MOORHEAD – The city of Moorhead will head to trial Tuesday against the private firm that operates the metro’s only toll bridge.
Moorhead is suing the city of Fargo and the privately owned Bridge Co., arguing that the company’s two shareholders have been using the bridge’s revenue for personal profit and that the bridge should be opened to the public’s use for free.
The Bridge Co. owns and operates the toll bridge linking Fargo’s 12th Avenue North and Moorhead’s 15th Avenue North.
“This is a cash cow for these people,” attorney Mike Nelson, who is representing Moorhead, said of Bridge Co.’s only shareholders, Clifford “Kip” Moore and James Dixon.
The spat has been ongoing for over a year, culminating in today’s trial.
Moore, president of Bridge Co., said he doesn’t understand why Moorhead is pushing so hard to get the bridge now when it could grant his company a contract extension and have the structure for free in about four years.
“It’s just been heartbreaking,” Moore said Monday. “We spent $2.1 million to build it in 1988 and now that we’re finally getting it paid for, they think they get it free right away.”
While Moore has argued that continuous flooding added to the bridge’s debt, Nelson said there is no debt and that the bridge should be turned over to the cities and made public.
Nelson said he expects the trial to last two days.
End of 25-year deal
The bridge opened on June 1, 1988, which is when its 25-year contract with Fargo and Moorhead began. Accounting for the 249 days when the bridge was closed due to flooding, that contract ended Feb. 5.
At the end of the contract, Fargo and Moorhead had two options: take the bridge over and make it public, but also assume all of its “qualifying debt”; or grant Bridge Co. a five-year extension to allow it time to pay off its debts.
In this case, “qualifying debt” is money owed from the bridge’s construction, or major maintenance or repairs. At the end of the five-year extension, the cities would take ownership of the bridge free and clear of any liens or debts.
Fargo voted in 2010 to grant an extension, but Moorhead tabled the issue indefinitely. On March 11, 2013, the Moorhead City Council voted to deny Bridge Co. the extension and to pursue legal action to make the bridge public.
“I don’t understand Moorhead’s position,” Moore said. “They’re going to get a free bridge no matter what happens, in less than four years because our time runs out.”
The company claims there is more than $480,000 in qualifying debt on the structure, according to a pretrial brief filed Thursday in Cass County District Court by Ronald McLean, Peter Zuger and Ian McLean of Serkland Law Firm, which is representing the city of Fargo.
By asking the court to give the bridge to the cities, Moorhead is acting “unilaterally … which would force Fargo to potentially assume up to over $240,000 in debt for a Bridge it could take free and clear of any liens or debts in less than five-year’s time,” Fargo’s attorneys say in the brief.
Randolph Stefanson, an attorney representing Bridge Co., argued in a separate pretrial brief filed in court Friday that it would be “manifestly unjust” for the court to make Fargo “pay for a bridge it does not want.”
Fargo’s attorneys are asking the court to dismiss the complaint, allowing Bridge Co. to operate the bridge until Feb. 5, 2019.
How much debt?
At the heart of the suit is how much debt is owed on the bridge. After the lawsuit began last year, Alerus Financial required Bridge Co. to pay off its outstanding original construction debt of about $60,000.
The company did that by transferring the money to Moore and Dixon, its only two shareholders, who then paid Alerus out of their personal checking accounts. Bridge Co. and Fargo argue that these payments were meant as loans from the shareholders.
“The ‘original debt’ was not paid off, instead it just switched to a different creditor,” Fargo’s attorneys argue.
But Moorhead claims that when Moore and Dixon paid Alerus, the original debt was paid. Any “gratuitous bookkeeping entry” making the payments appear as loans would be “nothing but a sham,” Nelson said in his pretrial brief.
Bridge Co. has also produced records that show it owes debt of about $105,878 for major repairs and maintenance to the bridge, attorneys for Fargo state in their pretrial brief, a claim Nelson refuted.
“They just don’t have any debt,” he said. “That bridge is a moneymaking thing.”
The bridge made about $216,000 in revenue after expenses in 2012, Nelson said.
A review of the personal checking accounts of Moore and Dixon found that Moore was paid $160,000 from Bridge Co. from Feb. 2, 2013, to about May 21, 2014, according to Nelson’s pretrial brief.
Dixon was paid $65,000 from Bridge Co. from April 8, 2013, to June 13, 2014, the brief said.
Moore said about $100,000 of the money transferred to him would be used to pay taxes. Bridge Co. is an S Corporation, which passes income, losses, deductions and credits through to their shareholders for federal tax purposes, according to the IRS. The remainder is meant as personal compensation, Moore said.
“I worked there for 25 years. I should get something,” he said. “I haven’t drawn anything other than that $160,000.”
Nelson argued the money could have gone toward paying $50,000 in back taxes Bridge Co. owes to Clay County. The company has filed for tax liens five times since 2010, which Moorhead argues is a breach of contract.
“[These] liens are in full force and effect even as we go to trial in this case,” Nelson said in his brief. “The two shareholders pocketed the money, and the tax liens on the Toll Bridge went unpaid.”
In a recent letter to The Forum, Moore said he was “flabbergasted” to learn that Moorhead has spent more than $120,000 in legal fees on this case. Bridge Co. has incurred $27,000 in attorney fees, he said.
A memo from Moorhead City Attorney John Shockley states that he intends to ask the court to award the city its costs and disbursements at the conclusion of the trial.
Messages left Monday for Stefanson and Zuger were not returned.