The city is preparing for possible legal action against a developer it says reneged on a loan from 2008.
Following a closed-door session Friday, the City Council took the unusual step of authorizing the city attorney to initiate a lawsuit or foreclosure action against entities headed by developer Don Gerberding. The loan relates to Gerberding's redevelopment of a parcel at 2nd Street and West Broadway that now houses his company, Master.
Precisely what the city intends to do remains unclear. A city spokesman said he would inquire about the city attorney's preference following today's vote.
Unrelated to the loan dispute, Gerberding is currently trying to develop a property a Franklin and Lyndale Avenues -- a project that has garnered a lot of attention.
The city granted Gerberding a ten-year, $350,000 loan in 2008 to transform a site once occupied by Irv's Bar, which had attracted many police calls. Gerberding developed the parcel -- though not to the city's original specifications -- but soon fell into default on the loan, according to city documents.
The city agreed to a forbearance, reducing the minimum monthly payments on the loan. The city says Gerberding then failed to meet one of the conditions of that new agreement: paying property taxes when they are due.
As a result, the city put the loan back into default and accelerated the repayment requirements in November 2013, according to a letter sent to Gerberding that month. The letter requested a payment of $405,500, which accounted for interest on the loan.
"We are a patient lender," said the city's community development chair, council member Lisa Goodman, following Friday's meeting. "We believe in the community development objectives. But a complete disregard for us as a lending institution is not acceptable."
