Zeal lease contract with the City of Sioux Falls is based on empty promises

Before we dive into the current proposed agreement (Item #18) watch these videos from 2018 (FF to 9:30 in the first Q & A and listen to the Mayor’s answer about personal guarantee);

So why do I bring this up? The deal that took place back than echoes what is going on with ZEAL.

Let me make this clear, I SUPPORT, Zeal & StartUp Sioux Falls moving to this building, I support their vision for the facility, I even kind of support the $1 a year lease. But let’s face it, most people in this city are worried about where their next paycheck and meal is coming from and not starting a business so there is absolutely NO reason the taxpayers need to partner with them. In fact DTSF has several private properties available for a facility like this without the city needing to get involved.

The main issue with the deal is the handshake promise that they will spend $1 million remodeling the building. It is true that in the contract they will be responsible for general maintenance and have to carry insurance, but like the Bunker Ramp deal there is NOTHING in writing that they must spend this money, even though the city promises to reimburse them if they break the lease. The mayor also has authority of what improvements can be made, which is good. But like the deal with Jeff Lamont that was based on a flimsy piece of paper that he was ‘good for the money’ ZEAL has NOTHING in writing they will spend the $1 million.

Did we learn nothing from the $26 million dollar pile of cement?

What baffles me is that while this mayor and the past one claim they are running the city like a business, NO ONE in the private sector would sign a contract like this if the promises were not in writing and approved by their legal counsel.

This is just another handshake deal between the mayor and his rich buddies with NO (legal) accountability, and while it frustrates me these backroom deals persist, I think for the most part the massive conflicts of interest sadden me when we could have just done better. I know the mayor shares a deep friendship with some of the individuals involved, but this isn’t the mayor personally borrowing his lawn mower to a buddy, this is a tax payer owned asset and we must dot the I’s and cross the T’s to protect OUR asset NOT the mayor’s friend’s asses.

Some may argue that this is NOT like the Bunker Ramp deal, which when it comes to value, they are correct. But when it comes to a private/public partnership almost everything is identical, including nothing in writing. We just don’t seem to learn from (recent) history when it comes to contracts with these partnerships like the cost overruns and shoddy work with the Pavilion, Admin Building, Events Center, Midco Aquatic Center and Bunker Ramp. I have even heard there are now millions in cost overruns with the Water Treatment and Public Safety facilities that are not even completed yet.

I don’t expect my council and mayor to be geniuses when it comes to these negotiations, but at least look at history and rely on your 6-Figure a year staff to give top notch advice and draw up contracts that value accountability.



26 comments ↓

#1 NTNLIQ on 01.07.22 at 10:13 pm

Most people are worried about where their next check is going to come from? Are you kidding? Unemployment is exceptionally low. Anybody that doesn’t have a job right now doesn’t want one. Every business in town is trying to hire.

#2 Very Stable Genius on 01.07.22 at 10:29 pm

That ThuneHaken, Beck, and Lamont moment was a precursor of things to come. A dress rehearsal, should we say? This format was later used by Trump and his covid moments. The only thing lacking in the first event, however, was a recommendation to drink bleach. That came later, but our city leaders have asked us often to just take a drink and not ask questions in recent years, have they not?

( and Woodstock adds: “What is this place, Jonestown or Taupeville?”…. (“I wonder if that stuff in that file cabinet is any good?”… ))

#3 D@ily Spin on 01.08.22 at 11:11 am

Sounds like another Huether-like back door deal. By now we (the people) and city leaders should have learned to stay out of private real estate business. Legacy and the Copper Lounge group were mentioned. Why involve past criminal failures? It’s suspicious that there’s no formal contracts and the mayor is financially involved. Isn’t it obvious this project can happen by itself? Why tap the city again for millions that won’t be paid back. It’s a TIF but 5 times worse. Citizens suspected the mayor would try to sneak in a personal wealth benefit despite city debt and infrastructure failure. Steal from the city but don’t be so obvious.

#4 Oh MyIKES! on 01.08.22 at 11:35 am

Let’s get an accurate value on the lease. Paulson said 15-20 per sq ft. The finance director said over 20. Let’s use $20 since it is a prime location. That is 120,000 per year. In addition, NNN costs would add another $5-6 pet sq ft per year in NNN cost. Let’s use 5.50. That another $33,000. The first year, the City will give Zeal $153,000. Over a decade that is $1.53 million. That does not include and annual cost escalations. Usually 2-3% a year. A very generous subsidy.

