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Despite Burton-Katzman Bankruptcy Filing, Dearborn to Continue Court Fight for $5M Compensation

We kind of figured there was something suspicious about the timing of Burton-Katzman’s bankruptcy filing last week.

Well, it turns out  it was a looming court-ordered deadline of Sept. 1 to pay the City of Dearborn $5 million in penalties related to the unbuilt development project in west Dearborn that triggered the bankruptcy filing, according to the City of Dearborn.

Instead of paying the fine, the Burton-Katzman company (West Village Commons, LLC, and Westminister Homes LLC) on Aug. 26 filed bankruptcy under Chapter 7.

“The City believes the Aug. 26 bankruptcy filing was a strategic move to avoid paying the $5 million due on Sept. 1,” the city said in a statement issued Monday.

City officials in a statement say they still plan to hold the individuals and other entities behind Burton-Katzman Development Company, Inc. responsible for the court-ordered payment and other court-ordered provisions.

For a bit more on the history behind this battle, click the link below.

In May, Circuit Judge Michael Sapala ordered Burton-Katzman and related companies to pay contempt of court fees by September 1 for not starting construction of the development project by the court-ordered deadline of April 3, 2010.

The judge ruled in November, 2009 that B-K and related companies had to begin construction of the west Dearborn project by April 3, 2010 and complete the project by July 2011.

When the companies failed to meet that April deadline, Judge Sapala ordered the contempt fees be paid on September 1 equal to the accumulated debt service on the city’s bonds issued in connection with the construction of two parking decks. That debt service is now $5 million.

The decks cost more than $12 million, and the City constructed them to accompany the never-built development project. Property taxes from the development were to provide revenue to help repay the cost of the parking decks. That revenue never materialized because the project was never built.

In May, the judge also ordered that Burton-Katzman begin construction on the project by October 1, 2010 or face possible additional contempt of court penalties during an evidentiary hearing scheduled for that date. The City wants that Oct. 1 hearing to proceed.

Under a preferred developer agreement approved in 2003, Burton-Katzman was to construct two mid-rise buildings on the site between the two parking decks on West Village Drive, east of Military. The company also was to construct 48 condos in the West Village Square complex off of Mason, south of Michigan Avenue, but only completed 36 of them.

Over the course of the court proceedings begun in 2009, the City has petitioned and won the right to add several companies related to Burton-Katzman to the lawsuit, and also hold certain individuals personally accountable for damages to the City due to the failure of the project. Among those are Peter Burton, Robert M. Katzman, Charles DiMaggio, Laurence R. Goss and Steven Bentley.

This entry was posted on Monday, August 30th, 2010 at 4:54 pm and is filed under Business, City Hall. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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  • cloe

    I really, unfortunately, believe that the City will never learn.

    Isn’t it time to stop trying to save face and cut our losses? They have to stop wasting tax-payers’ money on lost causes.

    Are they still spending money trying to change the flight patterns? While they’re at it, they might as well try to re-route the Amtrack line. It makes about as much sense.

    Stop the Insanity! Stop the Waste!

  • tdogg

    Oh Oh . . . that is definitely not a good press release. The filing of the Petition “stays” the obligations set forth by Judge Sapala, and transfers jurisdiction the US Bankruptcy Court. Thus, no money and no construction.

    Notice the Press Release speaks only to attempting to collect from others and that there is no mention of bonding or other insurance. Rest assured that all the “individuals and other entities” have their Bankruptcy Petitions ready to file. Frankly I will be surprised if the City ever recovers a penny from anyone. That begs the question – isn’t there bonding on this project?

    The Law Department should provide complete transparency on whether there is bonding or other insurance that would reduce or eliminate this burden – it is a very simple question.

    If the answer is “no” the next question is – why not? The persons who made that decision and the reasons for that decision need to be identified and presented to the taxpayers for due consideration.

    The citizens of Dearborn are entitled to prompt, specific guidance on this situation, in particular whether we are going to have to pay for this debacle (assuming BK & its people are uncollectible).

  • http://www.chicagotelevision.com/wgntv.htm Bob Bell

    I N S U R A N C E B O N D required for all construction contracts is standard, why did the City of Dearborn not have one? BK can avoid paying, due to our lack of due diligence. Heads should roll! What kind of BOZO’S run this City? 5 million here, 5 million there – - pretty soon your talking about real money!

  • shallowSaidwhat

    So when are they gonna build those 2 buildings between the parking decks?

  • SameAsitEverwas

    Another project ending in a court battle,same as it ever was. How long could the pools stay open with 5 million dollars in hand?
    BOB BELL asked a great question “I N S U R A N C E B O N D required for all construction contracts is standard, why did the City of Dearborn not have one?”

    The same reason the city purchased Montgomery wards while it was under seizure by the feds,they just weren’t aware of it.

    The only good thing the city legal department is good for is to pick on the small guy,like employees but they are out of their league going against BK.

  • norman

    Bob Bell a very astute observation. When are the people of Dearborn going to learn, we have idiots in the administration. Hopefully the people in this town will do away with the Bozo’s currently in the administration, and make some necessary changes.

  • DS0816

    Sounds like Dearborn needs different leaders (politically, of course).

  • MyTwoSenseToo

    This fiasco is gonna be the least of our troubles.

    How come no one is talking about the big hit we are gonna take with Dearborn’s revenue in 2011? Thanks to Governor Granholm’s sneaky tricks with the appointed state tax commission; a tax appeal was recently granted in favor of the Big Three Auto Companies. This means about 4 million dollars in slashed state shared revenue for Dearborn in care of Ford Motor Company. Other cities are already talking about it.

