Master developer's fee payment the subject of debate at Joplin City Council meeting

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August 20, 2012

Master developer's fee payment the subject of debate at Joplin City Council meeting

By Debby Woodin news@joplinglobe.com The Joplin Globe Mon Aug 20, 2012, 10:37 PM CDT

A contract allowing the city’s master developer to use the Joplin Redevelopment 353 Corp. for land transactions was approved despite a City Council debate Monday night over whether it permitted the master developer to be paid twice for the work.

The contract allows the firm of Wallace Bajjali Development Partners to direct property acquisitions and sales through the 353 board at a fee of 5.75 percent of the cost of the land per transaction.

Mayor Pro Tem Bill Scearce asked City Attorney Brian Head if that meant the fee would be charged on both the purchase of a piece of a land and the sale of it in an economic development project.

Head said that is a question that needs to be clarified. Though he had recommended approval of the contract, Head said he believed that the overall master development contract the council approved July 2, which allows a 5.75 percent fee to be paid Wallace Bajjali on projects, should cover the land transactions too.

David Wallace, president of the development firm, told the council that the fee on land purchases would be used to pay the costs of the transactions such as real estate commissions, appraisal reports, title work, environmental assessments of the land and legal expenses. “We see it as two fees, one for the land assemblage and one for the development,” Wallace told the council.

He said the firm is hiring a staff to open a Joplin office and has already invested its own money in investigating a number of issues related to the projects. The development fee would be the firm’s profit, and the land transaction fee would cover costs involved in that part of the work.

Wallace correlated the fees to the hiring of a property broker. He said brokers charge fees of 4 to 6 percent solely for the work of bringing buyer and seller together. That fee typically does not cover the other expenses of the transaction, such as inspections to ensure the land is clean environmentally, surveys, legal work to establish that the title is clear, and other services that go into the transaction.

Councilman Benjamin Rosenberg asked Head if, in his position as legal adviser to the council, he believed the contract with the fee arrangement was in the best interests of the residents of Joplin.

“As far as it being in the best interest of citizens, you have to make that decision,” Head said. “You are the policy maker.”

Councilman Gary Shaw asked if the property transaction contract is the same one as Wallace Bajjali has used in other cities where it has worked.

Wallace said the firm has never had to buy this amount of property before. He estimated there would be 8,000 transactions.

Said Scearce: “It upsets me that Mr. Head is telling us not to” approve the deal “and you’re telling us you won’t do it” without being paid the fee.

Said Rosenberg: “The truth of it is the more money he makes, the more the city makes. The better he does, the better we do. I hope he gets rich.”

Wallace replied with a laugh, “I love you.”

He said the firm has fronted money for the local staffing and for work such as a trip today to Jefferson City to meet with the Missouri Development Finance Board to try to obtain a $22 million bond backed by tax credits as part of the money to be used for the land buying.

The city attorney said he was merely calling the council’s attention to the fact that someone later could question whether the city paid twice for the land work and he wanted to make sure the fee issue was satisfactorily discussed.

Scearce then made the motion to approve the contract, and it carried by a vote of 9-0.

Wallace Bajjali was hired by the city to serve as the master developer to help with rebuilding and improvements in the wake of the May 22, 2011, tornado. The firm has outlined 19 projects — including 1,300 new houses — that would cost $794 million if they were all constructed.

In other business, the council approved a city property levy of 41.65 cents per $100 assessed valuation for next fiscal year. The rate currently is 40.66 cents. Most of the levy, 25.45 cents, goes to the Joplin Public Library for its operations.

Contract requirement

THE CITY’S CONTRACT with Wallace Bajjali Development Partners requires that the firm find sources of money to pay its fees. The city does not directly pay the fees.

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Master developer's fee payment the subject of debate at Joplin City Council meeting

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