Funding funny business?

If you ask someone for money, does it matter if he gives it to you out of his left pocket or right pocket?
That's my quandary after reviewing a proposal sent April 28 by Frank Dame, executive vice president and chief operations officer for Clearwater Marine Aquarium to Clearwater City Manager Bill Horne. It involves a request for the city to give CMA $13 million to help finance construction of a new aquarium.
As you may recall, a hard-fought campaign took place last year over a Nov. 5 ballot referendum to allow the city to negotiate a 60-year lease with CMA for a 200,000-square-foot aquarium complex on the city hall waterfront property in downtown Clearwater. Voters approved it, although a lawsuit over the validity of the referendum wording was filed and later denied by a local judge. It's now undergoing appeal.
The referendum allowed CMA to negotiate a leasing deal with the city. Terms call for CMA to pay up to $7.5 million to lease the property via a portion of future ticket sales, and thereafter, CMA also would pay $250,000 to the city for up to 60 years.
So far, so good. But here's where the roulette wheel gets wobbly. Before last year's referendum and ever since, CMA has promised to replace city hall at NO COST TO TAXPAYERS (CMA's own bold lettering). Other CMA pledges state that no general revenue of the city will be sought, which seemed to a voter like me to mean the same thing.
Not so, it now seems.
To wit: In the letter to Horne — more than five months after passage of the referendum — Dame requested that the city “invest” $650,000 per year for 20 years to CMA out of Tax Increment Financing funds allocated by Pinellas County. TIF funds are increased revenues from property taxes that are provided annually to various cities in the county such as Clearwater for Community Redevelopment Agency.
Dame's letter to Horne went on to state that CMA intended to assign that revenue to a third-party financing source. That means the city would be obligated to pay $650,000 for 20 years — a total of $13 million — while CMA receives only $6.5 million of it. That's because the city's other $6.5 million would be sold to wealthy third-party investors with an interest in the collateral if the project fails. CMA would be on the hook for nothing.
I posed those concerns to Dame and he replied, “Since building an aquarium downtown will likely be a catalyst to stimulate additional redevelopment and activity for new businesses, it seems appropriate that the CRA, which is funded by the TIF, would contribute to our project which, in turn, will help to generate more tax revenues for the CRA.”
Dame added, “TIF money is not considered general revenue of the city.”
Maybe it's not good politics to clarify that non-general revenue funds might be solicited, but that strikes non-accountants like me as trickery rather than transparency. In my view, local taxpayers' money is local taxpayers' money, no matter what pocket it's taken from. My understanding throughout this process was that CMA was going to be writing checks to the city — never the other way around.
As to my questioning of the selling of the city's TIF money for 50 cents on the dollar, Dame said, “We want to use the TIF money received to pay for the construction between now and 2017. If we are awarded the amount requested and we receive it over a 20-year period, it is practical for us to assign the committed revenue stream from the TIF to a funding source, on a nonrecourse basis, so we can receive the present value of that revenue stream. Although it is less cash for CMA than over the term of the committed revenue stream, it allows us to fund the project during the construction period so we can open in 2017.”
That arrangement might be “practical” for CMA, but is it practical for other needy recipients of the city's TIF money? If CMA gets its way, the famous JG Wentworth TV ad that says, “It's your money, use it when you need it,” would have to be changed to, “It's your money, use it when we need it.”
I asked Horne in an email about all this. He wrote, “Regarding the CMA request to use city/county TIF funds at the rate of $650K per year for 20 years, we have begun the staff review that is required to submit a formal request to the county, but the city council acting as the CRA trustees have not determined what level of funding it is going to provide CMA based on its request.”
That begged my follow-up question as to whether taxpayers will accept the city agreeing to any deal involving the payment of money to CMA that will be sold for a fraction of its full value.
“I don't think the taxpayers will oppose the city giving CMA TIF dollars as long as it is a reasonable amount of funding,” said Horne. “What CMA has requested is not supportable for a variety of reasons. We have to amend the current city/county TIF agreement to allow county TIF funds to be used for CMA at all.”
Acting as trustees of the CRA, the city council in June unanimously voted in favor of CMA's request and directed staff to prepare the appropriate documents necessary to ask the county to modify the TIF restrictions and extend the commitment to 2034.
The idea of a super aquarium revitalizing downtown Clearwater is great. But if making that happen entails the city of Clearwater funneling millions of taxpayers' dollars to a supposed lessee that will put to use only half of it, then it will most certainly set off a “general” alarm.
Doug Kelly, a resident of Clearwater, is also a book author and successful freelance writer who's worked on the editorial staffs of state and national magazines. He's a member of several media organizations as well as the Society of American Travel Writers.
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