Who cares if they are making an estimated $1 Million in improvements. In a commercial lease that is normal. Tenants pay for their improvements that are for their use. The improvements will not get taxed. The improvements are not structural, so they are not necessary to save the building. These improvements saves the City $0 dollars. If a new tenant came in 10 years they would likely need to fit the building and start over on the interior for their needs. That is the way commercial space works.

This will not be a 10 year lease. Zeal will come back and ask for an extension and it will likely be granted. This will be 20+ years.

Which building will PTH give away next?

#5 "Woodstock" on 01.08.22 at 11:45 am

“Let’s see”… “Let’s say you work at Macy’s”…. “You have a job, but there’re rumors the store is going to close”… “Or, you work at a local bar that’s closed due to the recent covid surge”…. “Ya, you have a job, but you have to wonder where you next paycheck is going to come from, don’t you?”….

#6 Fear & Loathing in Sioux Falls on 01.08.22 at 1:03 pm

That building is the old Milwaukee Road depot. The last passenger train pulled out of there for Sioux Falls in ’65, I believe. Then it was a place for parking and recking, which sounds like a bad date I once had. Now, it’s for innovation and entrepreneurial interests and intrigue. I hope the Levitt isn’t too loud for them, however.

#IHearTheHighSpeedTrainsNow! #WhatInnovation!

#7 Mike Lee Zitterich on 01.08.22 at 2:02 pm

This partnership between Zeal and the Residents of Sioux Falls is to place focus on the Economy. You have to admit, the people who really are the most ‘vested’ owners of the City are your “Land Owners” and “Property Holders” whom are well vested in land, real property, and the Commercial Business of that Community.

You are all looking at this in the wrong manner – this is the Mayor working out a partnership with a non-profit organization in order to help form “Public Discussion” to encourage better policy, results, and agendas on how to encourage us all to not only Support Small Businesses, but to encourage as many residents to become “small business owners” themselves.

While some of you are stuck on this matter of whether or not this is a subsidy, people like myslf, who own a business, see this as strong advocacy by the MAYOR to support us, us as in the “Small Business Community”

What benefits does this relationship have with the Residents – Jobs, Economic Benefits of Better Wages, more Private Investment into the Economic Trade Relations, and of course, working with Small Business Owners to provide them the services necessary to compete with the larger Multi-National Corporations.

This will be a public building that will utilized by those of us within the Small Business Community, to help make Sioux Falls a much better place to reside, live, and prosper. And when we all prosper, does the “City Government”

We need more of these type of partnerships !!!

#8 Hooterville's Boutique Grocer on 01.08.22 at 2:21 pm

The TenHaken, Beck, and Lamont press conference will go down in memorable history along with the Rick and Stace press conference, the Daugaard and Schopp interview with Angela, the interrogation of Ravnsborg, and the time a local attorney went live with Steve Hemmingsen in an attempt to spin the insider trading allegations against Wild Bill. We could use more good stuff like this. It’s good for ratings. It’s the ultimate in reality TV. They’re situations that put the Situation to shame…. Snooky or not…. #SouthDakotaShore #TruckerHat #DontComplainAboutHowIDress #SteakBakedPotatoDietCokeSelfDefense

#9 l3wis on 01.08.22 at 2:53 pm

‘You have to admit, the people who really are the most ‘vested’ owners of the City are your “Land Owners” and “Property Holders” whom are well vested in land, real property, and the Commercial Business of that Community.’

Mike, you have truly lost your mind. While I encourage everyone to buy property or a home because it is a good investment, to say workers in this community that don’t own property don’t matter or have investment is ludicrous. The 2nd penny which is generated thru sales taxes is spent on infrastructure. Who pays these taxes in SF? Well, everyone. Even if you are living under a bridge. If the taxes you pay are investing in this city’s infrastructure, you are a LANDOWNER in this city. I will say it again, not having an agreement in writing is a piss poor way to run government. But what would you expect from a Mayor his own family calls Poops.

