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Saturday, June 14, 2008
The Beacon and David Crowley on FSQ and 3CDC
Posted by The Dean of Cincinnati
Dear Councilmembers of 2007:
I have not heard from any of you regarding my message of June 4th, copied below. Roxanne Qualls’ office, who is copied on the strand, did write to make sure I remembered she was not on council, but I have not heard from the rest of you.
According to The Cincinnati Beacon’s senior analyst, Michael Earl Patton, the ground lease mentioned in City ordinance 85-2007 identifies the City of Cincinnati as the party responsible for paying $2.5 million in costs to construct the facility housing Via Vite on Fountain Square. Is this true? If Patton has made an error, can you explain where?
We are eager to understand what happened with this situation.
Respectfully,
The Dean of Cincinnati
cc: Roxanne Qualls
Michael Earl Patton
Councilmember Crowley’s Response
Dean,
My understanding of this deal is that the $2.5 million was part of the original $40 million in the repairs to the Square. When the deal was initiated in 2003 3CDC paid the City $7.5 million of future revenues for the right to lease the garage and plaza space. In fact the restaurant and the parking garage revenues were part of the financing plan that is being used to pay off the debt. The City owns the restaurant and the garage but they lease them to 3CDC who then leases the restaurant to Via Vite.
I should also point out that the revenues from the restaurant which is being leased can be used by 3CDC for only 3 purposes. First to pay the debt service on the Fountain Square renovation, next to invest in capital improvements for Fountain Square and finally to pay expenses associated with that garage and restaurant operations such as parking staff, utilities etc. The money does not just go into 3CDC’sa bank account is has to be used for the Fountain Square Project.
The reason it was difficult to understand is because you would have to examine the original financial documents that were adopted as a part of the overall renovation of the square from I believe 2003, which referenced a future restaurant, though the name was not known at the time.
I hope that this information helps to clarify how the project for Via Vite is constructed.
David
The Beacon’s Response
Councilmember Crowley:
Thank you so much for your reply. I passed the information along to The Beacon’s Senior Analyst, Michael Earl Patton. He has an extensive library of source documents concerning the Fountain Square project.
You mentioned the year 2003 as when the deal originated. You said you thought documents would be dated 2003. Patton has documents dated 2005 which cover the issues pertinent—so we figured those would be more accurate than anything in 2003 due to the more modern date.
Patton discovered a document covering expenses for the Square renovation, and they do not include costs for a restaurant. Remember, the ground lease that began our inquiry was authorized in 2007.
Please read the information below. I’m copying the rest of council so everyone can be up-to-date, should someone else decide to help clarify this issue. Any help would be appreciated.
[The Dean]
From Patton:
=
I would like some clarification on this explanation of the restaurant cost since it does not seem to correlate with the documents below that had been signed by the city. See items 1), 2) and 3).
Mr. Crowley may or may not be correct in where the garage revenue may be used (the language in the garage lease appears to be contradictory), but the revenue from the lease of the restaurant is clearly 3CDC’s to do with as they please. See item 4).
1) The $7.5 million that 3CDC paid to the city is described in par. 9 of the Lease and Operating Agreement (Fountain Square North Parking Garage) dated September 16, 2005 and authorized by city ordinance 231-2005. That paragraph says that the city is under no obligation to use the $7.5 million for any expenses or obligations except as set forth in the agreement.
2) The above lease incorporates the Construction License Agreement, also dated September 16, 2005. That agreement specifies in paragraph 5.(f) of Schedule 1 that the funds for the overall development project are as follows:
1. $15,000,000 first mortgage loan from Fifth Third Bank;
2. $4,000,000 grant from the Owner (that’s the city—MEP);
3. $4,000,000 loan from the Fountain Square, LLC (that’s 3CDC—MEP);
4. $10,750,000 new market tax credits;
5. $4,905,612 from corporate/philanthropic contributions; and
6. $4,000,000 state - urban redevelopment loan
The overall amount is $42,655,612.
Curiously, the agreement goes on to state that the city “acknowledges and agrees that only a portion of these funds shall be used to redevelop/renovate the Asset under terms of this Agreement.” There is additional curious language in the documents as to what may happen with garage funds, but that is not the subject of the question at hand.
3) Exhibit B of the Construction License Agreement says that $3 million of the $4 million from the city shall be used for site preparation and the remaining $1 million will be used for concrete/masonry.
The project cost is broken down as follows:
1. $11, 537,520 for site preparation
2. $5,893,442 for concrete/masonry
3. $3,644,946 for miscellaneous finsihes
4. $5,228,592 for Mechanical, Electrical, and Plumbing
5. $7,500,000 for acquisition
6. $8,851,112 for soft costs
The total is $42,655,612.
4) It is the Lease and Operating Agreement (Fountain Square Above-Grade) which covers the restaurant. This is also dated September 16, 2005 and was also authorized by city ordinance 231-2005. Paragraph 5.A. of the lease states that 3CDC “shall have the possessory and beneficial ownership of all such items and shall have all rights to benefit from and utilize all depreciation with respect to same, and to retain all income derived from the operation thereof.”
So, the city agreed to pay $4,000,000 to 3CDC to be used mostly for site preparation work and a million for concrete/masonry work. There is nothing in these documents about city money to be used for a restaurant. That, as explained elsewhere, is specified in a separate lease agreement with Fifth Third that was signed over a year later. Further, 3CDC gets to keep all the money it makes from leasing the restaurant building (except for a token $100 per year that it pays the city for the lease of public land).
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15 Jun 2008 at 07:27 pm | #
Who’s the junior analyst?
15 Jun 2008 at 08:27 pm | #
Why, that’s you. We keep hoping you’ll graduate to the big leagues one of these days, suz.
