That inspired another letter to city council:
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Hello Folks,
Since writing to you yesterday with some questions about the memorandum of understanding on the performing arts center, I have come to better understand the ownership issue and it is even more discomforting.
If I have this right, the City will not own the center for the first ten years while it is used as collateral for the bank backing of the donor contributions. Then, after ten years, even if all has gone according to plan and ownership successfully transfers to the city, the city can only further transfer the center by giving it away to the non-profit; no other options.
I hope it is as obvious to you, as it is to me, the kind of financial jeopardy to which that scheme exposes the citizens of Greensboro. Should something go awry in the first ten years -- cost overruns, donor contributions fall short, loan default by the non-profit or some other fiscal speed bump -- the people of Greensboro will be over a barrel: Either come up with more money to ameliorate whatever problem may have arisen, even if it was the responsibility of other parties, or lose ownership of the center and our tens of millions put in it. Even if we successfully pass the ten year mark and the center transfers to the city, the center would be encumbered in a way unlike any other city property: ours, but not to do with what we will.
This alternative strikes me as simpler and more fair: Have the CFGG and the PAC donors, especially those whose names will supplant Greensboro in the naming of the facility (even though we are its largest financial contributor), have them get a bank letter underwritten by their assets instead of "borrowing" public property to underwrite their financial promises. The Community Foundation of Greater Greensboro has $146 million in assets, why must it put public property at risk to back its donor pledges instead of using its own massive assets? If that is a risk they are unwilling to take, we should ask why.
Yours,
Roch
Correction: This post has been updated with the correct amount of the donor pledges.
To my knowledge, Tanger is the only donor requiring ten years.
ReplyDelete" a separate non-profit will be created that will own the center for the first ten years and put it up as collateral for the donor pledges."
ReplyDeleteHave I not been saying for months that a separate non profit would have to be created? The CFGG Articles of Incorporation prohibit CFGG from donating the money directly to the City of Greensboro. CFGG can only donate to other non profits.
That's true, you have been saying that. Remind me, what exactly keeps CFGG from donating directly to the city? Is is something particular to CFGG's charter or non-profits in general? I'm interested because the plan is for the newly-formed non-profit to eventually turn the building over to the city and I'm wondering if that kind of gift would be allowable when donations from CFGG are not.
ReplyDeleteI believe CFGG can't use their assets to collateralize the loan.
ReplyDeleteThey appear to not even be able or willing to use the donor's pledged assets.
If a financial institution ties the facility to the ability of CFGG to pay the bank back, and doesn't, the bank will put a lien on the property, and the memo says the city can't sell to anyone other than giving to property to CFGG.
Why not build the thing, and then sell it for $40 million?
City would make $10 million.
The agreement prevents it, from my reading.
Looks like tying the loan to the property puts taxpayer monies more at risk than $30 million.
It sounds like it would be very easy for the taxpayers to end up on the hook for more than we bargained for.
ReplyDeleteAgreed, George. It looks like the deal, as proposed, would make taxpayers ultimately responsible for the donor's $35M with the only alternative being to walk away and turn the whole thing over to the non-profit, forfeiting the City's $53+ million.
ReplyDeleteI feel sure this is so bad that it will not get approved without significant modification.
For non profits to donate to governments the non profit generally has to be set up with the intention of donating to government. For example, a police benevolent society might fund the needs of police department(s) without any issues as its articles of incorporation would establish that as its purpose.
ReplyDeleteThere are times when CFGG can give money to the City of Greensboro, say for instance, funding an arts program for children or something of that nature but as I understand their articles of incorporation funding the building of a PAC comes outside of what gifts to government they are allowed to make.
In looking through old CFGG tax records I have never found a donation to any government entity despite worldwide donations. That is, unless the Kennedy Center for the Performing Arts in DC or Arlington is government owned but I think it too is a non profit. CFGG gave them a quarter Million.
Hence, as I predicted months ago they form yet another non profit to fit through the loop hole.
Now the CFGG could fund the PAC without forming a non profit but then they and their doners would loose the tax free status of their donations. And we all know that ain't gonna happen.
Of course, the real reason Mayor Vaughan still continues to entertain the idea of a PAC is because Roy Carroll holds her hostage.