City’s deal with developer violates Michigan Constitution

Correction: An earlier version of this story characterized Dock Mark as a competitor to Parkland.

The city of Muskegon violated the Michigan Constitution when it tried to give away valuable property and easements for a nominal fee, Judge Kenneth S. Hoopes of the 14th Circuit Court ruled on Feb. 20. City officials also acted in bad faith and violated city code, the judge wrote. The ruling voids the city’s deal with Parkland Properties, which had said it would develop a new boat storage facility.

The ruling is the latest development in a legal contest between the city and West Michigan Dock & Market Corporation, which owns nearby land. Dock Mark, as the company is commonly known, had been negotiating with the city for a land swap, as CapCon reported in October.

One issue in Dock Mart’s lawsuit was whether the city had received enough compensation in an agreement it made with Parkland. The city argued that it got more than two dollars in return: It got a promise from Parkland to develop a $2 million dry dock.

The judge disagreed. The city had signed both a deed and a document to terminate easements. Both documents called for Parkland to give the city a dollar. Neither document, the court observed, provided the city with additional compensation. “The parcel is valuable lakefront property and the easements are dedicated public spaces. The city gave them to the developer for $2 and nothing else.”

Bad faith characterized the transactions, the judge wrote, adding that the city violated Article 7, Section 26 of the Michigan Constitution. Under that section, “Except as otherwise provided in this constitution, no city or village shall have the power to loan its credit for any private purpose or, except as provided by law, for any public purpose.” Muskegon officials had not complied with that provision, the judge wrote. “There is no evidence or argument from the City that the ‘public purpose’ it asserts was authorized by statute.”

The judge also found fault with city officials for the way they surrendered (“vacated”) the land, a process governed by city code. According to the code, the zoning administrator must submit a petition to the planning commission, which must give public notice and hold a public hearing. If the planning commission approves the petition, it sends the petition to the city commission, which then must decide whether to grant the petition. “None of these required steps took place,” the court observed. “The extinguishments of the easements are therefore void for this reason as well as being unconstitutional.”

Mart Dock President Max McKee applauded the ruling. “We’re pleased with the judge's decision to place the property back in the hands of the public,” he wrote in an email to CapCon.

“Muskegon is fortunate to have a uniquely beautiful lakeshore and we have immense opportunities in front of us. We’re hopeful that public officials will make future decisions not for personal reasons or to appease a small number of loud voices but in the community's best interests.”

The two sides did consider reaching a settlement, Muskegon City Manager Jonathan Seyferth told CapCon in an email. “One offered by the plaintiff included language that the City would not do a future similar deal. That same settlement offer also included that the city pay legal fees for the other party in excess of $100,000. The City declined that offer.”

McKee told CapCon; “We countered their refusal for our attorney fees by pulling that request off the table. But we still required language acknowledging their violations and illegal process. Without this language, the city could attempt the transfer again.”