Thursday, March 01, 2007

Harrison Square Financing, part 2

I met with Pat Roller (City Controller) and Greg Leatherman (City deputy director of development) today. We spent about an hour and a half discussing the financing package for Harrison Square.

I thanked both of them for their time and I appreciated the opportunity to discuss the financing package for Harrison Square.

The gist of the conversation was "There is NOT an approved hotel proposal nor is there a financing plan." Period! Everything is in flux and NOTHING has been finalized.

The City of Fort Wayne still expects to have the deal approved by City Council and in place by April 1st... Wow, they are in a hurry... This DOES NOT make sense to me and I do not like it.

I went to the meeting with a list of 62 questions that I wanted answered. Since their plans are still in the planning stages they could answer very few of my questions. I did not ask almost 3/4 of the questions because it was obvious they could not answer them since there is not a plan in place... They were able to answer the following questions with some degree of certainty:

1. They used a present value factor of 5% in their calculations.
2. They said that they were able to lower the minimum number of hotel rooms the hotel would need from 300 to 250 because the construction cost of the hotel per room increased from $160,000 per room to $188,000 per room. Greg Leatherman said that construction prices have increased since Hurricane Katrina for various reasons. Since the construction cost of the hotel per room increased they are projecting that the property tax revenues will increase... (This explanation does not make a lot of sense to me, they sent out the proposal in December and changed it within 30 days... Construction prices did not go up almost 12% in those 30 days...)
3. I asked why the $300,000 escrow deposit was waived. Greg Leatherman said it was waived because we are a "second tier" market and because the overall market is "soft."
4. The City of Fort Wayne is paying all demolition costs for the project.
5. The City of Fort Wayne is going to contract operation of the new Parking Garage to a private company! (This is a GOOD thing)

Most importantly Pat Roller told me that she would let me know when the final hotel proposal is completed and when the final financing package is completed and we could meet again and she would answer my specific questions about the project once they had the ability to answer them.

There were a lot of simple questions they could NOT answer:
1. When will the bonds mature?
2. How will the revenues from the stadium be split?
3. How will the parking revenues be split?
4. What are the plans for Memorial stadium?
5. What are the projected operating costs for Memorial stadium?
6. If the Wizards move downtown how will that effect businesses near Memorial Stadium?
7. How many spaces will the Parking garage have? 8. What will the parking deal be with Lincoln?
8. What will the parking deal be with the new hotel?
9. What are the operating costs of the new Parking Garage?
10. What will be the size of the overall bond?
11. What effect will the new hotel have on the operation of other downtown hotels?
12. New hotels are being built on the north side of Fort Wayne, has this been factored in?
13. If the TIF and CReED taxes do not cover the bond payments where will the money come from to make up the difference? (They think from CEDIT.)

I have to say that after talking to them my opinion has not changed. I have the exact same questions that I had before the meeting... They did point out a couple of things about the project financing that I had not considered and that should minimize some of the losses I think will occur; however, there were also expenses that I pointed out to them that they have not accounted for...

There are not enough details to even do a preliminary analysis. In my opinion this project is being rushed through too fast.

From a financial standpoint my largest concern is that this is going to get "rammed down our throats" and we will NOT get a chance to review the project and question it appropriately.

Here is what I think is going to happen:

1. The Hotel Proposal and overall Financing Plan will be finalized on about Friday March 23rd near the end of the day...
2. The proposals will most likely be contained in documents that have a couple hundred pages of details, projections, etc. The proposal and financing will be fairly complicated and all of the details will not be finalized for all aspects of the project.
3. Tuesday March 27th the proposal will be presented to City Council.

I 100% hope that this does NOT happen.

If this does happen I THINK Fort Wayne City Council should decline to vote on the proposal for a LEAST a couple of weeks so that the City Council members and the taxpayers can review the proposal!

What do you think?

Mike Sylvester

P.S. Republican City Councilman Sam Talarico has correctly pointed out their neither he nor I are experts in Governmental financing arrangements. Sam Talarico; how long do you think the City Council and the taxpayers should have to review these complicated proposals after they are finalized?

P.S.S. I think we should have at least two weeks and should really have about four weeks.


12 comments:

Jeff Pruitt said...

Mike,

Sounds like the interview went as I expected. There are simply no details to report which is why I find it strange that some people are so openly supportive of the project.


