Monday, April 16, 2007

This afternoon's Fort Wayne Redevelopment Commission Meeting

I attended the meeting today since the Harrison Square project was inserted into the agenda at the last minute.

At 2 PM I checked the Cities website and downloaded the agenda for the meeting. The agenda did NOT yet include Harrison Square.

It was added at the last minute.

At the beginning of the meeting Greg Leatherman made a point of letting us know that it was a Public Meeting and that the "public" would not be allowed to comment or participate.

The recently released Memorandums of Understanding were NOT distributed to the public at the meeting during which they were discussed. I found this VERY surprising... It seems that the documents were released to the Downtown Fort Wayne Baseball Blog just before the meeting; but, no copies were provided to the public at the meeting. The lack of information is incredible...

The first thing that was discussed was the Cities option to purchase the Omnisource site. The option expires on 12/31/07 and is not renewable.

Several other things were discussed, basically the normal business of the Commission.

Last but not least were the two Memorandums involving Harrison Square...

The first Memorandum discussed the hotel. I noted several interesting things:

1. These documents are NOT contracts. They are just a beginning for formal negotiations. They are not binding.

2. This next comment from the City blew me away and I think it will you as well. The City currently expects the hotel to have ABOUT 250 rooms. It could still have more or less rooms. The exact number of rooms has not been determined yet.

3. A Cred Credit of six to nine million is anticipated. This is new news to me; I have always heard it would be six million.

4. The parking garage will have to set aside 300 parking spaces for the motel. The motel will have to pay the City a small parking fee for use of the parking spaces. The fee will have to cover operating and maintenance costs on the garage. The fee will not cover ANY of the capital costs. The hotel can charge what they want for the parking spaces, The City will only get the small fee to cover operating and maintenance costs.

5. This next item COMPLETELY blew me away. The hotel will be allowed to keep a portion of the Innkeepers tax that it collects. No other hotel in Fort Wayne that I know of is allowed this subsidy. The amount of this subsidy was not disclosed to the public.

6. The City is still pursuing more incentives that have not yet been quantified. These include the New Markets Tax Credit and further incentives.

The members of the Redevelopment Commission asked some pretty good questions. Karen Goldner specifically asked some very good questions. These questions revealed the following:

1. The number of rooms in the hotel could be fewer then 250. In fact, and this is scary, one member of the Redevelopment Commission asked if there was a guarantee that the hotel would have a nominal number of rooms, for example 150 rooms. The Cities answer was no, there was no actual guarantee for a minimum number of rooms. That is still to be negotiated.

2. It became clear that the motel can be less then a full service motel.

Believe it or not, even with the above facts revealed, the Commission approved this Memorandum unanimously.

Next came the second Memorandum which covers the rest of the Harrison Square Project. This Memorandum is even worse for the taxpayers of Fort Wayne.

The cities presentation revealed the following:

1. Once again this is not a contract, just a framework for negotiation.

2. The Baseball Stadium will be up to AA standards.

3. The stadium will be a "depressed bowl: stadium and will have only 5000 seats. There will be an area where other people can be seated on the grass, etc...

4. There will be a minimum of 12 "suites."

5. Hardball Capital will contribute 5 million dollars by the time the stadium opens.

6. There will be 60 condos and 30,000 square feet of retail.

7. This memorandum discusses phase 1. HBC will contribute about 14.5 million to build condos and retail.

8. The final agreement will have benchmarks for the 2nd and 3rd phases. No benchmarks have been agreed to yet!

9. The City will cover the costs of a capital maintenance Fund that will be around $300,000 per year. The naming rights of the stadium will be split with HBC and the City thinks this will cover most of this cost.

10. This part is AMAZING. The Wizards expect the new stadium to have attendance of 360,000 in announced ticket sales. Lets do some math here. If the Wizards play 72 home games and the stadium has 5000 seats. 72 x 5000 = 360,000.

They are projecting sellouts to every game!

11. Stadium Parking revenues have NOT been negotiated.

The Commission members asked several good questions that revealed the following tidbits:

1. HBC is expecting to get about 4 million in Cred from the construction of the retail and condos. This has NOT been included in the public investment.

2. As the agreement stands there is NOTHING in place to force HBC to build the 2nd or 3rd stages of the project. NOTHING. This means that they can decide not to build phase two or three if their condos and retail do not sell... This means that the 14.5 million for phase 2 and the 14.5 million for phase three that the City is counting as Private Investment may never happen...
Per Steve Brody market conditions will determine if phases two and three happen.

3. Check this out. The condos and retail are going to include Meeting Space. This Meeting Space revenue will go to HBC and will compete with the GWC. They now also plan on having some roof seating available aka Wrigley Field.

Even after the above facts came out the Commission approved the Memorandum unanimously.

This just gets worse and worse.

No wonder they do not want to provide any financial information to the public. They cannot afford to let the light of day shine on this project...

I am back to being VERY opposed to Harrison Square.

I am absolutely disgusted by the Mayor's lack of willingness to release information to the public and his insistence on ramming it through City Council without releasing financial information to the public.

Mike Sylvester

8 comments:

scott said...

Documents aren't "released" to DFWB. We have to ask for practically everything that ends up on the blog. A lot of this we go out of our way to do because our visitors request it.

Karen Goldner said...