#10 Further Fear & Loathing on 01.08.22 at 2:53 pm

What type of culture will this Zeal place have? Do we have need for a culture officer for it? Do such officers eat free? Four course meal? #WhyDoIHaveTwoForks?

#11 Fearing the Fuhrer & More on 01.08.22 at 3:16 pm

This place sounds like a great place to break the open meetings law. It will become a service club overtime. We must be cognizant of Uber drop-offs there, however. #BottleService&Hookers #NowThatsSomeInnovation

#12 Oh MyIKES! on 01.08.22 at 5:01 pm

That is funny Mike. No issues with Zeal, I just don’t think they need a $1.5 million dollar gift. I also don’t think anyone should be given a back door lease to a Cotg property, which I struggle to even call a lease. You might as well move them into City Hall next to the Mayor’s office.

Seriously, all this stuff you want to happen is already happening in a building they probably already own. Why does it need to be in prime real estate owned by the City. Why would you move them away from the SBA that already has this mission. Are they too good to use the Public Library where the City dumps millions in with public meeting rooms. Maybe they can lease in the Lloyd building that just got 25 million dollars.

Mike, are you buying a membership to Zeal Country Club soon to be DT? Look like they start around. $50 a month.

#13 Mike Lee Zitterich on 01.08.22 at 6:31 pm

The only ‘land’ owned by the collective ‘residents’ is land owned by the City in order to utilize for Public Services – Administration, Town Hall, Public Buildings, Police, Fire, Rescue, Public Works, Water-Sewer Facilities, Public Parks, Public Roads, and Public Utilities – of which “public taxes” go to pay for…

While the Federal and State Government’s hold some ownership to land to conduct business of those entities, paid for by the collective people of the State..

Other than that, the majority of land is owned by “Private American Citizens” inside this State.

When it comes down to it – the true ‘vested’ owners of any such State or Local Community are “Land Owners” and “Property Holders”.

IF a City should happen to lose its residency, the “land owners/property holders whe remain, shall petition each other to dissolve the city, while the circuit court is tasked to preside over that dissolvement – the CITY maintains a minimum allowance of public officials enough to pay off its debts, liabilities, obligations, expenses, collect all reciavables, selling off all collective public properties…

While the “proceeds” left over get dispursed among the remaining Land Owners/property holders, while the land resorts back to its natural state and/or Township or Local Subdivisions.

So – yes, Land Owners/property holders are your most important vested owners of any state or local area.

#14 l3wis on 01.09.22 at 6:40 am

Ted Turner owns the most land in South Dakota, with a Bad River Ranches spanning over 141,357 acres and he doesn’t even live here. In fact most of the land in the US is owned by the super wealthy;

https://www.usatoday.com/story/money/2019/11/25/these-people-own-the-most-land-in-america/40649951/

But I don’t care. The citizens of this city collectively own the building ZEAL wants to use, and as owners we deserve a contract that respects that ownership. We do not have one currently. Just a couple of friends promising each other stuff over a handshake. A piss poor way to run government, and extremely lazy and ignorant. I can’t believe a former business man would allow such sloppy governing.

#15 D@ily Spin on 01.09.22 at 12:52 pm

Zeal, def.
Enthusiasm in pursuit of a cause

Enthusiasm to procure free city monetary support?

#16 Sick of Fearing on 01.09.22 at 12:59 pm

But all Ted Turner had to do is buy a RV to vote here.

#17 D@ily Spin on 01.09.22 at 1:04 pm

So, for $50/mo anybody can lease unused space in the city offices building. How about a Hooters. It’s a good location near the city library (Romantix) and cheaper than nearby space the city could have leased.

#18 Hooterville's Boutique Grocer on 01.09.22 at 1:07 pm

I love it when Mike mentions “patented land”. It’s better than a blue pill.

#19 Blasphemo on 01.09.22 at 3:17 pm

There are LOTS of questions to be answered about this deal, and that’s why dissenting voices should be heard and heeded.

