Good Money Chases Bad At Tamarack

Ghost town of unfinished luxury development at Tamarack.

Ghost town of unfinished luxury development at Tamarack.

Bankrupt developers, property liens, misrepresented sales, a $250,000,000 loan default, and multiple lawsuits are all elements in a proposed bailout of Tamarack Resort in Valley County.

A bankrupt Mexican and Frenchman are seeking a bailout with assistance from the U.S. Department of Commerce and the Idaho Housing and Finance Association (IHFA) in the form of a $670,000,000 bond sale to “institutional investors” like pension funds–such as those operated on behalf of unions and the Public Employee Retirement System of Idaho (PERSI).

The IHFA stands to make about $3.5 million in fees if the deal is consummated with their help. A spokesman for the IHFA told the GUARDIAN the fees would go toward “affordable housing” in the area of the luxury resort and subdivision. Other sources tell us Tamarack is the big owner of those properties as well.

The Tamarack publicity machine runs overtime, attracting financial giants like President G.W. Bush and the former Idaho Guv–who once stiffed his barber with a bad check– Dirk Kempthorne. Dirk went on to be Interior Secretary. G.W. currently ranks as the most “ disapproved president in history and Tamarack is after the hard earned retirement money of worker bees and pension funds so the rich will have a playground and multi million dollar vacation homes.

The potential for financial disaster with this scheme ranks right up there with Enron, and all the recent sub prime lending and resulting scandals that has brought the national economy to its knees.

The Idaho Housing and Finance Association claims to be a “quasi government private corporation.”

That means they were created by the legislature, the board is appointed by the governor, but there is no state control of their lending. They have a monopoly on selling the bonds sought by Tamarack, but adamantly state NO STATE FUNDS are used or obligated.

The GUARDIAN submitted a series of questions to IHFA. Their written responses follow:

1) Tamarack approached the Association in partnership with the US Department of Commerce to pursue a privately placed conduit financing. There are certain large institutional investors, primarily pension funds, that will not make direct real estate loans but will invest through a conduit financing structure. These financing structures offer an investor a Trustee Bank, such as Bank of N.Y., to oversee financial matters relating to the investment. The Association is the only authorized entity in the state that can issue bonds under this type of economic development financing structure. Traditional banking entities could offer direct loans for Tamarack, but cannot facilitate access to certain of these large institutional investors.

2) The Association will not invest any funds toward this transaction, nor will it provide any credit enhancement or place any assets at risk. If Tamarack is successful in finding an investor(s), all funding will be provided by the applicable investor. Any bonds issued will be done on a private basis and not offered in the open market to any unsuspecting investors. Only highly sophisticated institutional investors are qualified and will conduct their own due diligence in determining the propriety of such an investment. Tamarack is responsible for identifying and negotiating a successful outcome with any prospective investor. There would be no guarantees on the bonds – the investor’s recourse in the event of a default is to foreclose on the underlying loan or pursue other security or personal guarantees offered by Tamarack in their negotiated terms and conditions with the investor.

3) The Association’s Board of Commissioners considered Tamarack’s application for this financing at their July 25, 2008 Board meeting. It was determined that the application met all Statutory and Association policy provisions. A significant report on Tamarack’s economic impact to Valley County and the State overall was presented to the Board. It was also confirmed to the Board that the proposed financing would pay off all outstanding debts owed to contractors and others connected with Tamarack. The Board passed an initial or inducement resolution for the financing. This allows the Association to move forward with public hearings for the purpose of determining whether a “public purpose”

will be served by this financing. Additionally, Tamarack must find an investor, and then acceptable terms and conditions must be negotiated with both Tamarack and an investor. The bond financing is not yet approved. There will need to be additional action by the Board, assuming the transaction comes together acceptably. We are aware that Tamarack is pursuing other debt restructuring alternatives.

4) After making inquiry to staff members involved with this transaction, we are unaware of any inquiries, phone calls, e-mails, or other communications by political figures to either support or object to the Tamarack financing application. Our expectation is that we will hear from various community and elected officials during the comment/public hearing phase of the financing approval process.

We cannot understand why an outfit that claims it is not a public agency would hold public hearings, but not much makes sense with this story.

Comments & Discussion

Comments are closed for this post.

  1. I like how IHFAs second answer contradicts their first answer.

    The fact is that in this case, IHFA is operating as a laundry for the bond seller thus allowing (suckering?) financial institutions to invest in real estate that otherwise would not or could not do so.

  2. “G.W. currently ranks as the most “ disapproved president in history”

    Something to remember, just because the left says it over and over does not make it so. The test will be time. Truman had that claim till Carter and then Truman was resurected….I believe Bush has a long way to go to equal Carter for inept and Clinton for crooked and inefectual (name anything he did in 8 years he was not forced to do except raise taxes)

  3. Just when I have found myself agreeing with you on a few things over the past month, this gets posted. This one is much more “slant” than “news”.

