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City will pay $21,000 to Exchange Bank developers

It took the owners of the Exchange Bank building nearly a decade to fulfill their end of a purchase agreement with the city of Farmington, but it's the city that has to pay up in the end.

Farmington city council members voted 4-1 Monday to approve a settlement agreement between the city and the building's owners, Hosmer Brown III and Hosmer Brown IV, owners of the 2004 Real Estate company. The settlement prohibits either party from pursuing future litigation over the building's ownership, but still requires the city to pay the Browns $21,500.

The Browns filed a lawsuit against the city of Farmington and the Farmington Economic Development Authority last August. In it, the Browns alleged the city failed to return the historic building's deed after dropping action to seize that same deed nearly a year prior. The Browns also pursued compensation for an $80,000 line of credit they had issued and the city had drawn upon.

Sounds confusing? It should. As one of the landmarks in downtown Farmington, the Exchange Bank is a source of pride for the community landscape, but it's been a headache for city officials for nearly 12 years.


Built in 1880, the Exchange Bank was one of the first buildings constructed after what is called the Great Fire of 1879. The fire leveled many of the wood-sided buildings in early Farmington. Over the years, it was bank on the main level and the Grand Hall upstairs, where high school graduations and community concerts were once held.

By the early 1990s, though, it was a boarded-up eyesore in desperate need of TLC. Years of neglect marred the building both inside and out. Farmington's Housing and Redevelopment Authority owned the building and spent years looking for a buyer who would give it the care it so needed. The HRA even went so far as to fund the exterior renovation.

Then, in November, 1998, the Browns came to the HRA with a plan, a promise and one dollar. They purchased the building from the HRA with that dollar, and signed a purchase agreement that stated they would do necessary upgrades to the interior - on both the main and upper levels - within 18 months of purchase.

Nearly a decade passed. Some work was completed on the building and a few tenants came in to do business on the main level. Still, the work required in the purchase agreement was not complete. Over that same decade, the HRA had become the EDA, and the EDA members were ready to see that work completed.

In early 2008, the city started to issue deadlines to get the work finished. Those deadlines were extended several times.

Finally, in June, 2008, the EDA exercised its right to reclaim the building's deed and record it with Dakota County. In addition, the EDA drew upon the $80,000 letter of credit that accompanied the deed.

A couple of weeks later, though, under advisement of the city attorney, the city of Farmington decided to reverse its actions in hopes of warding off any litigation the Browns would seek.

More than a year went by. Then, last August, 2004 Real Estate filed a lawsuit against the city and EDA questioning the city's right to take back the deed and draw on the letter of credit, among other things.


The EDA and city council has since held several closed meetings to discuss the litigation. A few weeks back, a settlement agreement was drawn up and reviewed by both city officials and the Browns. The Browns signed the settlement agreement late Monday afternoon. It was presented to the city council for approval a couple of hours later.

In a nutshell, the agreement clears both parties of any blame in terms of who was right or wrong. It also prevents either party from bringing any future lawsuits on this.

Still, it does require the city of Farmington to reimburse the $80,000 letter of credit, and it also requires the city to pay 2004 Real Estate $21,500, which will come through the city's insurer, the League of Minnesota Cities Insurance Trust.

Council members said Monday that they considered the $21,500 payment the lesser of two evils. Without the payment, the agreement would not have gone forward and the city would have entered into a court battle that would likely have cost more than $100,000.

"It was a financial decision," said mayor Todd Larson. "No one up here is happy with it, but we didn't want to pay $100,000 (to fight it)."

The settlement was approved on a 4-1 vote, with council member Christy Jo Fogarty casting the dissenting vote. As one of the council and EDA members throughout the past several years' worth of dealings with the Browns, she held her ground on the matter.

"I have been dealing with this issue for a great number of years. Cities are consistently sued, and it's usually cheaper to pay out than to fight it," she said. "I completely respect anyone who does vote for (the agreement), because it does save the city and the residents money, but I cannot."

The EDA is the final party to approve the agreement. That action is expected to take place at the June 28 regular meeting.

Michelle Leonard

Michelle Leonard joined the Woodbury Bulletin staff in November, 2014, after 14 years covering news for the Bulletin's sister publication, the Farmington Rosemount Independent Town Pages.  Michelle earned her Bachelor of Science degree in Mass Communications: News-Editorial from Mankato State University in 1991. She is an active member of the American Legion Auxiliary Clifford Larson Unit 189 of Farmington, and served as the 2014-15 Third District President to the American Legion Auxiliary Department of Minnesota. Michelle is also the volunteer coordinator for the Minnesota Newspaper Museum which is open annually during the Minnesota State Fair. She has earned Minnesota Newspaper Association awards in Investigative Reporting, Local News Coverage, Feature Photography and Column Writing. 

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