At issue are payments made to a real estate consulting firm it hired.
The city of Ramsey is looking into whether it violated state law by hiring a real estate consulting firm that doesn't have the license required to collect real estate commissions.
The quality of work performed by Landform Professional Services is not the issue, city officials say. The question involves a portion of the $1.4 million the Anoka County city has paid Landform, several hundred thousand dollars for what Landform President Darren Lazan describes as "incentive fees" for "engineering work, attending meetings, site-planning, platting and marketing."
Those responsibilities, Lazan says, have nothing to do with brokering real estate deals and conform with Minnesota law, as well as a contract that says Landform is not "entitled to any compensation for work which requires a license."
"I am fully confident that we are within the scope of our contract," Lazan said this week. "We're not brokers, we don't get commissions. The vast body of our work involves work brokers don't do."
Lazan never hid that he and Landform have no real estate or broker's licenses, required by state law for brokering real estate deals -- which involves listing properties. That fact is mentioned early in the company's contract with Ramsey, an agreement to "provide development services" for a 140-acre property that officials have hoped would become a new downtown.
But newly elected Mayor Sarah Strommen, who was not a City Council member when Landform was hired in 2009, said the city has sought legal counsel to define Landform's role and review a contract that expires March 31.
Anonymously sent document
Spurring the issue was an anonymously sent nine-page document challenging "compensation" to Landform for what it called "brokerage" work. Strommen was among those who received the unsigned document nearly three weeks ago, but says she has no idea who wrote or sent it. She said it's "interesting, but we don't know how much of it is credible."
Lazan, who received a copy from the city this week, said that "following unsigned allegations is a dangerous road."
Strommen agrees -- which is why she wants a city-hired attorney to review a Landform contract she has questioned since her special election to the council in 2011, just months after the current two-year contract was approved. Strommen says the unsigned document piqued her interest. She forwarded it to City Administrator Kurt Ulrich, who asked a city attorney to review the contract.
New Council Member John LeTourneau also received the document. He said the city needs its own legal opinion "to help put this to rest, to make sure there are no liability issues."
The state Department of Commerce, unaware of details in this case, would not comment, offering only this generality: If a company brokers real estate deals, incentives are considered compensation and a license is needed.
On Thursday, in a five-page letter, an attorney for Landform reiterated to Ulrich that the company "is very confident that neither it nor [Ramsey's Housing and Redevelopment Authority] have abridged any law of this state."
Work by Landform
Landform did preparation work for a 230-unit apartment complex under construction and the planned construction of two SuperAmerica stations, a McDonald's restaurant and an assisted-living complex. Landform also "cleaned up" city-owned land, making it salable, said Ulrich.
By the time Landform's current two-year contract expires, the city will have paid the Minneapolis-based firm $1.51 million since August 2009, according to Diana Lund, Ramsey's finance director.
Lund says the city has been authorized by its HRA to pay the company a total of $617,518 for "incentives" relating to specific projects. Landform was already paid $374,439 for the apartment complex being built by Indianapolis developer Flaherty & Collins, and for another project that was discontinued. The city will pay another $80,000 to Landform when the complex is completed. The remainder owed Landform is related to the other deals, Lund said.
Landform is also paid a $15,000 monthly administrative fee -- $360,000 over two years.
Landform was hired to work on property, rebranded the COR, that was part of the Ramsey Town Center project, a quagmire of controversy for years. At $1.3 billion, the Town Center was supposed to transform acres of soybean fields and vacant land along Hwy. 10 into a bustling suburb with a downtown, small shops and parks and 2,800 nearby homes. But the project collapsed after developer Bruce Nedegaard went bankrupt and died in 2006, and three bank executives involved in the project were eventually convicted of federal fraud charges.
By 2009, Ramsey's council had changed. Newly elected Mayor Bob Ramsey and fellow Council Members Matt Look, Colin McGlone and Jeff Wise were the core of a group that recruited Landform. Mayor Ramsey, McGlone and Wise lost bids for re-election last year. Look is an Anoka County commissioner.
The Landform contract is not expected to be renewed. Strommen said the "direction" the council recently discussed was hiring a city employee to be economic development manager. Lazan said he is not planning to continue his relationship with the city.
"I'd like them to engage in effectively transitioning this team," he said. "The worst thing the city could do is throw it away."
Paul Levy • 612-673-4419