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Published September 22 2013

Emails show pressure on Bismarck leaders for Civic Center expansion

BISMARCK – As soon as Ron Knutson’s plan hit the newspaper, the gloves came off.

City leaders here knew that Knutson, an anesthesiologist and real estate developer, was gearing up to formally present his proposal for an events center in north Bismarck.

Meanwhile, they were backing a $27 million plan to double the Bismarck Civic Center’s convention space, an attempt to salvage what they viewed as the most urgent piece of a proposed

$90 million Civic Center overhaul that would have required nearly $70 million in hospitality taxes.

Residents rejected the new taxes last November by a vote of 57 percent to 43 percent, and the commission came back with the scaled-back proposal in January.

When the Bismarck Tribune reported Feb. 8 that Knutson wanted the City Commission to scrap its $27 million expansion plan in favor of his new $150 million events center, Commissioner Parrell Grossman emailed Mayor John Warford and three high-ranking city officials that day.

“Now, he is starting to provide some details that will make his proposal vulnerable and provide a basis to challenge,” Grossman wrote, noting how Knutson said in the article that the city could pay for the project as hotel and sales taxes grew from surrounding businesses, or pay for it like other communities.

“I’m sure we could easily borrow $150M based on a promise to ‘pay the debt as our taxes grow …’ ” Grossman wrote. “How does he think other communities fund these large projects … jars at convenience stores?”

Emails obtained by The Forum through an open records request give a behind-the-scenes look at some of the pressures exerted on city commissioners during the weeks before their March 12 unanimous vote to expand the Civic Center Exhibit Hall’s trade show floor space by roughly 50,000 square feet.

Input came from real estate developers and business and property owners in the central business district who stood to lose financially if a northside events center were to move forward and draw potential customers and tenants out of south Bismarck. Input also came from supporters of Knutson’s 14,000-seat arena proposal who could capitalize on the development it would attract to Bismarck’s already bustling north side.

Such a struggle between competing proposals could play out in Fargo as city leaders consider expanding the Fargodome with more convention space.

Prominent Fargo developer Doug Burgum recently stepped forward and proposed an alternate vision that would use Fargodome reserves to build a convention center in downtown Fargo as part of a larger plan that would also include a new City Hall and a Second Street North floodwall. The centerpiece of Burgum’s ambitious plan would be a $125 million, 23-story building to be built by his development firm, Kilbourne Group, in the currently empty U.S. Bank Plaza along Broadway.

The city has hired a consultant to study the Fargodome expansion, which dome General Manager Rob Sobolik said would likely be at least 50,000 square feet, as well as potential downtown sites for a convention center. The study by HVS Convention, Sports and Entertainment Facilities Consulting of Chicago is expected to be completed early next month.

Knutson, who has since withdrawn his arena land offer in Bismarck, was still seething about the commission’s decision when he spoke by phone Friday from Sicily during a stop on a 10-day cruise, saying the panel “had no intention of listening to my proposal.”

“We voted this down. We voted no Civic Center expansion. Why? Because everybody knows you can’t make a dinosaur live in today’s environment,” he said. “It’s time to do something different.”

‘Extremely frustrated’

Warford, in an interview Thursday at the City/County Administrative Building in downtown Bismarck, said he viewed the November vote not as a referendum on whether the Civic Center should be expanded but rather on the funding mechanism for expansion.

He said the Civic Center was “maybe the most studied issue that we’ve had in the city of Bismarck.” A market analysis conducted by consulting firm Convention, Sports & Leisure in 2008 and updated just before the November election suggested the Civic Center’s current 10,000-seat arena was adequate for the market and that additional convention space was a more pressing need.

Emails show those pushing for the Civic Center expansion began quickly preparing to build public support for it and sway sentiment away from Knutson’s proposal after he outlined it in the Tribune.

In a Feb. 9 email, Warford asked City Administrator Bill Wocken if the city needed to have Civic Center General Manager Charlie Jeske or the consultant “prepared to discuss, from a solid research/statistical position, why the large arena or an arena outside of the core of a city does not fit our market?”

Wocken replied, “Yes, I think that would be wise. We also have to be prepared to defend the combination of arena and exhibit space as more versatile and cost effective.”

Warford said Thursday that the commission “tried to listen to Dr. Knutson” and respect that he was offering to donate 50 acres for an arena as the centerpiece of a 640-acre residential and commercial development.

“However, Dr. Knutson’s proposal was nebulous in our mind,” Warford said, citing a lack of detail about how the arena would be financed, the cost of extending sewer, roads and other infrastructure, and the obstacle of major power lines that ran through the property north of 57th Avenue near Highway 83.

