Posted by Michael Earl Patton

Photo courtesy of here.

How Many More Hidden Deals Are There?

If a deal is so good for the city, why would council appear to go to such lengths to hide it?

Did council hide other deals?  How many, to whom, and for how much?

I have often criticized Cincinnati city council for showing special treatment to the favored few, but at least council (I thought) was in the open about them.  For example the $30 million to Corporex for a free parking garage for their new office building now under construction.  At least council was relatively up-front about it.  There it is in the minutes for August 1, 2007:

Item #: 200700848
ORDINANCE (EMERGENCY), Providing for the issuance, sale and delivery of not to exceed $30,000,000 of Economic Development Bonds (Baldwin 300 Project) or notes in anticipation thereof, of the City of Cincinnati, County of Hamilton, State of Ohio, for the purpose of financing certain improvements; authorizing a pledge of the City’s faith and credit or a pledge of and lien on certain revenues and other city resources, as appropriate, to secure such bonds or notes; and authorizing necessary documents to secure such bonds or notes, and declaring an emergency.

It’s clear from this wording that there is something significant happening with taxpayer dollars here.  It’s not difficult to actually go to the ordinance and see that it is for a free parking garage for Corporex.  All 9 members of council voted for this (Qualls had not yet taken Tarbell’s seat).

But such directness was NOT the case with the gift of a $2.5 million restaurant building now occupied by Via Vite on Fountain Square.  Eventually I tracked down the authorization but it was very well hidden.  It certainly was not in the minutes.  Here’s what the minutes for February 28, 2007 say about the ordinance which authorized it:

Item #: 200700183
ORDINANCE (EMERGENCY) submitted by Milton Dohoney, Jr., City Manager, on 2/14/2007, authorizing the City Manager to enter into and execute a Ground Lease Agreement with The Fifth Third Company for property located adjacent to Fountain Square. (THIS ITEM WAS APPROVED BY THE CITY PLANNING COMMISSION ON 2/16/2007)

Nada—nothing—about a free restaurant building in that wording.  The restaurant is run by Via Vite, which is not mentioned here.  The “possessory and beneficial ownership” in the building is held by Fountain Square, LLC (owned by 3CDC), not Fifth Third.  Again, all 9 members of council voted for this (and again, Qualls had not yet taken Tarbell’s seat).

If one goes to the ordinance itself, 85-2007, again there is no hint of the gift.  Instead it states such things as,

Whereas, the City of Cincinnati wishes to lease the Property for assignment to Fountain Square, LLC, to use in the construction of a restaurant on Fountain Square ...

and

That the City Manager is hereby authorized to enter into and execute the Ground Lease Agreement for unimproved property adjacent to Fountain Square with The Fifth Third Company that shall be substantially in the form attached hereto.

No real tip-off here.  If one goes to the lease itself it starts off by stating that the surface amount of land to be leased is 1,126 square feet, the subsurface amount is the same, and the base rent shall be Zero Dollars per year (par. 1.1(c) and 1.1(g).  The base rent is a little low, although since the city is charging only $100 per year for its much larger portion maybe that’s not too odd.

Paragraph 2 lists various exhibits attached to the lease, paragraph 3 talks about the landlord’s use of the property and the length of the lease, and paragraph 4 talks in detail about the rent.  Nothing about the free building there.

Paragraph 5 talks about the use of the land as a full service restaurant.  Can’t use it as bank.

Paragraph 6 says the tenant (that’s the city) has to keep the premises in good repair.

Paragraph 7 has more about Fifth Third being able to enter the building given reasonable notice.

Paragraph 8 is titled “Construction of Building and Alterations and Improvements to Premises.” And it is here where I find it, in sub-paragraph 8.1 (c): “Tenant (that’s the City) agrees to pay for all hard and soft costs, including architectural fees, incurred in the construction of the Building.”

Wow.  Over a year before this, the City had signed a lease agreement with Fountain Square, LLC (which is owned by 3CDC) that they would have all “possessory and beneficiary ownership” of the restaurant building and can “retain all income derived from the operations thereof.” But I saw nothing in that lease about who would actually pay for the building.  That would come over a year later.

The building itself cost $2.5 million to build according to this story in the October 5, 2007 edition of the Cincinnati Business Courier:

Pietoso declined to say what he has invested in the site, but admitted, with a laugh, that it is about $500,000 more than he expected. He has signed a 10-year lease with the Cincinnati Center City Development Corp., known as 3CDC, which in turn is leasing the building from the city. The structure itself, not including Pietoso’s investment, cost $2.5 million to build, said Chad Munitz, executive vice president of 3CDC.

Sounds like a pretty luxurious place.  The cost of outfitting the building to the Via Vite restaurant was paid by Via Vite, but the cost of the building itself, $2.5 million, was paid by the Cincinnati taxpayers.

Why did council appear to go to such lengths to hide the $2.5 million gift to 3CDC if it’s supposed to be such a great deal for the city?

Even though the building was built using city money, 3CDC gets to keep virtually all of the money they get from renting the building.  There is a nominal charge for the use of the public land, a mere $100 per year.  At that rate the city will recoup its $2.5 million investment in a mere 25,000 years.

How many more such deals are buried in attachments to innocent-sounding ordinances?  It was comments by “dieterschmied” and “R” which got me digging into the paperwork I got from the city to look for something like this.  The amount 3CDC was getting for the building was so low it looked as if they weren’t trying to recoup their investment.  And if it wasn’t their investment, whose was it?

Here’s a partial listing of the documents I searched:
1. Lease and Operating Agreement (Fountain Square, Above Grade), 36 pp.
2. Sublease, 42 pp.
3. Lease and Operating Agreement (Fountain Square North Parking Garage), 31 pp.
4. Ground Lease Agreement, 52 pp.
5. Construction License Agreement, 22 pp.

I don’t have the time to keep doing this.  I don’t have the time to search all the documents for, say, the Banks Project to see how many millions of freebies City Council handed out.

Authorization of major expenditures should be disclosed up-front, not hidden.  Such expenditures should be either in the budget or in the minutes.  Further, it is hypocrisy to publicly cut such items as social services and swimming pools, claiming there is not the money, and then secretly subsidize restaurant meals for the wealthy.

The Cincinnati Beacon has asked all 8 of the members of council who voted for this expenditure and who are still serving if they knew about the gift when they voted for it.  After all, it was pretty well hidden.  To date, not one of the 8 has responded.  Ms. Qualls was not asked since she was not a member at the time although her office did contact the Beacon, merely stating that she was not on council then.

Thank you for reading (and printing from) The Cincinnati Beacon.