As was discussed at the meeting yesterday, the possibility of the hotel being significantly smaller than 250 and less than a full service hotel is ONLY IF the rest of the Harrison Square project is NOT approved. If Harrison Square is approved the hotel will be approximately 250 rooms and a full-service hotel.

Also as was discussed yesterday, the "approximate" reference to the 250 rooms is because the building hasn't been designed yet. Depending on the layout there may be a few more or a few less rooms. I don't see that as significant.

And I disagree with your representation of the Memoranda as "non-binding," Mike. These documents lay out the major terms of the deal and are to be followed by more specific agreements. This is just common sense and good business practice. When you buy a house you agree upon certain major items in the offer. These are not the final documents of the deal, but they are the ones that lay out the major terms. You don't go to closing on your new home if you haven't agreed on the price yet.

Although there were details released yesterday that had not been widely discussed before, I saw nothing that was inconsistent with the previously discussed structure of the deal. The details are being drilled down, but the things that people either like or dislike about the project do not seem to me to have changed at all.

Over the past couple of months there have been many opportunities for people to say their opinions and ask questions about the project, both in person and through a variety of blogs including this one. I have been following these discussions pretty intently and I believe that is true for the other members of the Commission. There is a difference between not having your opinion prevail and not being heard.

I started as very lukewarm on this project but am now in favor of it because I see it as an important catalyst - and it is a REAL project that has a developer and financing and a possibility for success, rather than simply an idea or a dream. We have a lot of ideas and dreams but often are satisfied with just talking rather than doing. I do not believe that is the way to rebuild our city's economy.

You and I will have to agree to disagree on this project, Mike.

LP Mike Sylvester said...

Karen Goldner:

The Memorandum is NOT a binding agreement and the plans can change. The hotel can be decreased in size and it can be less then full service...

All the Memorandum says it that the CURRENT intent is that the hotel be approximately 250 rooms and be full service. Everything is still being negotiated. This is a Memorandum and it is NOT a contract. Three different people during the meeting emphasized that these Memorandums are NOT contracts...

I am sure you remember when one of the Board members asked Greg Leatherman if he could ensure the Board that the hotel would be at least 150 rooms. Greg Leatherman specifically said NO.

A lot of new details were released Karen. Tell me when you first learned that part of the Innkeepers Tax was going to go to the hotel. I learned this "gem" at the meeting.

It was the first time I ever heard it and I have followed this as closely as I can.

The City to date has not answered any of the questions I submitted to them and they have not provided me any of their financial projections...

This is shameful.

Mike Sylvester

Anonymous said...

Karen Goldner-

The problem with the MOUs is that they do not have to include even essential terms if the parties choose not to include them. What is your understanding of why you were presented with MOUs rather than full agreements contingent upon approvals and financing? My concern is that an MOU is a good way to hide (through omission) terms that you do not yet want to publicly disclose.

I agree with Mike about the Innkeeper tax issue. Is this something your Commission knew about in advance? I don't recall anyone asking any questions about the issue? What is the dollar value of this tax relief?

I am also very curious about Paragraph 11, which states:

"The Commission and the Development Team agree to negotiate, in a final Development Agreement, a provision to give the Commission and/or GWC [Grand Wayne Center] an economic interest in the Hotel in the event, after the first full five calendar years of the Hotel's operation, the Hotel is then achieving and expected to continue achieving certain minimum threshold investor returns."

This is avery unusual term and not one anticipated by the RFP. The term might make sense if you had ten bids for the project and everyone thought it was a sure thing the hotel would make scandalous amounts of money. Or if the City had expressed some interest in being in the hotel business, notwithstanding our inability to run the GWC at a profit.

I was told beforehand that the hotel developer was demanding the City agree to take an equity position in the hotel if, after a set time, the hotel was NOT meeting certain economic thresholds. Paragraph 10 looks to me to be a reciprocal agreement for such a term, i.e, if we have to share in excess losses, we want the right to share in unprojected profits.

Can you shed any light on this? Can you explain why paragraph 11 is in the MOU? Were you aware of it beforehand, as none of the Commissioners asked any questions about this term?

Mark Garvin

B.G. (Semper Paratus) said...

Welcome to the wonderful world of "Big City Politicking"...

I guess those blinders all of US are supposed to be getting will no doubt be costing more than we anticipated, eh?

B.G.

Karen Goldner said...

Mark, I believe that it was explained Tuesday night that the innkeepers tax was something the developer requested, and would (at most) end up being some type of in-kind arrangement with the GWC.

The income-sharing arrangement is in there as a way for the public sector to share in upside on the hotel if there is any. I guess I'm confused that several of the people opposing this project apparently feel that such a provision is inappropriate - I would have thought that opponents would have been angry if it were not included.

Does that help explain anything, Mark?

Anonymous said...

Karen-

Yes, that clears up the Innkeeper tax issue. On the equity position, is it the case that we will be obligated to take an equity position if the hotel does NOT meet certain financial projections? I can't understand why the hotel would limit its upside if not also covering the downside.

Who's idea was it that the City (possibly) get into the hotel business?

Thanks,

Mark Garvin

Karen Goldner said...

No, the City wouldn't be obligated to take an equity position - and as Greg Leatherman explained Tuesday night at Council, the City is more interested in sharing income than sharing ownership.