My guess on the room capacity change is that the 300 rooms has been on the drawing board for quite some time. And when they sent out the RFP they didn't update it with new numbers based on the new build prices. The most important thing (to me) is that the expected revenue will be there.

They want everything in place by April 1st and I think they are going to push for this date no matter what. I concur that the public needs two weeks to consider/debate the prosal before it comes to a council vote.

Scott Greider said...

Mike,

What do I think? I think you have way too much time on your hands. Either that or you're incredibly efficient with your time. Probably a little of both. ;-)

Let me ask you, though, do you really care about the answers to all those questions? Or are you just trying to make a point? I mean, do you really care how many parking spaces the new garage will have? Will that exact number somehow make or break the grand idea?

With all due respect, it seems like you’re missing the forest for the trees. I know you're a details man, but you have to admit this project - and indeed the entire future of the Fort - is about more than details. It's about hoping for something great, and having faith that we can make it happen.

Take my own experience. We never had any intention of ever leaving NYC and returning to FW. “Dead town,” we would always say. Nothing happening there, and no real sense that it ever would. But then about a year and a half ago I started hearing about changes being proposed for downtown. Then I started talking with some of those involved in developing those proposals. Then I started talking to others about how they and their friends would love to see the realities suggested in those proposals come to fruition. And finally, I said to Hallie, "Looks like something big is about to happen in the Fort. Let's go back and be a part of it!" One thing I never even remotely considered was the details! Not that they're not important on some level - they are. But perfect details are not what are bringing us and our family and our investments back to the City. On the contrary, it’s vision, and passion, and hope. That's what moves people! That’s what makes cities great!

In the end, if details sink this project (i.e. Hardball reconsiders and leaves with its money), FW will lose. And lose BIG TIME! In ways we can only imagine. As somebody who seemingly has significant local influence, I plead with you to support as much of this development as possible - and then write about it! In addition to concerns, write a little (more) about its great aspects. And do it often. Sure, get your concerns on the record, hopefully even influencing some leaders. But please, think reconsider your overall lack of support. After all, our bet only pertains to a downtown Wizards game. ;-)

In parting, and in defense of some elected officials who seem to be taking a beating, some fitting words, I believe, from Robert Coles:

"Abraham Lincoln did not go to Gettysburg having commissioned a poll to find out what would sell in Gettysburg. There were no people with percentages for him, cautioning him about this group or that group or what they found in exit polls a year earlier. When will we have the courage of Lincoln?"

See you soon.

Parson said...

I think there is a old saying "The devils in the details". To me that means if you don't pay attention to the details the devil is going to bite you in the butt later on.

Think about this, if no one is paying attention to the details of these deals, we could end up with a 300 room hotel and only 1/2 the needed parking. There are million other things, but that is just a simple example.

Do enough people go to Wizard games to make a new hotel really needed? I never been to one and I don't really know were to find those kind of records.

Anonymous said...

The details do exist, you and I aren't being given access to them. Ask to see the "preliminary" plans, proposals, projections, etc.

Anonymous said...

To Scott (and All),

I have been following the Harrison Square project with some interest. I am certainly not as detail oriented as Mike is. Rather, I will normally defer to his judgment on fiscal matters. I on the other hand tend to go with what I see as common sense.

Just reading your posting deeply moved me. It truly did. I am impressed with your passion for this city. I would like to think that I am as deeply passionate in wanting what I see as best for Fort Wayne. I have lived here most of my life and as much as I may deride it for my perception of its shortcomings I do like my Fort.

Fort Wayne is a sick town. By sick I mean that we are hemorrhaging jobs and our economy isn’t doing so hot. We are accumulating vast amounts of debt in the form of bonds that we continue to pay on. We are lead by folks who are less than honest. They tell us the restaurant tax will go away and then they find a way to extend it. They tell us that we need a nonsmoking area and when local business owners spend thousands of dollars to comply they turn around and tell us that isn’t good enough. Money wasted.

But that is OK. After all, it wasn’t an elected officials money. It was somebody else’s money. It seems that once anyone is elected and they start spending someone else’s money it becomes easier and easier to spend.

We have lost Magnavox. We have lost most of Harvester. We have lost Dana Corporation. Lincoln Life – gone. Slater Steel – gone. Waterfield Mortgage – gone. We have lost many other small factory jobs. These losses have cascaded down to small businesses all over Fort Wayne. These last 20 some years have not been great for us. My father’s small insurance business was significantly hurt when Harvester went under.

