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News-Sentinel.com Your Town. Your Voice.

Loan guidelines needed to keep projects moving, protect Legacy fund

The lobby of the Clyde Theatre could be packed with concert-goers once a proposed $5 million renovation is complete. But the lack of guidelines makes the timing of a requested $1 million loan from the city's Legacy fund uncertain. (News-Sentinel file photo)
The lobby of the Clyde Theatre could be packed with concert-goers once a proposed $5 million renovation is complete. But the lack of guidelines makes the timing of a requested $1 million loan from the city's Legacy fund uncertain. (News-Sentinel file photo)
Michael Barranda
Michael Barranda
Russ Jehl
Russ Jehl
Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.The Associated Press
Thursday, February 16, 2017 05:05 am
Sweetwater Sound founder Chuck Surack's proposed $1.5 million investment in the conversion of the former Clyde Theatre into an entertainment venue is welcome news indeed but should not obscure the fact that it may not happen without a requested $1 million from the city's Legacy fund — the timing of which remains uncertain because of the lingering lack of lending guidelines. "When we approved (a $2.5 million Legacy loan for) The Landing we said, 'We'll let this one go but make sure there's a process in place for the next one.' Deputy Mayor Karl Bandemer said he would work with us, and my expectation is the administration will formalize things and (the Clyde request) won't come before us until then," said City Councilman Michael Barranda, R-at large.

Satisfying Barranda's concern is important because six of council's nine members must approve use of the fund created through the sale of the old City Light electric utility. It's also proper, because the differences between the two loan requests indicate a lack of consistency, vision and oversight that should be addressed sooner, not later.

When council voted 7-2 to approve the Legacy loan as part of the $32 million needed to convert The Landing into shops, offices and apartments, dissenting Councilman Paul Ensley, R-1st, called it the "sweetest of the sweetheart deals" in part because of its developer-friendly interest structure. Although the deal called for an interest rate of 2.5 percent, Cincinnati-based Model Group would be required to pay only 1.5 percent per year, with the remainder due after 15 years.

But when the Legacy Joint Funding Committee meets Thursday to review Even Keel Holdings' loan request for the Clyde, 1808 Bluffton Road, the application will not include any information about interest at all — and suggests the $1 million loan be repaid not by the for-profit developer but by taxes generated by the project.

Ensley, a member of the committee that screens requests and forwards them to council for final approval, generally supports the project but is legitimately troubled by the omission since it will require him to cast a less-than-informed vote. The Legacy Investment Committee may correct that deficiency before the application goes to council, but that only further illustrates the need for guidelines and accountability.

When council approved the Landing loan, it also passed an amendment requiring the deal to be reviewed and finalized by the Investment Committee. Ensley proposed an amendment that would have required that final agreement to win council's OK as well, but that attempt, unfortunately, failed — meaning the committee has the authority to change terms previously approved by a supermajority of elected council members. That's not good.

There's a certain logic behind the details of each loan. Lowering the initial interest rate on the landing deal would ease cash-flow concerns in the early years of the project. And Ensley, normally skeptical of government incentives, correctly points out that Even Keel is not seeking a tax abatement on the Clyde project and that the loan could allow the project to qualify for a $1 million state Regional Cities grant.

"I don't see a better way," he said.

Maybe not, but it doesn't hurt to look.

Should loans be included in the "corpus" of the Legacy fund council members say they want to protect? What sort of risk should Legacy loans be willing to accept? When should interest be charged, and at what rate? Failure to address such questions will expose use of the Legacy fund to charges of arbitrariness, favoritism — or worse.

"You're asking the right questions," Councilman Russ Jehl, R-2nd, said. "These deals aren't put together with the public in mind."

That may be a bit harsh. Public incentives can be justified if they help produce worthwhile projects that might not have otherwise happened. They can also pay for themselves over time by creating jobs, economic activity and taxes. But if highly subsidized projects like the Landing and Clyde produce profits for their owners, surely some of that profit should be used to repay the loans that made the project possible in the first place.

This column is the commentary of the writer and does not necessarily reflect the views or opinions of The News-Sentinel. Email Kevin Leininger at kleininger@news-sentinel.com or call him at 461-8355.

  

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