(And before you start your rant, let it officially be known that I am a radical feminist who totally supports gay people.)
Now, back to the issue, please?
16 Jun 2008 at 09:28 pm | #
There is nothing about the City paying for the costs of the restaurant, because THEY DID NOT pay for the costs of the restaurant. Once again that part of the lease MEP found really speaks to the costs that the City as owner would normally incur but which they passed along to 3CDC as the entity with the leasehold interest to incur.
16 Jun 2008 at 09:32 pm | #
Fine, Anon. Now link to a single document which substantiates your claim. Just one. We’ve got a lease that says the City paid costs. We have Crowley saying it was part of the original $40 million, but then we have docs which show where that money was supposed to go—and it wasn’t for a restaurant.
Meanwhile, the City Planning department has been put on fiscal watch. Word has it that spending on projects is out of control, and that Council is the last place to turn for help.
16 Jun 2008 at 10:11 pm | #
The City committed 4 million to Fountain Square in the very early stages of planning. The City spent exactly 4 million on Fountain Square when it was all said and done, not a dollar more.
blah blah blah 100 million in revenue...ok you can make that argument even though I don’t buy it. The 100 mil you always refer to doesn’t deal with construction, but on-going maintenance.
At the end of the day the City lived up to its commitment of 4 million. Based on the increased traffic, tons of restaurants, and a cleaner and safer City I think that was a great investment.
Does anyone have any sense on the increased tax base from all these visitors that are downtown now that weren’t before. I bet the City has already made their money back.
17 Jun 2008 at 05:53 am | #
That’s an interesting premise, since the Planning Department has been put on fiscal watch, and since the City needs to install red light cameras and raise property taxes to make budget.
17 Jun 2008 at 06:54 pm | #
anon, the city still pays half a million a year for maintaining the square despite the 40 years worth of lost garage revenue.
You don’t buy that council gave up $100 million dollars in garage revenue? Well how much do you think council gave to 3CDC in garage revenue over the 40 year term of the lease?
And why won’t 3CDC or any council member that voted for the deal (or that pretends it was a great deal) give us an estimate or projection on what 40 years of Fountain Square garage revenue will be? Because $100 million is a conservative estimate!
Joe Grey told us that the parking fund took a hit on this deal and parking rates at all the other city garages will go up because of it. That seems like a hidden tax to me.
You 3CDC trolls can continue to stick your fingers in your ears and say blah, blah, blah,(apparently that’s the best you can do) but that doesn’t turn this into a good deal for the city.
New restaurants are a good thing, but you make a false assumption that the city couldn’t have used the $4 million and the 40 years worth of garage revenue to clean the garage, put new lighting and better signage in etc. And again there wasn’t any real public support for moving the fountain. It is our public square after all!
(Btw, when will 3CDC make the garage safe for the disabled. The fact that they spent $42 million to renovate the garage and failed to make it any safer for the disabled is damn near criminal, don’t you think?)
18 Jun 2008 at 10:52 am | #
# 5 Does anyone have any sense on the increased tax base from all these visitors that are downtown now that weren’t before. I bet the City has already made their money back.
No other way to put it but to say It would be crazy to think they have made their money back.
Tons of restaurants???? Mortons was already there, So was Palamino So was Pigall’s. So was the Brizilian
So that leave The ranch, Oceanaire, M&S Black Finn ( which replaced one that went out of Business) Skully’s ( replaced Redfish) Your favorite place Rockin Robins, and 2 others that have been 100 different things in the last 8 years.Nada ( David would have done that anyway)
So, I would say that CPD LOST more restaurants than it gained. Certainly more bars.
Look at how many condo’s that people overpaid for, that they either need to rent or forclose. Read the classifieds, or even craigs list. They can tell alot about a city. Look how many are for rent. Watch the rents dropping. Even in Gateway, my bellweather Loft has dropped in price 25 % since it went on the market. Still no takers. It’s the best one I have seen down there.
So no, they didnt make their investment back yet. Not even close. They cant even say what the investment was. It is safe to say that these “hokey” financial deals have hurt this city badly. In your own mind at 3cdc this may be progress, but you haven’t even come close to what was promised, and to saw that “ the city has already made their investment back is totallly delusional, buy any standard of measure.
Maybe in that investment they forgot about the attempt to build a really big wall. Being the people who built the wall, dont have a good track record, let history remind you, even the best walls can and will come down. Just as this one will. Count on it. Deals done in he shade, as big as all this is, are the first to see the sun. Too many people involved to keep it all a secret. Too many people have pieces as part of their duties, they are required to participate Arrogance makes these people mad, and when they finally get mad and see the deception, they are the first to turn. After all, they are also part of the people being screwed.
18 Jun 2008 at 09:33 pm | #
R - That’s probably the most intelligent comment I have ever read on this blog.
19 Jun 2008 at 02:07 am | #
Can you stick for fingers in your ears , say blah blah blah and chew gum at the same time?
“blah blah blah 100 million in revenue...ok you can make that argument even though I don’t buy it. The 100 mil you always refer to doesn’t deal with construction, but on-going maintenance. “
100 million for “on-going maintenance? I am sure you have a very good bad explaination for that one.
arrogance man. Too many people on a daily basis deal with it. They hold the anger inside, and then, little by little, they start sharing their experiences. Most of them are just good hardworking people, trying to do their best, raise their families, live a good life. Simple things and they are happy. The problem is, for people like you, they have morals, ethics. They begin to tell others. the others they tell, tell even more people. Good for them, bad for you.
Go run yourself thru the Mr Clean a few times. You’ll feel better. Mr Clean in the Fountain Square Garage. The one with the 100 million in on-going maintenance . The irony.... There is hope.
You read the NY times by any chance?