All is looking up though. We are breaking ground on our 5th Wallmart… (Friendly sarcasm here)

It sounds to me as though you really, really WANT the Harrison Square project to succeed. You speak of vision, imagination, and hope. All noble and commendable traits.

I see a flaw though. It seems to me that the cure for revitalizing downtown is Snake Oil. Buy it! It will cure all of your woes! It removes stains, cures constipation, and gives hope to the downtrodden. Mikes questions seems to simply be asking “what’s in the snake oil?” and you don’t want to be confused by the facts.

In my humble job I drive people who are elderly or disabled all over this city. I talk to most of them and NOT A SINGLE ONE I’ve met likes the Harrison Square idea. NOT ONE! I just spoke with my father who talks to small businessmen every day. Guess what? You know what’s coming. NOT A SINGLE ONE agrees with the idea of Harrison Square as is.

It seems that the only folks who are for it are bureaucrats and politicians. That concerns me. As much as you want the Snake Oil to work it should concern you too.

We are going to need hundreds of millions of dollars to fix our sewers. We are going to be spending hundreds of millions of dollars on our schools. The backs of local taxpayers can only take so much.

I would like to see better jobs than Wallmart brought into Fort Wayne.

I wish that there were a miracle cure to our woes. Life would be easier that way.

God has blessed each one of us with a brain to think, reason and analyze. The government forces drug manufacturers to tell us what is in each pill.

The harder we look at the proposed Harrison Square project it appears to be a placebo, and an expensive one at that.

Please don’t fault Mike for pointing that out.

Respectfully,

Doug Horner
Secretary, Libertarian Party of Allen County

Robert Enders said...

I agree with you on a couple of point, Scott.

1. The details in the end do not matter. I will oppose this project as long as it involves government subsidies. It is wrong to support a few businesses at the expense of everyone else. The developers ask for public financing for this project because they know that it will be a money pit.

Other people feel that the details are important, so Mike provides it to them. It certainly does not do much for public confidence when members of the city council do not know the details of what they are voting on.

2. We do need politicians with the courage of Abraham Lincoln. I personally am not afraid to take an unpopular stance on an issue. I have even argued openly with Mike on this very blog.

Harry Browne once said that sometimes democracy is two wolves and a lamb voting on what to have for lunch. I believe that the reason we have so many corrupt politicians is because so many of the voters themselves are corrupt and/or gullible. They often vote only with their own prejedice and self-interests in mind. The purpose of the Constitution is to keep democracy itself in check, so that even if a majority of people demand that free speech be overturn, we still retain the right to speak our minds.

Anonymous said...

No, Scott, if the "details" sink this project, it will mean that the exposure of the "details" prevented Fort Wayne from making the same mistake that our neighbors in South Bend and Gary have made. The fact that our City officials are working so hard to keep so much from so many suggests that there is a compelling reason to find and examine the details, not to use "hope" as a justification for blind enthusiasm.

The City of Gary cut a deal with a group of owners that had no baseball exzperience. That group is falling apart and the project has been, by any reasonable measure, a failure. We also have a group with no baseball experience making excessive demands to which our leaders appear to have already surrendered. But hey, we can "hope" it works out OK.

Mark Garvin

Jeff Pruitt said...

Personally I think that hoping everything will work out when we're talking about $125+ Million investment is a recipe for disaster. I admire your passion but I sincerely hope our city leaders take their job a little more seriously...

Anonymous said...

Wow, where do I begin? I usually stay away from posting a lot on blogs, but after reading Mr. Sylvester’s summary of his meeting with the city I had to respond.

First of all, I have to admit that I was not in the meeting and have no idea what was said, but can you HONESTLY expect city employees to have answers to some of those questions. This project is still in planning, and not everything is figured out in one day Mike. Also, you mentioned how Mr. Leatherman had referred to Hurricane Katrina. Again, while I was not in the meeting, I highly doubt that Greg solely spoke of Hurricane Katrina. It was only a few weeks ago that Greg mentioned in a Journal Gazette numerous reasons for the hotel being 250 rooms. One which I remember from the top of my head was due to the situation with the Holiday Inn. Personally, I feel you should include all the parts of the story if you are going to include some of it.

