Council to vote on Library Lot sale despite legal questions

Thursday, April 13, 2017 - 5:54pm

City Council will go ahead with a vote on a $10 million contract to sell the downtown Library Lot to Chicago-based real estate firm Core Spaces during its April 17 meeting, despite the raising of legal questions regarding the contract by former Councilmember Stephen Kunselman.

Kunselman raised concerns the sale of the lot to a private firm would jeopardize the tax-exempt status of the Build America Bonds that were used to fund construction of the surface and underground parking lots the Library Lot is currently used for. Should the council approve the contract, the city will still continue operation of the underground lot.

According to Councilmember Zachary Ackerman (D–Ward 3), the contract does not put the status of the bonds at risk, based on the legal advice of Dykema Gossett PLLC, the city's outside bond counsel. One of Kunselman's main concerns was that a 2012 memo from Dykema was not signed and did not carry legal weight.

"Basically, the 8/9/12 Bond Counsel memo was written in response to the 'hypothetical' and certainly one would expect Bond Counsel to stand by their 'unnamed and unsigned' advice on the 'hypothetical' cause they can't be held accountable for that if the Core Space 'private use' proposal of the 'bond financed facility' is found to 'jeopardize the tax-advantage status of the bonds,' " Kunselman wrote in an email Thursday to the council.

Ackerman confirmed that even if the legal advice from Dykema were invalid, it is insured, meaning any cost incurred to the city as a result would be covered by Dykema.

"So this issue was put to rest five years ago, and like a lot of things, information gets buried over time, especially when they're legal findings," Ackerman said. "It re-emerged now, as we're approaching the vote, and the concern is that this memo from our bond counsel, Dykema, was never signed. We have since confirmed with Dykema that they still hold their finding to be true, and that any memo issued to a client is legally justifiable and covered by their insurance."

Responding to the email from Kunselman, Mary Joan Fales, a senior assistant city attorney, noted the absence of a signature on the memo did not invalidate the advice or its insurance.

"Dykema’s professional insurance coverage applies to legal advice rendered in a memorandum to a client to the same extent as legal advice rendered in the form of an opinion letter," she wrote. "Neither the manner in which the legal advice is rendered nor the inclusion or absence of a signature create any liability exposure for the City or alters the City’s right to rely on the legal advice provided.  Bond Counsel has specifically confirmed applicability of insurance coverage and that the memorandum was prepared with the understanding the City would be relying on it."

In his email, Kunselman suggested an alternative revenue-generating plan for use of the Library Lot –– building another library. This, he noted, didn't run the risk of using the bond-funded lot for a private purpose, and the plot of land across the street, on which the current downtown district library stands, could be sold for private use.

"There is no risk whatsoever to the City for using the Library Lot for a public purpose such as a public library,” he wrote. “There is no risk in allocating public parking spaces for public use, and no risk for using a portion of the bond financed facility for a public library. It's that simple; all's Council has to do is pivot direction and support a new public library on the library lot; the library will get a great deal (i.e. no cost) on an adjacent lot, the library will remain open during construction, and the public will easily unite behind a millage request to fund it because we all want a new world class Public Library; the existing library property will be sold to the private sector generating property tax revenues; and all this can be done within 4 years."