship with city hall. I’m not going to repeat the allegations floating around, but I will say the city should definitely care about the perception whether it’s true or not.

After all, if there is a perception among the real estate community that the process isn’t fair, why would they bid in to do work for the city if they feel they had a fair shot?

Answer: many wouldn’t.

And that could be happening.

Consider that the city’s 2008 request for qualifications (RFQ) for real estate services (the city’s attempt to develop a list of qualified firms it could easily hire to handle real estate deals as they come up) ended up with five firms the city could hire for such transactions.

Fast forward to 2010 and the same process produced just three firms for the city’s “go to” list. Does that mean fewer firms bothered to bid as they don’t feel the process is fair?

Next, when the fire hall bids closed only Shindico ended up applying for the work. Why is that? Shouldn’t city officials be concerned with the lack of competition to drive down prices?

And finally…why does the 2010 RFQ for real estate services have an option to conduct the work for an additional two years whereas the 2008 RFQ is for a fixed two-year period?

2008 RFQ states:

The intent of this Request for Qualifications is to provide the City with sufficient information to qualify Applicants to perform commercial real estate transactions with estimated commissions exceeding $100,000.00 from date of award of Contract to July 31, 2010.

2010 RFQ states:

The intent of this Request for Qualifications is to provide the City with sufficient information to qualify Applicants to perform commercial real estate transactions with estimated commissions exceeding $100,000.00 from August 1, 2010 to July 31, 2012, with the option of two mutually agreed upon two- year extensions.

“WIth the option of Two mutually agreed upon two-year extensions”??? – Why on earth would anyone on the approved list disagree with renewing the list? If you were on a short list of people that could sell the government, say, toilet paper, would you want the government to open the list up and let more people come in and compete with you? Of course not!

If the auditor had a chance to do a bit of digging in the whole department who knows what kind of constructive recommendations he could make and weaknesses he could discover...