Developers called out by Duluth city councilor have been paying utility debtsEarlier this year, At-Large Duluth City Councilor Jim Stauber made a formal inquiry about overdue utility bills. “When bills aren’t paid, all the other customers have to pick up the slack,” he said.
By: Peter Passi, Duluth News Tribune
Earlier this year, At-Large Duluth City Councilor Jim Stauber made a formal inquiry about overdue utility bills after learning the Great Lakes Aquarium had amassed about $129,000 in unpaid bills under previous management. In January, the council voted to pay off that debt using unexpectedly large proceeds from local tourism taxes.
The vote got Stauber wondering who else was seriously in arrears.
“When bills aren’t paid, all the other customers have to pick up the slack,” he said.
Stauber got a list of the top 20 debtors and took particular notice of a couple of names: Eric Ringsred and Clyde Iron, both of which have received city money in the past three years.
Eric Ringsred comes in at No. 4 on the March 7 list, owing the city $9,843 for utility services.
That led Stauber to question whether Ringsred had been behind on utility payments when the Duluth Economic Development Authority agreed to purchase the NorShor Theatre and Temple Opera buildings from him in June 2010.
“Considering the $2.6 million the city forked over, we should have at least withheld whatever he owed the city for utilities,” Stauber said.
Brian Hanson, DEDA’s executive director, said all the utility bills for the two buildings the authority purchased from Ringsred had been paid at the time of the transaction. But he wasn’t sure if Ringsred was behind on utility payments for other properties he owned in the city. Ringsred reduced the amount he owed the city by about $5,000 between February and March and said he aims to pay off the balance in full, soon.
“That’s money we owe, and we’ll pay it,” he told the News Tribune.
Ringsred said he doesn’t believe he had any significant utility debt on any of his properties at the time that he sold the NorShor and Temple Opera buildings to DEDA. But even if he did, he said that publicizing utility debts is hurtful.
“People don’t get behind on their utility bills because they want to,” Ringsred said.
As for his current debt, he said it was largely attributable to his acquisition of the St. Regis Apartment Building, which was almost entirely vacant when he purchased it. Ringsred said he has since fixed up the place and now 17 of 18 units are rented out, enabling him to catch up on utility bills.
Stauber also raised questions about a year-long $500,000 bridge loan DEDA made to Clyde Iron principal partner and developer Alex Giuliani in April 2010 and extended until May 2011.
Hanson said Giuliani had no significant utility debts when the loan was first made, but at the time of the extension in March 2011, he had fallen behind on his bills. Giuliani, who redeveloped the Clyde Iron complex in Duluth’s Lincoln Park neighborhood, had amassed about $1,500 in past-due utility payments when DEDA granted him an extension, according to Hanson.
As for the role outstanding utility debts should play in DEDA’s decision-making, Hanson said: “Is it something that could or should be considered? Of course. We look at all kinds of factors.”
But Hanson said the standing of a person’s utility accounts is just one piece of the puzzle. He said DEDA also considers would-be partners’ reputations, their other financial dealings and the non-quantifiable benefits certain projects can bring to the community. Hanson noted that Giuliani agreed to personally guarantee the loan before an extension was granted.
He also pointed out that DEDA’s faith appears to have been well placed, as Giuliani ultimately paid off the
market-rate loan in full in May 2011.
While Stauber said outstanding utility bills should not be an absolute deal-killer, he considers them a red flag that DEDA and the city ignore at their own peril.
“Why would we loan someone more money if they already owed us a lot of money?” he asked.
As of March 7 this year, Clyde Iron owed the city $1,658 in overdue utility bills, but the development was on a payment plan, and it appears on pace to settle its debt soon. From February to March, Giuliani and Clyde Iron reduced their combined utility debt to the city by nearly $6,900. Giuliani no longer personally owed anything to the public utilities department in March.
Giuliani said Thursday that he was dumbfounded to learn anyone was making an issue about the utility bills of Clyde Iron, which now employs 55 people.
“To the best of my knowledge, I am in good standing with Comfort Systems,” he said.
“I put together a $28 million project with not one penny of subsidy from the city, and he (Stauber) wants to talk about a $1,600 utility bill? It seems so wrong,” Giuliani said.