It seems to me Mike, that the city and ALL proponents are in a no-win situation with you. Do I respect some of the points you bring up? Yes, and many of your questions will eventually have answers. But you have to realize Mike, that no matter what the city would have done, you would have criticized it somehow, someway. If they hadn’t allowed you to speak with them, then you REALLY would have criticized them. They couldn’t win.

I can’t have said it better than the way Scott did in his post. Do some of your questions really have any significance to the project as a whole? Absolutely not. You are trying your absolute best to find issues with this project, and that is truly disappointing knowing how much this could do for our city. Look at Scott for instance—he is coming back to Fort Wayne. I know at least three people who have told me they WILL LEAVE if this project doesn’t go forward because it would show the path that this city is heading for.

One last thing in reference to Mark’s post. Mark, you must realize that this is not the same type of project as the ones completed in South Bend and Gary…..NOT EVEN CLOSE. If you take a look around the country at cities who have completed these projects the way Fort Wayne plans on, not one city has had a failing project—not one. Gary and South Bend did things much different. They built a stadium thinking it would revitalize. This isn’t just about a stadium Mark. This is about a multi-use development project. To become more informed on this, read the Bluepring Plus and Baseball Plus reports. If you do, you might see what I am talking about. Take a look at Greenville NC and Greensboro SC. Even take a look at Dayton. They are now planning on condos and retail space to accompany their ballpark…..something our city has already included in the original plan.

We must support our leaders such as Sam Talarico and Mayor Richard who truly are doing their best to make our city a better place. It’s so disappointing that we have this “keep it as it is” attitude. Numerous times in our city’s history we have had opportunities to improve our city and each and every time, we have failed to act. If that’s the kind of city you want, then fine. You better get ready to continue to say good-bye to the youth of this city then.

Notice how almost every major leader in our city has supported this project—the mayor, Talarico, Tim Pape, Paula Hughes, the Chamber of Commerce, Bob Taylor, Chancellor Mike Wartell, Mark Pope. This list goes on and on and is comprised of Democrats, Republicans and business leaders. This isn’t about Libertarian, Republican, and Democrats Mike. This is about shaping our future to be the best it can be. Now I feel it’s time for you to stand up and join these leaders as someone who wants what is best for our future. God Bless

Adam Welch


PS: Scott, keep up the good work.

Anonymous said...

Adam-

Thanks for your thoughtful post. You are correct that a mixed use development is something of a different animal and I agree, generally, that such a project has a greater chance for success.

The Gary comparison is with reference to the apparently very low level of team owner participation in construction of more expensive than typical minor league ballparks and to ownership groups that, while including talented people, had, I think, little or no prior experience as owners of minor league baseball teams. If I am incorrect as to those points, I will be happy to be corrected.

I have read the reports you mention and they are, in part, a source for my present unease with this project. You mention Greensboro. The BaseballPlus report indicates that the Stadium there was financed 100% with non-public funds. In Greenville, which you also mention, stadium construction costs were also 100% non-public, although the City provided the land. The 16.5 million in residential and retail was, according to the report, "largely without City involvement." Harball Capital is proposing to contribute somewhere between 11% and 18%, depending upon the cost of the stadium. I have been unable to determine the estimated cost of our stadium despite what I consider substantial effort.

The level of team owner participation in our proposed stadium seems to me to be unusually low. If that is due to factors unique to Fort Wayne (disinterest in baseball, lack of disposable income, etc.), then I am concerned that those same factors make the success of this project questionable. I am, however, still in the process of trying to obtain information to make an informed judgment.

Label me as a "keep it as it is" naysayer if you want. I support the hotel and parking garage components and the land acquisition efforts. If I had another idea for the space currently allotted to a ballpark, and you thought my idea a poor one, would that make you a "keep it as it is" kind of person, and eliminate the need for me to address the merits of your criticism?

Mark Garvin

brian said...

Good posts, Mark and Adam. I enjoyed reading them. This is a great discussion.


"The level of team owner participation in our proposed stadium seems to me to be unusually low."

Mark- Look at the level of non-baseball investment that the baseball team owners made in the cities you have mentioned. From what I remember reading it is zero in each case.
Maybe if Hardball wasn't spending some of their investment dollars in the areas surrounding the proposed ballpark, the dollar amount able to invest specifically in the ballpark could be higher. Simply my opinion.

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