Consider: 1) Zeal/Startup SF founder & current board member Matt Paulson was City Council Member Alex Jensen’s 2020 campaign manager or treasurer. 2) In spite of this prior close political & business relationship, Alex Jensen did not recuse himself from voting at the 1-4-22 First Reading of this proposal. 3) The mayor (who initiated this proposal) is a past Zeal Board Member. 4) Matt Paulson’s company Marketbeat’s office is at 326 E. 8th Street in DTSF. 5) Paulson & three of his Marketbeat employees are listed on the Startup SF web site as “Community Builders”. 6) Startup Sioux Falls has an existing organizational home in a modern building at 2329 N. Career Avenue near Southeast Tech, which presumably needs no renovation or remodeling. It shares this address with the local office of the Small Business Administration (SBA), a government organization created in 1953 to support entrepreneurs and small businesses with capital, contracts and counseling, and the entrepreneur mentor program SCORE, a resource partner of the SBA. There is also a private HR resources company at the same address, rounding out what appears to be a convenient one-stop-shop for budding businesses.

The sun doesn’t rise and set based on the doings of Startup SF – they are not the end-all-be-all for small business. The SBA & SCORE have been providing similar services to entrepreneurs and small businesses for decades prior to Zeal, etc. Startup SF is an ongoing enterprise; the services they offer will not likely be fundamentally transformed by relocating to this downtown location, as Startup’s Brienne Maner and Chamber of Commerce’s Jeff Griffin imply. Startup SF already has a modern office building shared with other tenants who provide similar industry services. Why would they wish to move to a building they regard as needing a major expensive remodel – for which they won’t have an option to renew the lease after 10 years (according to Shawn Pritchett)?

It appears the mayor and Matt Paulson don’t want to answer any inconvenient questions about this proposal. At first reading, Paulson said, “…maybe not pay as much credence to…whatever people are going to say on the Internet.”

This proposal smacks of a nudge-nudge-wink-wink sweetheart deal among buddies, and in part perhaps Alex Jensen repaying Matt Paulson for helping get him elected via that $100k+ campaign & whopping 97 vote margin. Matt Paulson would likely prefer Startup SF be moved downtown to make impromptu coffee meetings and lunches more convenient for himself, his employees and his cronies. Brienne Maner is a prior DTSF employee, so she thinks moving back to her old stomping grounds would be nice. The SF Chamber offices are downtown, so that makes the move even more chummy. If this deal is approved, I would also not be surprised to see the potential naming rights for the downtown facility miraculously go to Paulson’s company Marketbeat.

If Startup SF thinks they HAVE to move, let them take on a real lease or buy their new DT HQ themselves. If the COSF doesn’t need the vacant downtown building in question, SELL IT.

#20 "Workin at the Car Wash, Yeah!" on 01.09.22 at 3:55 pm

A city sponsored Hooters? Now, you are talking. They could rename it the Bosom Burger Battle, too. Who wants another chicken sandwich when you have chicks-fil-DD?

#21 Warren Phear on 01.09.22 at 8:19 pm

Should the snake oil salesman behind the curtain of zeel also have a seat on the city council?

#22 Fear Not! on 01.09.22 at 10:37 pm

MP actually runs the city. The rest are merely his tools. He controls the “toolbox”.

#23 My Mistake Mike on 01.10.22 at 9:34 am

With Click Rain about to move out of PTH’s building one block south at 7th & Phillips, why doesn’t PTH make Zeal/Start Up SF a sweetheart deal without involving a public building and taxpayer support? That would end this controversy immediately, and the entrepreneurs would have a space much better suited for networking and whatever else they intend to do.

Speaking of sweetheart deals, why is nobody bitching about the $1M+ in public money about to be spent to spruce up PTH’s cul-de-sac (see bullet #2):
https://www.argusleader.com/story/news/business-journal/2021/11/16/sioux-falls-road-construction-projects-phillips-avenue-traffic-2022/8623932002/

#24 D@ily Spin on 01.10.22 at 10:55 am

Very suspicious. Body language on video seems to say ‘Let’s see if this con works?’ It’s dangerous when one private business gets preferential treatment from government.

#25 Ask Not! on 01.10.22 at 2:12 pm

#CliqueRepublican

#26 George Glass on 01.10.22 at 3:08 pm

Not sure you can tie that building to PTH. It is owned by an LLC. It also looks like the LLC changed hands in recent years. The LLC signer is now the CEO of Lloyd Companies. I’m not sure if that is better for worse.