Knutson said he spent $30,000 on his proposal and that it was up to city officials to work out the details of how to make the plan work.

Grossman said he was “extremely frustrated” because he believed the commission brought forward “a very solid, well-researched project supported by really many years of review,” while Knutson presented a “last-minute proposal full of some possibilities but mostly speculation.

“And I struggled to be able to try and confirm the appropriate level of detail to actually draw a fair comparison between the two projects,” he said.

Weighing in

Among those emailing commissioners in support of the Civic Center expansion were several real estate brokers and developers, none more prolific in his emailing of Warford than Bill Daniel, owner of Daniel Companies.

Daniel sent the mayor at least 11 email messages from Feb. 1 to March 8, forwarding his exchanges with well-known members of the community as he confirmed their support for the Civic Center expansion, including Bank of North Dakota President Eric Hardmeyer and Blarney Stone partner Jim Poolman, a former state insurance commissioner.

In a Feb. 26 email, Daniel informed Warford about a pending land sale that he said would give some indication of the value of the property Knutson proposed to donate to the city for the northside events center. Daniel explained that he represented the seller of the land – 66 acres to Bismarck Public Schools for the new Legacy High School in northeast Bismarck – and that based on the square footage price of the pending sale, Knutson’s 50 acres would equate to a value of $2.57 million.

Daniel, in response to emailed questions, said sharing the information was “very important to those making a decision” because Knutson was purporting his land gift to be worth $10 million.

Knutson disputed the lower value, citing rising land values in Bismarck and recent sales of parcels near the one he offered.

Jeffrey Ubl, the architect for the Civic Center expansion, also helped to pick apart Knutson’s proposal, stating in an email to Warford, Grossman, Jeske and Wocken that Knutson’s cost estimate of $200 per square foot for the arena project was “very low.”

“We have been using $284.00/SF for our work. It you take the difference between their $200 and our $284 that’s a difference of $33.6 Million. I would estimate that they could be as much as $93.5 million dollars low.”

In a lengthy email March 4 to the mayor and city commissioners, Daniel attached an aerial photo of a one-square-mile area around the Civic Center. He noted there was about $40 million worth of private development projects happening in the highlighted area, and that the public infrastructure and amenities convention goers desire were already in place.

‘Huge coalition’

Daniel said he didn’t lead the charge for Civic Center expansion, noting there was a “huge coalition” of business and land owners around the Civic and downtown who “did not want to see the Civic Center, a major component in the heart and soul of our city, ripped out of the core of for (sic) the benefit of a few land investors wanting to grow north Bismarck faster.”

A Bismarck-Mandan Chamber of Commerce survey of its members drew nearly 400 responses, 61 percent of which supported the $27 million expansion using existing hospitality tax revenues.

Grossman said the level of input from the business community wasn’t unusual, but added, “I think maybe what was different in this particular issue is we had maybe real-estate folks on both sides.”

“There was some finger-pointing that we were listening to the wrong people who were self-interested. Well, yes, these people are interested in the downtown,” he said. “They have businesses downtown, just like many of the folks who were supporting Dr. Knutson’s proposal, they had business relationships with Dr. Knutson and their incomes and et cetera may have relied on that relationship. So I think it was one of those kinds of situations that maybe polarized people on one side or the other.”

At least one official expressed concern about that polarizing effect in an email to Warford.

Russell Staiger, president and CEO of the Bismarck-Mandan Development Association, emailed the mayor on Feb. 13, writing that he believed there needed to be a discussion with a “fairly small group” representing both the city and Knutson.

“We cannot let this become a major public issue John, or no one is going to get what they want. And the community will be the loser,” Staiger wrote.

Warford said there “really was not a discussion” about having a public vote on the $27 million expansion. First of all, he said, there wouldn’t have been enough time to hold a vote and complete the expansion in time to accommodate the highly valued 2014 Williston Basin Petroleum Conference. Secondly, he said the commission had a consultant’s recommendation to expand the Civic Center, and the commission has the authority to spend taxpayer dollars for the expansion, “just as we do for the water treatment plant or the other various entities.” There also were three public meetings on the two proposals, he noted.

In addition to approving the expansion on March 12, the commission approved a public-private study of the feasibility of a northside center.

The Future Venues Task Force, which was organized by the chamber and counted Knutson among its members, will bring a recommendation to the commission on Tuesday to hire a consultant to take over the study at a cost of up to $120,000.

“I think that demonstrates that the City Commission is serious about looking at what is right for Bismarck in terms of designing an events center and where should it be located and … how will the community pay for it,” Grossman said.

Readers can reach Forum reporter Mike Nowatzki at (701) 241-5528