Posted: 10/15/03

EDA facing legal action

Cliff Buchan
News Editor

A decision last month to end involvement in a downtown restaurant project could land Forest Lakeís Economic Development Authority in court.

Principals in the Lakepark Development partnership said this week they are considering legal action following the Sept. 22 EDA decision to terminate the exclusive development rights agreement that had been in place for 34 months with the developers.

A letter explaining Lakeparkís opinions has been received by the city and the EDA. The letter, written by attorney Travis Stottler of Miller Law Office, Wyoming, says the group is ìconsidering its legal alternativesî unless the EDA elects to reevaluate its decision.

If a response is not received within two weeks of the Oct. 1 letter, Stottler said heís been directed to initiate legal action.

The EDA went into closed session during Mondayís regular meeting to discuss the threat of legal action by Lakepark Development.

After meeting with attorney Dave Hebert, the EDA board resumed its regular public session and voted 3-0 with two members absent to reaffirm the Sept. 22 decision and to prepare a findings of fact within 30 days. Notice of the decision will be sent to Lakepark.

In an interview Monday, Mike Muske and Ron Vannelli, two city business owners and partners in Lakepark, said they were hopeful the Oct. 1 letter would bring the two sides back to the table.

ìWe donít want to sue anyone,î Muske said. ìWe just want to get it (the restaurant) done. The letter is a means to an end.î

The two men, who joined Peter Paidar and Dan Scholl nearly three years ago, said they are still puzzled why the plan was killed by the EDA last month. After making numerous changes in the proposed plan and agreeing to look at a site suggested by city planner Bill Sanders, Muske and Vannelli said the group was still willing to get the project done.

ìThis concept is still good,î Muske said. After two other positive additions to the downtown redevelopment effort in The Plaza and Park Place, Muske said the restaurant adjacent to Lakeside Memorial Park would be a ìshining starî for the downtown and ìsomething for the city to hang its hat on.î

Lakepark demands

The Stottler letter spells out clear demands from Lakepark that if approved would head off a legal challenge.

The partnership contends that Paidarís sale of the Laker Landing mini-golf site to the EDA three years ago was an integral part of the decision by the EDA to grant Paidar and eventually Lakepark Development exclusive development rights for a restaurant on what is today municipal parking area downtown.

ìWe do not believe the city had the right to unilaterally terminate the exclusive development rights agreement...î Stottler wrote.

Lakepark said it will approach legal action on four courses of action:

ïRescission of the Paidar sale of the Landing site to the EDA based upon the EDAís action in terminating the exclusive development rights agreement. Lakepark would seek an injunction against the transfer of the Lakeside site by the EDA pending resolution of the underlying lawsuit.

ïA declaratory judgment action declaring that either the EDA did not have the legal right to terminate the agreement or forcing the EDA to continue to negotiate in good faith with Lakepark for the establishment of a fine dining establishment in the downtown lake district. An injunction would be sought against the EDA granting any other developer the right to develop a restaurant property in the downtown lake district pending resolution of the lawsuit.

ïA declaratory judgment seeking an order that any EDA attempts to transfer the Laker Landing site to the park board are void, as such a transfer would fail to comply with the cityís tax-increment financing plan and would be in violation of both the express terms and spirit of TIF statutes. Lakepark will argue that using TIF funds to purchase park property is directly in contradiction with the cityís stated purpose for TIF development and the purpose and intent of TIF financing. An injunction against transfer of the Landing site would be sought.

ïA breach of contract action against the EDA for recovery of Lakeparkís costs, expenses and consequential damages relating to the EDAís express and implied breach of the exclusive development rights agreement and the failure of the EDA to negotiate in good faith under the agreement.

ìWhile Lakepark believes it has strong claims against the EDA, and at the very least, the ability to significantly stall downtown development by tying up key downtown properties for an extended period of time, Lakepark remains steadfast in its desire to build a restaurant in the downtown lake district,î the attorney wrote.

ìFor this reason, Lakepark would be willing to forgo pursuit of its legal claims relating to the EDAís most recent action in return for the exclusive right to pursue development of a fine dining establishment in the downtown lake area.î

Other factors

In Mondayís interview, Muske and Vannelli said a series of factors posed problems during the near three years of planning for the development.

The initial plan called for a fine dining restaurant and banquet facility on an upper level. Parking to serve a banquet facility, however, became a problem.

Lakepark took steps to acquire the former Kline Johnson Insurance building and earmarked Paidarís Forest Lake building for removal to provide some of the parking area needed to make the banquet facility viable.

More site changes in the project scope followed when purchase of the Forest Theater building could not be achieved. Without the theater building site as a parking area, the scope of the dining facility began to shrink, the partner said.

By the time the developers went before the board on Sept. 22, the plan called for a dining establishment with some 4000 square feet of space that would front Lakeside Park on its northern border.

The plan, Muske and Vannelli said, would enable the public boat landing area to remain in place.

Muske and Vannelli said they remain intent on pursuing the restaurant project and believe the letter will be motivation to resolve differences.

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