Why did city of Milford and FC Cincinnati spend $5M on land auditor appraised for less than $2M?

Will suit jeopardize FCC practice facility?
Will suit jeopardize FCC practice facility?
Posted at 5:07 PM, Oct 03, 2018
and last updated 2018-10-04 09:16:05-04

MILFORD, Ohio -- The city of Milford agreed to buy land for the new FC Cincinnati training facility at more than double the price of its appraised value.

The 24-acre tract of land on U.S. 50 near I-275 was most recently valued on the Clermont County Auditor's website at $1.98 million, but the city and the Major League Soccer team agreed to pay $5 million for the land, finalizing the sales of two adjoining parcels in late August and September.

The city agreed to the $5 million sale price without conducting a written appraisal of the land, which had been owned by Max Dixon's Expressway Park and Beauty Ridge LLC, according to an email obtained by WCPO from the city's law director.

"An appraisal is required by virtually every lender for even the most low-budget of home purchases, yet the city of Milford secured a whopping $3.5 million in bonds to acquire real estate to give away to FC Cincinnati without so much as an appraisal or valuation on behalf of the taxpayers," said resident and freelance journalist Rachel Richardson, who is suing Milford City Council, accusing it of holding secret meetings and hiding details of the deal from the public. "Is this $5 million purchase price too high? Taxpayers don't know, and that's the problem."

Milford law director Mike Minniear declined to comment and said no city leaders could weigh in on the topic because of Richardson's lawsuit. Owners of Beauty Ridge and Expressway either declined to speak on the subject or did not return requests for comment.

The $30 million state-of-the-art FC Cincinnati training complex is expected to be fully operational by July 2019. Plans include a two-story facility with a team building, youth soccer academy, grandstands, locker rooms and a turf field. The complex is expected to generate at least $1.6 million for the local economy.

Although an appraisal is usually done before a real estate purchase, the Milford city charter doesn't require it. In fact, city rules allow leaders to buy land, "without the necessity of competitive bidding," said media attorney Jack Greiner, who is not involved in the lawsuit.

"It is certainly common practice to conduct an appraisal before buying real estate. Even if the buyer wants to avoid the expense, the bank … typically insists on one," Greiner said. "But … I see no requirement that the city conduct an appraisal."

A review of meeting records show that city leaders offered no explanation for the $5 million sale price, of which the city will pay $3.5 million. FC Cincinnati will pay the remaining $1.5 million.

Emails obtained by WCPO show that Milford city leaders began meeting with the owner of Expressway Park in October 2017 to determine a sale price. The 20-acre site at 689 U.S. Route 50 had five softball fields, a retail shop, a warehouse and a concessions area, according to the auditor's website.

The auditor valued the land at $700,000 and the buildings at $153,800 in 2017 -- the most recent appraisal available. However, the city and FC Cincinnati agreed to pay $1.5 million for Expressway -- nearly double what the auditor appraised the site for.

FC Cincinnati bought the second parcel, a 3.7 acre-site containing three warehouses at 707 U.S. Route 50, on August 28 for $3.5 million. That's more than three times the $1.1 million value the auditor placed on the land and buildings in 2017.

That property was owned by Beauty Ridge LLC, which court records show is owned by Dale Roe. In a 2015 court affidavit, Roe said that he is the owner of the Dale E. Roe Family Trust - which is the single member of Beauty Ridge. Roe is also the president and owner of DER Development Company in Milford, and owns numerous properties. 

How does the city explain the discrepancy between the appraised price and the sale price?

"It is possible that the auditor's appraisal was inaccurate. It is possible that there were more recent comparable sales that supported the higher price," Greiner said. "But you would need to talk to the city on that."

A city solicitor has wide leeway to negotiate real estate purchases, and city council can hold private meetings to discuss land sales.

"The city solicitor is not a public body and is not subject to the Open Meetings Act, so the solicitor could freely meet with a seller out of public view and negotiate the deal," Greiner said. "It is difficult to get a lot of transparency in this setting."

Richardson believes city leaders should have been more open about the details of the FC Cincinnati soccer training deal from the start.

"This information is emerging only now, more than two months after council voted to approve this high-profile deal, and certainly not because city leaders voluntarily released it," Richardson said. "Milford residents deserved to have all information available to us before council voted."

In July the club entered into an agreement with the city of Milford, Clermont County, Clermont County Port Authority and Clermont County Ohio Convention and Visitors Bureau for the project, which included a 1 percent lodging tax increase.

The city agreed to pay $3.5 million through the sale of securities. The extra lodging tax will be used to repay that debt over 20 years, but the city will still spend a projected $46,000 from its own funds each year on debt service.

If there is a lodging tax surplus, FC Cincinnati will be reimbursed the $1.5 million it spent to buy the property, according to the development agreement.

Under the agreement, the city will acquire the land and convey it to the Port Authority to lease to FC Cincinnati, which is exempt from paying property taxes.

"Milford residents should not have to file lawsuits, submit public records requests, scour through hundreds of pages of public records and conduct their own investigations simply to find out basic details on tax deals that should have been revealed by council in public meetings," Richardson said.

If her lawsuit is successful, it could "invalidate" any ordinance that city council passed illegally and jeopardize the deal with FC Cincinnati, said Richardson's attorney, Matt Miller-Novak.

This is the second time Richardson has sued Milford City Council. She sued in 2016 over a series of illegal meetings about a hotly contested apartment complex at Milford Main.

The city settled the lawsuit, paid $36,000 in Richardson's legal fees and agreed to send city council members to remedial training on the state's open meetings laws.