Saturday, March 12, 2011

CCR 03-12-11: Free Rides at McDougalville

the Controversial Committee Report

“We don’t raise sacred cows...we just butcher them.”

Prepare yourself. This CCR report is long! But when your city council is spending your money, more detail will assist as you ask the question: What was on these folks minds when contracting with McDougal?

While staff of the CCR cannot answer this question, we do know that it will be hard for any incumbent to spin a plausible explanation as to how they could keep pumping good taxpayer money into a bad sink hole that we like to call: McDougalville.

And remember kiddies, the rides at McDougalville are free...always courtesy of Irving taxpayers.



Joe Putnam

The McDougal Project is a south Irving development project originally named the South Irving development initiative. Delbert McDougal of Lubbock, Texas, was hired by the City Council to undertake and manage the development program.

The project commenced on December 14, 2006, when the City Council authorized a Memorandum of Understanding with McDougal. The development area is the area bounded by Pioneer on the North, Shady Grove on the South, Britain Road on the East, and MacArthur Boulevard on the West.

Initially it was contemplated that total City Funding, including bond funds and a land banking fund, would be $17 million, plus an additional $345,000 for fees and expenses.

Year 2007 was to be devoted to opportunity assessment, documentation, product definition, third party developer solicitation, project financing, and land use planning.

The 2008 and 2009 work by McDougal was to be as follows:


1. Prepare comprehensive compilation of 2007 Scope of Work deliverables.
2. Evaluate the feasibility of creating a Tax Increment Finance ("TIF") district to provide funding for public infrastructure improvements within the Heritage District. If both parties agree that such financing mechanism is appropriate, McDougal will facilitate creation of the TIF.
3. Prepare a market assessment value of the land and improvements upon completion of the entire development district to establish a taxable value for the City.
4. Establish a time line for completion of each phase of the project.
5. Prepare draft zoning overlay ordinance for the Heritage District containing design guidelines and standards.
6. Continue aggregation of properties within the project area for inclusion in redevelopment project.
7. Work with City representatives to address aesthetics and development potential of DART storage yard.
8. Create a comprehensive marketing program for the Heritage District.
9. Present concept plan for first redevelopment project with minimum private investment of $35,000,000 to City Council for review and approval.
10. Prepare comprehensive compilation of 2007 Scope of Work deliverables.


  1. Begin construction of the first redevelopment project with minimum private investment of $35,000,000.
  2. Identify the second redevelopment project with a minimum private investment of $30,000,000.
  3. Continue aggregation of properties within the project area for inclusion in redevelopment projects.
  4. Provide January 2009 Status Report to the City Council.


December 14, 2006
Execution of Memorandum of Understanding for "South Irving Development Initiative"
$150,000 retainer
$195,000 for expenses

June 28, 2007, and July 19, 2007
City Council authorizes Loan Purchase and Sale Agreement with Comerica Bank.
Total credit amount is $35 million.
$3.5 million for interim loan.
Term of agreement 60 months.
City of Irving is obligated to assume obligation to Comerica if McDougal is unable to repay amount of funds borrowed for property purchases.
Comerica has first lien on all property purchased.
Some notes are due in 36 months.
September 6, 2007
City Council defines focus area.

September 14, 2007
McDougal states that construction is expected to begin in 2008/
October 12, 2007
Comerica Bank approves increase in loan amount to $13.5 million. Reaffirms City's absolute and unconditional liability.

November 15, 2007
City approves increase to $13.5 million.

January 30, 2008
Memorandum from Doug Janeway, City's Real Estate Services Manager, with the following comments regarding the McDougal contract: There should be a requirement of real development in the near term. Any development outside of Downtown should be with McDougal's own funds. City needs an exit strategy. Additional needs:
* Plan in place by May 2008 for development.
* Major project under construction by December 2008.
* Major projects on schedule thereafter.

February 7, 2008
City Council approves a two-year consulting agreement with McDougal.
2008: $150,000 retainer $124.000 expenses
2009: $150,000 retainer $100,000 expenses
McDougal required to begin construction on the first $30 million project in 2009 and identify the second $30 million project.
March 13, 2008: Focus area is modified
City Council authorizes purchase of three apartment complexes.
Increase loan amount by $10.5 million to a total of $24 million.

June 12, 2008
City Council authorizes purchase of additional properties.

June 26, 2008
City council approves sale of 129 West Irving Boulevard to McDougal for $525,000.

July 24, 2008
City Council approves purchase by McDougal of eight single-family lots and gives McDougal $128,000 grant toward purchase price.

September 2008
City Council increases total loan amount of $40 million for purpose of property acquisition.

May 14, 2009
City Council approves loan to McDougal for $568,862.29 for demolition of Vista Del Lago apartments.

