Appellate decision issued
WORTHINGTON -- A decision by the Minnesota Court of Appeals disappointed city leaders last week when appellate judges affirmed the decision made by Judge Jeffrey Flynn to grant summary judgment to New Vision Cooperative, dismissing the city's claim regarding the grain elevator on 10th Street.
"The city is extremely disappointed," said Worthington Mayor Al Oberloh. "This has state-wide ramifications."
Oberloh said if a business is allowed to get rid of a bad asset by selling it to a shell corporation to relieve themselves of any liability, the tax payers will end up paying the price.
"We thought we had a good case in the fact that the nuisance was already initiated by the previous owner," Oberloh explained. We all know that proceedings had already started with New Vision. They chose to sell the property to get out from having to mitigate the nuisance, in the eyes of the city."
Flynn issued the order dismissing the city's claim against New Vision in 2008, after deciding the ordinance regarding nuisance properties makes only the current owner liable for abatement. The 10th Street grain elevator was deemed a public nuisance in September 2007, two months after New Vision transferred ownership of the property to Ruby Development W, LLC. Court proceedings between the city and Ruby are still pending, but Ruby was ordered in 2007 to file a plan of abatement. They had 90 days to do so.
The subject of the nuisance claim against New Vision and Ruby is a sore one for the city of Worthington.
"The courts are looking at a document that says the owner (of the elevator) is Ruby," Oberloh said. "They are not addressing the fact that we're claiming a corporations was set up as a way of getting around the nuisance situation."
Records indicate New Vision paid Ruby $50,000 to take possession of the grain elevator property.
"It was actually a reverse sale," Oberloh stated.
The Minnesota Secretary of State Web site shows that Ruby Development was filed with the state as a limited liability company just days before taking possession of the elevator. The address to which the business is registered is also the address to Blue Earth Environmental Company in Mankato. The street name of the address is Ruby W.
As for the abatement plan, Ruby contends that they filed the plan, but Worthington City Administrator Craig Clarke said what they filed is not an abatement plan.
The document, filed in district court, is actually titled "Plan of Development of 10th Street Elevator." Inside the plan are several aerial photos of the elevator, two newspaper articles from other states regarding elevators that have been turned into climbing towers, what appears to be a college paper written on grain elevators in Texas, a print of the front page of the Worthington Web site, a print of a Wikipedia page regarding tax increment financing (TIF), and some CAD drawings of some proposed buildings.
The summary of the development plan included several different options for the site. The first plan is for continued use of the silos for grain and seed storage. The second plan is to demolish the silos, bring the site grade to flood level, and the city would compensate the property owners for the loss of property value of the existing building as per five years tax value. A third plan also includes city finances. It states the silos could be converted to a climbing gym, and that using TIF, the city development staff could work with Ruby to develop the project. A fourth plan stated the site could be used to build a storage facility.
Nowhere in the plan is the subject of abating the nuisance brought up.
The unfortunate thing of whole deal is that it is heading down the line where taxpayer money will be used to mitigate a nuisance that was caused by others," Oberloh stated. "At a state level, that's huge. There are a lot of old buildings out there that can just be abandoned now by selling it to a corporation with no assets."
Discussion about the elevator's condition between the city and New Vision had been going on for quite some time, possibly as far back as 2000. The city alleges that in 2002, New Vision was informed the structure was considered a public nuisance.
At one point, there was talk of the city buying the elevator from New Vision and demolishing the structure at tax payer expense, then later New Vision requested financial assistance from the city to demolish the building. In 2007, the estimates to remove the building to grade level were just under $100,000, and the cooperative board was willing to put $20,000 to $25,000 toward the project, asking the city to fund the remainder, then purchase the site for an additional $48,900. New Vision later transferred the elevator property to Ruby.
Oberloh said he is not sure what the next move will be, but the city is still waiting for decisions to be made on the Ruby portion of the civil suit. To make matters more difficult, the city's case was being handled by attorney Dave Von Holtum, who was killed in a car crash this past fall. The case was then turned over to another attorney.
According to Oberloh, when New Vision chose to no longer utilize the elevator on 10th Street, they built new and left the old one with the negative value behind.
It looks like the tax payers will end up having to take it down," he added.