AG Nessel: No opinion, probe in hospital sale

MARQUETTE — The Michigan attorney general declined a request to investigate the proposed redevelopment of the former Marquette General Hospital.

State Rep. Sara Cambensy, D-Marquette, asked Attorney General Dana Nessel to investigate possible transparency and conflict-of-interest issues between the Northern Michigan University Foundation and a local developer in July.

The attorney general’s office issued a statement on Tuesday saying in part that the state is not legal counsel for local units of government and that its resources are best used to respond to opinion requests involving the operation of state government.

“Moreover, while the Attorney General’s opinions are binding upon state agencies and officers, they do not have the force of law and, therefore, are not binding upon local units of government,” the office said in a statement.

According to the attorney general, legal questions related to conflict of interest, tax consequences, property valuation and the bidding process for a local project often are best left to local counsel.

Cambensy also requested an opinion from Nessel about whether the NMU Foundation should be considered a public body, therefore subjecting the charitable arm of Northern Michigan University to the Freedom of Information and Open Meetings acts.

“Further the questions presented related to the Freedom of Information Act and the Open Meetings Act are not novel but rather can be evaluated under the existing body of case law, which weighs against the Attorney General issuing a formal legal opinion,” the office said.

The decision went on to say that the facts presented in the request do not support a viable action under charitable trust law or provide sufficient grounds for a criminal investigation by the department.

“The Northern Michigan University Foundation is extremely pleased with today’s decision by the Michigan Attorney General declining to take any action regarding unfounded allegations by State Representative Sara Cambensy concerning the redevelopment of the former hospital site,” it said in a statement. “The Board of Trustees and staff leadership of the NMU Foundation appreciate the Attorney General’s diligent, expeditious and thorough review of this matter, and we remain focused on continuing the process of bringing this significant project to fruition for the benefit of the Marquette area, Northern Michigan University and the Upper Peninsula.

“Our appreciation extends to the City of Marquette staff, Mayor Jenna Smith, City Commissioners, the Marquette Brownfield Redevelopment Authority, Michigan Legislature, Governor Gretchen Whitmer, the Michigan Economic Development Corporation, Veridea Group, UP Health System-Marquette, our consulting team and members of the Marquette and NMU community who have joined this important effort over the course of the past year for the betterment of our community.”

Plans to develop the former hospital site had taken plenty of turns, and it’s not really a done deal yet.

But the attorney general’s opinion helps.

Cambensy said she was left with optimism after the AG’s response to her letter, noting in an email that she doesn’t see the letter as an ending point to the questions she asked but rather a starting point to where the taxpayers want to go with getting answers and transparency.

“After speaking with the AG’s office today, I believe the public has several options to consider going forward,” Cambensy said. “First, the AG’s office is still willing to take testimony from individuals who have detailed information regarding this project that may lead to a criminal investigation. My office cannot speak for those individuals, but I would encourage those who have information and who have shared that information with me to still contact the AG directly.

“Second, even though public universities are given great autonomy in how they operate in our state constitution, our judicial system remains one of the ways the public can challenge university decision making and transparency surrounding projects such as the hospital sale and redevelopment property when they can’t get answers directly from elected or appointed officials, or see many of the documents used.”

The public, Cambensy said, would start that process using the Freedom of Information Act and request meeting minutes and documents from the NMU Foundation and/or city. The public also can contact the IRS regarding tax compliance or any other information they feel would be important to the agency regarding the NMU Foundation, LifePoint and Veridea surrounding the gift of property for this project while remaining anonymous. The link, she said, is https://www.irs.gov/compliance/reporting-other-information-to-the-irs.

“Finally, the public can direct local and state officials to strengthen brownfield laws to make sure there are increased checks and balances that protect the public taxpayers,” Cambensy said. “State brownfield laws rely on local officials to understand extremely complex state laws that put them in vulnerable positions. Developers and consultants have lobbied for the laws to be fluid, and as recent as 2017, extend the number of qualifying uses that brownfields can be used for that purpose. Taxpayers could also look into requiring that any developer with a brownfield request over a certain threshold for a project be subject to adequate public review time or even a vote by the public.”

Cambensy said she hopes that the significant amount of public support from the taxpayers her letter received is an alarm to those orchestrating this project.

“Even a month later, there continues to be a growing concern for why the project is being done this way and the lack of transparency surrounding it,” she said. “Yet, those involved obviously feel that they don’t need to gain the public’s trust and support with the almost $58 (million) of public tax dollars or credits they were able to secure in a matter of five months without even showing a detailed plan of what the project was. The average taxpayer can’t go to a bank and get a $1,000 loan without signing their life to it, yet appointed or elected officials gave $58 (million) of your tax dollars away this spring without hardly knowing what the project entails, who was involved or how the money is going to be used. It’s really quite unbelievable.”

David Nyberg, executive director of business engagement and economic engagement with the NMU Foundation, said, “Our mission is to align resources and relationships to advance NMU.”

He acknowledged, however, the process has been “complicated” and “complex.”

NMU Foundation CEO Brad Canale said the focus is to figure out “how to get this done,” referencing the $166 million project.

One of the major points of contention is the gift of the old hospital site by LifePoint Health and the sale to the Veridea Group, which would develop the 23-acre property.

Cambensy also asked if the information regarding the appraisals and taxable evaluations of the property could be made public to assure the taxpayers that a private deal that fell through between LifePoint and Veridea in 2019 was not an effort to devalue the property.

An agreement to allow the NMU Foundation to purchase the property for $1 was initiated in the summer of 2021. That agreement has not been finalized.

Canale said that in 2018, LifePoint hired a broker from Atlanta to look at how to view the hospital property going forward. That broker spoke with him and university leadership separately.

