OTTUMWA — Court documents show the contractor hired to demolish St. Joseph Hospital claims Blackbird Investments owes it more than $1.5 million. It wants the property sold to pay the bill.
Elder Corporation, a Des Moines based company, filed a mechanic’s lien asking the courts to force the sale to cover the remaining debt. The suit was filed against 312 E. Alta Vista LLC, a company set up as a subsidiary to Blackbird.
The filing said Elder was hired in December 2017 to handle demolition, which remains incomplete. Plans called for the building’s removal in order to clear the way to construction of new, high-end housing at the site.
Court documents also suggest Blackbird, acting through 312 E. Alta Vista, has borrowed against the property. Elder’s filing said the company filed a mortgage against the site on Jan. 29, 2018. That’s after Elder was hired and, according to the filing, gives Elder’s claim priority in court. Blackbird's answer admitted the mortgage was taken out on the property.
The suit asks the court to declare Elder’s claim “prior and superior to all rights of the Defendant and that the Property be sold under special execution free of the rights of the Defendant,” with proceeds applying to Elder’s bill.
Blackbird challenges Elder’s claim that it fulfilled its side of the contract. Its response said Elder “performed some work on the project but denied that Elder fully performed under the contract … . The extent of the work performed and amounts due, if any, are the subject of a pending arbitration.”
The case is on hold pending the outcome of that arbitration.
It’s unclear how much the city previously knew about the situation. Mayor Tom Lazio said during Tuesday’s council meeting Blackbird mentioned the situation during their most recent discussion.
“They are in a legal discussion with the contracting firm Elder. At this point I don’t have any other information of than that they are negotiating and trying to get a legal settlement. they said they’d keep us posted and we’d hear something in the very near future,” Lazio said.
On Friday, Lazio said a meeting is planned for Monday morning to discuss the city's options with regard to Blackbird.
"It's time to get something done," he said.
The severity of the situation was a surprise to the city council. Councilman Marc Roe said he was not aware that Blackbird had set up an LLC to handle the project rather than acting through its own name.
“I don’t even know what to say about that. That’s interesting,” said Roe. “I’m kind of at a loss on this. We’re at such a tricky situation as a city.”
Roe said one of the city’s big concerns is that somehow it winds up on the hook for the cost of completing demolition. It isn’t clear what effect a forced sale might have on that risk.
Councilwoman Holly Berg shared Roe's concern.
"That has been a question I have. We want to be sure we do what is in the best interests of the taxpayers," she said.
Councilman Matt Dalbey said the city has not received information from Blackbird consistently.
“It seems like every time we ask, we get some kind of an update but it never has these kind of details,” he said. “We’re all frustrated with it.”
Dalbey said the city needs to be prepared to begin action if Blackbird continues to be unable or unwilling to act.
“When the communication breaks down and is as lax as it is, we hold every other property owner responsible,” he said. “I think the next step should be we put a time frame in place and we require some action.”