    Let’s also not mention that taxable values on business and residential properties are expected to fall again.

    Shouldn’t the City be watching it’s pennies!

  • Sloppy Joe

    Hey Norm, the only time the people of Dearborn are going to learn anything, is when they get off their butts & go to a council meeting and ask some questions! Are the Bozo ‘s in the administration the real idiots or is it the residents who allow this type of behavior & actions to ran rampant thorough the city hall! Why don”t the legal dept. work on enforcing the city charter, like all appointed city officials who do not live in the city limits ( they have no vested interest ).When legal can’t handle a real legal case they just hire the contract lawyer for $300.00 per hr.

  • cloe

    If government was run like private business, they would all be fired.

    When you are incompetent in a job, you should be replaced with people who can actually do what they are paid to do.

    Wake up people. We are the ones who pay their salaries. WE are their bosses. Demand that they do what they are being paid, with our money, to do.

  • Sign Me Up

    How can I sign up for some of that $300 per hour legal fees? I could do as well as those who gave legal advice in recent years…

  • SameAsitEverWas

    I think sloppyjoe is right,people must get more involved and go to these meetings and become more informed. The spending has always been out of control and its because the council and administration are never held accountable by the tax payers and voters.
    Here is just a sample of the amount of money being passed at the last council meeting:

    The resolution was unanimously adopted.
    By Darany supported by O’Donnell.
    8-462-10. RESOLVED: That the bid from Bell Equipment
    Co. received for Two Trailer Mounted Leaf Vacuums is hereby
    accepted in the total amount of $52,000, that the Mayor is
    hereby authorized to execute a formal contract upon the
    approval of the Department of Law; provided however, that
    all of the specifications and instructions in the bid have
    been fully complied with; be it further
    RESOLVED: That this contract shall be
    financed from the Fleet and Equipment Replacement Fund,
    Department of Public Works, Parks Division, Capital
    Equipment, Operating Equipment Machine & Equipment Account
    (Account #668-2074-693.74-20); be it further
    RESOLVED: That this resolution be given
    immediate effect.

    By Darany supported by Hubbard.
    8-463-10. RESOLVED: That all bids received for the
    Camp Dearborn Paving Project are hereby rejected except the
    bid of T & M Asphalt Paving, Inc. in the total amount of
    $84,467, that the aforementioned bid is hereby accepted,
    that the Mayor is hereby authorized to execute a formal
    contract upon the approval of the Department of Law;
    provided however, that all of the specifications and
    instructions in the bid have been fully complied with; be it
    further

    By Darany supported by OIDonnell.
    8-464-10. RESOLVED: That all bids received for Rescue
    and Extrication Equipment are hereby rejected except the bid
    of Douglass Safety Systems in the approximate amount of
    $90,776.68, that the aforementioned bid is hereby accepted,
    that the Mayor is hereby authorized to execute a formal
    contract upon the approval of the Department of Law;
    provided however, that all of the specifications and
    instructions in the bid have been fully complied with; be it
    further

    By Hubbard supported by Abraham
    8-465-10. RESOLVED: That all proposals received for
    Power House Consulting Services are hereby rejected except
    the proposal of BE1 Associates, Inc. in the total amount of
    $19,500, that the aforementioned proposal is hereby
    accepted, that the Mayor is hereby authorized to execute a
    formal contract upon the approval of the Department of Law;
    provided however, that all of the specifications and
    instructions in the proposal have been fully complied with;
    be it further

    By Darany supported by Shooshanian.
    8-467-10. RESOLVED: That all bids received for the
    Rehabilitation of 7943 Pinehurst are hereby rejected except
    the bid of Mando Construction, Inc. in the total amount of
    $90,560, that the aforementioned bid is hereby accepted,
    that the Mayor is hereby authorized to execute a formal
    contract upon the approval of the Department of Law;
    provided however, that all of the specifications and
    instructions in the bid have been fully complied with; be it
    further

    By Abraham supported by Hubbard
    8-475-10. RESOLVED: That City Council hereby
    authorizes the issuance of purchase orders to WXYZ-TV in the
    amount of $90,000; Dearborn Times Herald in the amount of
    $2,800 and the Dearborn Press & Guide in the amount of
    $4,200 for the Advertising of the Recreation Department’s
    2010-2011 Professional Show Season; be it further
    RESOLVED: That these purchase orders in the
    total amount of $97,000 shall be financed from the General
    Fund, Recreation Department, Theatre Division, Publishing
    Account (Account #101-3033-734.54-00); be it further

    These type of numbers go on all the time,50,000 here,100,000 there,but dont worry S.O.P.,you guys keep busting your butt raising your own money to keep the pools open while the FAT CATS running this city keep blowing money and padding their pockets.

  • vincent

    People in this town must be idiots, because they keep reelecting these numskulls.

  • Milwood Fordson

    Hey Vincent,

    it goes deeper than the elected numskulls. its in the appointed numskulls and thier little yes men too.

  • Donna Hay

    Get rid of the numskulls and their little yes men are sure to follow.

  • Marty kaltenbach

    The city obviously tried to make some deal with Burton-Katsman to no avail. Everybody and his uncle knew there would be no building erected when the mortgage meltdown and it’s fallout took hold. The $64,000 question only the lawyers know is what will be left over from the bones of bankruptcy. Where does the city stand in the line of creditors. Since there was no building built I would think it is back in the pack. The city had better show that more than just the lawyers got paid for all the time and effort.