“Both the university and the foundation said, ‘We’re not interested in acquiring the property permanently or anything else like that, but we would attend an interest to the future because of the critical nature next to the university,'” Canale said.

When Veridea’s due diligence review did not “pan out,” Veridea walked away from the property because it had to be demolished, he said.

Canale said that during COVID-19, the federal government decided that for-profit corporations could increase their deductibility percentage, which was the “kernel of the concept” to approach LifePoint regarding giving the property to the foundation plus a gift of $10 million to facilitate the demolition.

Eventually, it was decided that the foundation would purchase the property for $1.

Nyberg said the foundation solicited requests for qualifications in March. The process closed within a month. Website data showed 180 downloads of the RFQ. But Veridea provided the only response to the request.

“Just because we had one response, that’s viewed as a victory because we could have not any response, and then we’d be done,” Nyberg said.

In May, the NMU Foundation Board unanimously approved Veridea as “qualified” for the project and instructed staff to work with the company on the next steps.

Questions raised

One point of contention in the community was the fact that Robert Mahaney, who is president and founder of Veridea, serves on the NMU Board of Trustees.

“Knowing that’s an element going into this, we very carefully on the foundation side and on the university side also cleared any conflicts ahead of time,” Canale said.

He acknowledged that people “are saying that something’s going on,” but stressed that’s not the case.

“Veridea is the approved master developer upon their submission,” Canale said. “End of story.”

In an email, Cambensy expressed her thoughts after learning that Veridea was the sole respondent to the RFQ.

“At that moment, I joined the growing number of community members that thought this project now had the appearance of being an inside deal specifically for an NMU board member,” she said.

Canale pointed out that there have been no official agreements.

“There’s concepts of where things are going, but until we know we have demolition done, there’s no development,” Canale said. “So we did everything to make sure it’s safe because the only reason we need a master developer is to partner in the LLC (limited liability company), or whatever is created, that’s for-profit to enable to tap the TIF (tax increment financing) — the brownfield plan — should that happen.

“Everything is basically prepared.”

Due diligence regarding environmental feasibility finished late in 2021.

Concurrent with that process, a partnership with the city of Marquette and the Marquette Brownfield Redevelopment Authority to develop and approve the brownfield redevelopment plan for the site was needed.

That was important, he said, because the property is a brownfield and there are many costs associated with the demolition, environmental remediation and reconstruction of College Avenue that can be reimbursed through brownfield funds.

The brownfield plan was unanimously approved by the Marquette City Commission.

The next milestone is finding the funding required for the demolition, which Nyberg said now is $20.5 million.

“If we can’t find the resources, this project is dead,” he said.

As a result, multiple angles were examined, including the Michigan Economic Development Corporation and other state agencies, as well as the Michigan Legislature, Nyberg said.

Assuming economics, brownfield activities and other issues are successfully handled, the next step is an agreement with the developer, followed by the drafting of an actual plan between the developer and the city, he said.

“Those are conditions of closing on the agreement with LifePoint and finding the public funding,” said Nyberg.

He said that the funding is “close” to being obtained.

Nyberg said the Michigan Legislature included an $8 million appropriation for blight elimination in its budget, presumably for the city of Marquette or the foundation. The appropriation is part of a broader one-time $75 million statewide investment for that purpose and will come out of the Michigan Department of Labor and Economic Opportunity budget.

Nyberg said if the Upper Peninsula was not awarded the $8 million, it would have gone to some other project.

“It came as a surprise to us, because we didn’t expect it,” he said. “It was a key, key, key variable to making the public funding happen.”

Nyberg anticipates that the $8 million will be available in the near future.

The city has been in discussions with the MEDC for a Community Development Block Grant, he said, which would also be used for blight elimination.

Cambensy noted in an email that she and state Sen. Ed McBroom, R-Waucedah Township, were “blindsided” by the $8 million appropriation to the NMU Foundation. She said appropriations for projects aren’t generally put in legislators’ districts without them knowing about it.

Nyberg said the infrastructure along College Avenue will not be counted in the demolition. Because the brownfield plan is now in place, the city is able to capture increased taxable value associated with the project — provided it happens — to reimburse itself for the reconstruction.

“This is not coming at a cost to taxpayers,” Nyberg said. “The brownfield is reimbursed new investment.”

Money for the project would also come from whatever the NMU Foundation is able to invest from its agreement with LifePoint, he said.

The project will also address the urgent need for housing in the city.

“If you’re adding housing stock to Marquette, that’s only a good thing, and if that housing stock is diverse — rentals, owner-occupied, multi-family,” Nyberg said. “We’ve used the term ‘a blend of housing options,’ which is completely accurate what the vision for this is.

“Even though the foundation is not the developer, we know that by facilitating demolition, we’re enabling a development to happen that will have that benefit to the community and the university.”

Canale said it would be “a dynamic process on the mix of housing” that would happen over the course of several years.

A question of transparency

Cambensy said she was concerned about the transparency of the process, but

Nyberg noted Cambensy could have taken the foundation’s offer to stay informed about project.

“If you’re getting concerns from constituents about this project and they don’t understand it, come and talk to us,” he said. “We’ve been very open with all legislators and public officials about what we’re doing, and unfortunately, we didn’t have the opportunity until we saw a press release with this letter that went out.”

Cambensy said the NMU Foundation was going to put something on paper that she could discuss with members of the legislature in January.

“They never did that,” Cambensy said.

She went to her colleagues in the Legislature and determined that she could not make the request without the details in writing.

“It was agreed upon that asking either chamber for an appropriation specific to this development project was not going to even be considered unless the foundation came back with a two-page proposal, like every other community project submits to our offices in order to be considered for funding,” Cambensy said.


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