    Simply put, this bond sale will either live or die based upon free market principles. Even with guarantees in place from quasi-governmental underwriters, large retirement/pension funds like PERSI will stay away if the deal doesn’t makes sense or is likely to end with bad press (no matter how good the returns). Just take a look at PERSI’s track record. They are one of the best managed funds anywhere.

    If this deal does get subscribed, it is a pretty good indication that the financials make sense for everyone involved.

  4. Perhaps I didn’t read carefully enough, but I was not aware, after reading mainstream media accounts of the Tamarack bond sale proposal, that IFHA was involved.

    Your site and Betsy Russell’s “Eye on Boise” are two of the best sources of “Idahoans-need-to-know” news. Thanks for your diligence and good work.

  5. Jon, you say that this deal, “will either live or die based upon free market principles.” Then why is a quasi-government agency involved? Let’s let the free market dictate what happens at Tamarack, without a government (or quasi-government) bailout.

  6. Wow JimV, still a few of those G.W. supporters around eh. Most of my Republican friends have claimed that he has been a disaster for the party, of which I vehemently agree. Bush is a disaster for a president and will likely go down in history as one of the worst if not the worst presidents in American history. Really amazing that with all the crap coming out of this administration he still has supporters. Well, I guess he still has supporters in Idaho and some backwaters in the deep south.

  7. Everyone needs to call their legislators and the govs office and tell them to keep the IFHA OUT OF THIS DEAL!

    There are NO USA banks that will touch Tamarack and the IFHA should not touch this either. Please call this week. It is not the function of our state to be a front for real estate scams.

  8. Well Rivercity, if one simply believes all the empty headed slogans the left flings about as fact, then you would have a point, It, however, helps to have some knowledge of US history. It also helps to be able to define disaster. I recall that a few presidents have had problems. Nixon had Watergate, Carter his entire inefectual 4 years. Truman was demonized to the point he had lower poll numbers than Bush. Lincoln wass called every name in the book and then some. Jackson shot a fellow for insults. Harding turned a blind eye to perhaps the most crooked administration in history and his critics wrote of his speaches “an army of pompous phrases moving across the landscape in search of an idea.” (not unlike Obama) Clinton was in a class of crookedness all his own. If one measures a presidency by what it does, Clinton raised taxes…period. He passed not a single budget and zero serious legialstion, He simply had the good sense not to get in the way of the economy and took credit for everyting from welfare reform (which he opposed until forced by public opinion to sign) to all pretty sunrises. No, Bush will be viewed over time and by folk not suffering from BDS. I suspect his reputation will go way up, especially when compared to Clinton before and Obama after.

    EDITOR NOTE– Come on guys. This is about real estate scams. Bush has the lowest “approval rating” on record, hence the casual reference (swat). GUARDIAN hosts the forum, tries to keep it open, but for and agin GW belongs on right wing talk radio. Let’s try to stay on topic.

  9. Point noted, but a history lesson is sometmes needed

  10. I have felt for the last 25 or 30 years that the now named Tamarack project would fail. As with your article about the Teton valley vacation place – with starting prices in the millions – just how many billionairs are there?

    The biggest problem for the Tamarack development is and always will be Highway 55. The amount of traffic on the road has caused us to give up our annual trip to McCall to share a condo with family for a few days in the summer.

    So, unless, like G. Bush, you can bring your own helicopter, you have no choice but to take 55. So I predict that Tamarack will remain pretty much a ghost town unless something dramatic happens with the economy. I doubt that PERSI would get involved with such a dubious project.

    And I suspect that property values have fallen below what some purchasers originally paid during the “bubble” of the last few years.

    One can only hope and pray that our state government doesn’t get involved with a bailout program for Jean Pierre and his partner.

  11. Didn’t this project require leasing of state land to get area for the ski runs? If so, the state would have an interest in keeping it afloat to preserve the payments to the land board. Using the IFHA is a subtle way to do that. Public schools are the ultimate benefactor.

    Free market capitalism has a nice ring to it, but historically in Idaho government was essential to getting major industries established, either through land giveaways or cheap leases, subsidized infrastructure, war contracts for dehydrated potatoes, etc. It shouldn’t be any different now.

  12. Rod in SE Boise
    Aug 3, 2008, 5:33 pm

    Jon, please answer Sharon Ullman’s question!

    Editor: I agree with RiverCity about you know who, as should we all.