June 9, 2009
McDougal says that he intends to begin construction on $16 million shopping center and town home project in 2009 and begin $22.4 million residential project in 2010.

July 9, 2009
City Council loans McDougal $477,000 to make interest payments on personal loan.

August 5, 2009
McDougal makes progress report. Says that groundbreaking for 200 North Main construction will occur in the first quarter of 2010.
Says groundbreaking for Delaware-Britain project will occur in 4th quarter of 2009 or 1st quarter of 2010.
Says groundbreaking for Beauford Street project will occur in 2010.
Says groundbreaking for 503 West 6th development will occur in 2011(253-unit apartment complex).
Says groundbreaking for 430 West 6th development will occur in 2011-2012.
This status report confirms that Comerica Bank has capped lending at $27 million.

October 22, 2009
City Council loans McDougal $275,000 for demolition of MacArthur Square Apartments.

December 3, 2009
City Council loans McDougal $1 million for purchase of Beauford Street property.

December 12, 2009
City Council extends consulting agreement with McDougal:

2010: $100,000-$200,000 retainer $223,000 expenses

2011: $90,000 retainer $135,000 expenses

2012: $72,000 retainer $90,000 expenses

March 4, 2010
City Council loans McDougal $500,000 to pay interest due Comerica Bank.

May 14, 2010
City Council loans McDougal $2,084,290 for purchase of the Lakes Apartments.

June 7, 2010
Total amounts which City has guaranteed or has loaned to McDougal, or has paid:

Comerica Bank $ 27,000,000

Consulting fees, 2006-2009 $ 869,000

Consulting fees, 2010-2012 $ 710,000

Lot purchases $ 128,000

Demolition costs $ 568,862

Demolition costs $ 275,000

Interest payments $ 477,000

Land acquisition $ 1,000,000

Land acquisition $ 2,084,290

Interest costs $ 500,000
Total obligation $ 33,612,152

No development has occurred. It is not likely that Delbert McDougal will bring about any new construction.

The city presently owes Comerica Bank $27 million. Even though 88 parcels of land have been acquired, most of the property is encumbered by the $27 million debt to Comerica.

The City has no present means of paying Comerica. Before the land encumbered by the Comerica debt can be developed, Comerica must be paid and its lien released.

The Comerica loan guarantee by the City Council was illegal. Legal requirements were not followed by the City Council. Had the City Council complied with legal requirements, it would have established a method to repay the Comerica loan when McDougal defaulted. McDougal cannot pay the loan, and the City made no arrangement to pay the loan.

In order to buy time, the City Council has laundered $1.2 million in grant money through McDougal to pay interest on the Comerica loan. No one knows how the next interest payment will be made.

McDougal now proposes to construct high-density apartments on some of the acquired tracts. He has nothing else to offer. Yet the City, through McDougal, has spent approximately $15 million buying and demolishing six apartment complexes in the development area, including Villa Martinique, Vista del Lago, the Lakes, and imperial Courtyard.

And remember, in 1997, the City Council adopted a Comprehensive Plan which explicitly prohibited new apartment construction in South Irving. No new apartment development can occur without a significant modification to the Comprehensive Plan.

Newspaper comments on the McDougal Project that have been reported are:

December 14, 2006: Delbert McDougal, "There are great opportunities here and great things that can take place."

June 23, 2009: Delbert McDougal: "Quite frankly, we're really ahead of schedule." Brenda McDonald: "For him to be as on track as he is, is a success story."

December 18, 2009: Herbert Gears: "Since that time we've gotten pretty good bang for our buck."

March 4, 2010: Herbert Gears: "From my perspective I think its already accomplished and achieved more than what's ever been accomplished and achieved by any City Council in Irving."

May 13, 2010: Dallas Morning News: "On Wednesday, Gears said there has been redevelopment in South Irving because houses, apartment complexes, and other buildings have been turned into vacant lots."

There it is. Four years with McDougal, $35 million spent or owed to Comerica Bank, and vacant lots to show for it.

One other factor that the CCR would add which is not part of the above documentation. The term Lubbock Mafia was coined by the CCR to reflect that there were dealings that go back to Lubbock which placed Irving’s current city manager (Gonzalez), Irving Chamber president (Wallace) and McDougal, who has his corporate offices in Lubbock, in the same business arena.

Was this Lubbock Mafia connection evident when McDougal, chamber representatives and city staff were not supportive of the proposed Aldi grocery store zoning on Irving Blvd. when presented to the council for approval? The prevailing thought at the time was that an Aldi grocery store would not be consistent (or nice enough) with what McDougal might want to develop in a store for McDougalville.

We’re just saying…….