  13. Where does Bush fit into discussion of Tamarack… just a distraction…
    FYI GW Bush also holds the record for the highest approval rating as president- at 92% after 911.
    Shows how making a hard decision and sticking with it (based on long term best end result) can be tough on a persons popularity. Especially when getting beat up for years and years by adversaries and most of the press and not taking the time and effort to defend himself.

    EDITOR NOTE–Bush is the only president to visit Tamarack.

  14. Sharon, I would encourage you to look into the details of how IHF works. They are taking little or no risk here, but rather structuring a deal. They simply act as an administrator (and get paid for their services…they are not spending our tax $ on this). Once the bonds are placed, the private institution involved in the transaction assumes the risk.

    Oh…and Rod. Calm down. No exclamation point is needed. Some of us take a few vacation days this time of year and try to get as far away as we can from our phone and PC. 🙂

  15. Rod in SE Boise
    Aug 4, 2008, 2:43 pm

    Jon, calm down, it was only one exclamation point. lol

  16. Jon – Thank you for attempting to respond to my comment.

    I do know how IHFA works. In 1997, I wrote a three-part investigative series about the organization that was published in the Weiser Signal American. At the time, I also won the inaugural Max Dalton Open Government Award for my successful effort to bring the organization under the Idaho Public Records Act.

    IHFA was created by state statute and was originally known as the Idaho Housing Agency (IHA). The organization’s Board members were, and still are, appointed by our Idaho Governor. Their initial purpose was focused on the provision of affordable housing in Idaho. In its infancy, IHA did rely on state financial backing. They also did, and still do, sell tax-free bonds, thanks to a provision of our federal government.

    In the mid 1990’s, the organization went back to the Idaho Legislature and legislation was passed that removed the state sales tax backing, while changing the name to the Idaho Housing and Finance Association.

    Since then, IHFA has continued to increase its role in our State’s economy. For example, the organization now handles the sale of GARVEE (grant anticipation revenue) bonds for the State of Idaho.

    My point with regard to this story and your initial comment was not about IHFA’s risk. You suggested that, “Simply put, this bond sale will either live or die based upon free market principles.”

    I took some econ classes in college. My understanding of the free market does not include government (or quasi-government, in this case) bailouts or assistance when bad financial decisions are made by people in the private sector.

    Additionally, we have unaddressed affordable housing issues in our community. People who live in manufactured housing are periodically displaced when the land they are renting is sold out from under their homes, but the aged mobile homes are unable to be moved due to cost and other factors.

    Rather than butting it’s quasi-governmental nose into this Tamarack deal to help bail out wealthy land speculators, wouldn’t it make more sense for the State’s affordable housing agency to be assisting the often elderly, and sometimes disabled, folks who are displaced from their manufactured homes through no fault of their own but bad luck?

  17. Excellent letter, Sharon! I totally agree with you.

    If Tamarack needs bailing out let the private investment market do the bailing.

  18. Sharon, thanks for the history lesson. 😉

    I think we can all argue details until we are blue in the face, and while entertaining, it is probably not worth our time. However I will respond to a few things.

    Regarding a “free market” I was using that term in the general sense, rather than the textbook sense. In general, totally free markets often lead to chaos and corruption. As free market economies mature, certain control and planning mechanisms are usually put in place to ensure the ride isn’t quite so bumpy. Most laymen would call our economy a “free market” economy, but we all know that a tremendous amount of planning and manipulation takes place, and usually we benefit.

    As for Tamarack, I’m sure that they did a lot of things wrong, but I really doubt that they could have foreseen the direct impact that the housing implosion and the large European banking corruption scandals would have on their financial instruments. If they had, they would have been way ahead of the Fed and most of Wall Street. If you will remember, Tamarack’s troubles are a lot more related to their loans being called (due to bank cash needs in response to the aforementioned banking corruption scandal) than to any failings in their business model. They were still selling out most of their offerings when this all went down.

    In essence, by “butting it’s quasi-governmental nose” into this deal, IHFA can directly benefit the economy of valley county by ensuring construction, retail, and service jobs are created by the completion of the resort. Any way you look at it, that helps the people in Idaho’s economy that need it most.

    Oh, and BTW, I can’t disagree with you on the fact that IHFA needs to do way more than they are on the affordable housing front. Some tie in for this deal to affordable housing for resort employees would be a great start.

    I do still stand by my comment. If these bonds make sense, there will be a buyer. If not, well…then all of you that have been rooting for Tamarack to crash and burn may get your wish.

  19. How is IFHA involved in the GARVEE bonds? That must be the finance in IHFA but really, that’s pretty far afield from their original mission of housing for low income and first time home buyers.

    EDITOR NOTE–We are told the IHFA is the only entity in the state authorized to sell or “facilitate” the sale of these bonds. They have a monopoly, but don’t like the word.

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