Monday, January 30, 2017

The gift that keeps on giving: Are city taxpayers still paying for donation to Art Museum?

City keeps moving $2 MM contribution forward; is mum on where the money’s going.
By Roger McCredie

In June 2013 city council passed Asheville’s first significant tax increase since 1995.  The resulting revenue was to be used for what councilor Gordon Smith called “aspirational” projects, including road repair, parking deck construction, affordable housing …  and improvements to the Asheville Art Museum.

The art museum’s share of the proceeds was to be $2 million, a contribution amounting to one-third of the shortfall amount identified by Mayor Bellamy earlier that year.  It was to go towards the museum’s campaign, begun in 2006, to raise $24 million for extensive expansion and renovation of its space in the Pack Place Arts and Cultural Center.

Going Forward

But that didn’t happen right away. In fact it hasn’t happened at all yet.  Instead, although the tax was levied and collected -- and apparently is still being levied and collected --  the city’s $2 million present to the art museum has been bumped forward in the budget each year.

Now it shows up in the city’s Capital Improvement Plan for fiscal year 2017-18 as an item to be funded by “debt financing.”

Which, observers say, begs two questions:
  1. Why does the city need to go into debt for that $2 million when it enacted a tax to pay for it three years ago – a tax that is apparently still in force?  And, 
  2. What source will the city be borrowing from to pay the art museum?  Followers of city finances say one source comes readily to mind:  proceeds from the $74 million worth of general obligation bonds that were approved by city voters in November.  (See below.)
Then there’s the timing.  The art museum has now begun work in earnest  to remodel and enlarge the Pack Place building.  That, in turn, follows several years of controversial actions by the museum. These include directly profiting from the city’s hostile – and possibly illegal – takeover of Pack Place, defaulting on two county Tourist Development Association grants, and attempting to sell naming rights to a corner of Pack Square that is public property.

Where’s the money coming from?

The city’s Capital Improvement Program, inaugurated in 2014, is a rolling budget plan supposedly designed to anticipate and provide for infrastructure maintenance.  It projects estimated costs for such projects five years into the future and is updated every fiscal year.

The CIP projections for the fiscal years 2016-2020 show a total of $149 million earmarked for spending during that time frame.  Of that total, $110 million will be unfunded and must be covered by debt financing. (See AU’s article “How Did the City Become So Indebted?”)  

In April of 2016 the city issued $46 million worth of limited obligation bonds to set against this figure, but that still left a shortfall of $54 million.  Presumably the $74 million in GO bonds just authorized would cover that amount, with some left over.

Not in the Bond Referendum... or is it?

A contribution to the art museum’s own capital improvement fund is not among the 61 designated expenditures listed in the three-bond package.  Conceivably it would be covered by that $20 million cushion.  For that matter, the itemized bond expenditures are essentially suggestions only.  The bond language says the moneys “may” be used for those purposes, not “shall” be.  A given bond may be used to finance any expense at all that can be made to “fit” into its category.  

City Hall and the Art Museum: A Love Story

Critics have for several years looked askance at the art museum’s cozy relationship with city government.

For instance, they say, the city ignored the fact that in 2012 the Tourism Development Authority had accused the museum of defaulting on $2 million worth of TDA performance grants by failing to attain fundraising benchmarks on its own.  (TDA later relented and extended its compliance deadline by six months.  Twice.)

In July of 2013, former mayor and city manager Ken Michalove caused what Mountain Xpress called “a brief ruckus” by asserting at a council meeting that then Vice Mayor Esther Manheimer and Councilor Marc Hunt, as well as City Manager Gary Jackson, had acted unethically by supporting the $2 million contribution to the art museum’s project. Manheimer and Jackson, Michalove said, should have recused themselves because they were personal friends of museum director Pam Myers and the Van Winkle Law Firm, where Manheimer practices, had once represented the museum.

Nothing came of Michalove’s objections.

In 2013 the museum entered into secret negotiations with the city for a separate, direct lease on its Pack Place space, in effect seceding from its Pack Place membership.  Then in April of 2014 the city engineered a hostile takeover of the Pack Place property and handed the museum the space vacated by the Coburn Earth Sciences Museum, which had been forced out by the prospect of having to pay higher rent.  The art museum expanded into the Pack Place common space as well, forcing Diana Wortham Theater’s ticket office to abandon the foyer and use a side entrance.

And a large metal sign reading “Asheville Art Museum” was placed over the stone inscription “Pack Place” over the building’s front door.

In the fall of 2014, Myers informed Manheimer by letter that the museum desperately needed money for its capital campaign.  She asked city council’s permission to cut a deal with State Employees’ Credit Union whereby SECU would give the museum $1.5 million in exchange for naming rights to the building’s Pack Square entrance.  It was to be called “SECU Plaza.”

But in fact the art museum, apparently acting on the premise that it is easier to ask forgiveness than permission, had already made the naming rights deal with SECU. On October 28 council gave its after-the-fact blessing, despite the Pack family’s reminder that George Pack’s bequest of the square property to the city contained an ironclad clause that it was to be used as a public park in perpetuity.

Meanwhile SECU, which had been unaware of any restrictions or controversy, rethought its position. “I guess our concern is, why this lack of transparency?”  SECU President James Blaine asked a reporter.   ‘Obviously there are issues that still have not been resolved. Is this a power struggle? Politics? What?”

And the SECU Plaza idea quietly went away.  It is not known whether SECU contributed to the museum on another basis.

Hello … Hello?

With the art museum’s construction project now in full swing and the appearance of the $2 million donation on this year’s CIP list, AU reached out to the city’s chief financial officer, Barbara Whitehorn, on January 21, as follows:

“ In 2013 the city passed an $.04-per-$100 property tax increase designed to finance several projects, including a $2 million grant to the Asheville Art Museum. Documents indicate that the city put this money in the CIP and has continued to nudge it over into the following year's budget; it is now listed in the FY 2017-2018 expenditures (see attached).

So the question is: since the tax levied in 2013 has been collected every year since, which would amount to several times $2 million, where have those proceeds gone, and why does the city keep moving the original $2 million Art Museum contribution forward?”

As of today (January 30) Whitehorn has not responded.
# # # # #

Sunday, January 29, 2017

Debt and Taxes for 2.2 Miles and Greenways

"Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes."
— Benjamin Franklin, in a letter to Jean-Baptiste Leroy, 1789
 
When it comes to government, it's not death and taxes, it's DEBT and TAXES. The City of Asheville faces $110 million in capital improvements projects that will be financed through municipal debt which will be paid for by city taxpayers, adding to our tax rate and tax bills. With increases in city fees and charges for all services despite population growth that has remained steady, what is fueling our debt and taxes?
 
 
As, mentioned in our last article, "How did Asheville become so indebted?" the City's capital improvement project budget saw a 148% increase in 2014. Analyzing the capital improvement projects before and after that time reveals the City's priorities, a 2.2 mile stretch of road for a project called RADTIP, New Belgium and Greenways.
 
The FY 2016 City budget reveals a plan to debt finance a little over $31 million for:
  • Greenways - $4,356,022 
  • RADTIP and Craven Street improvements for New Belgium -$26,831,964
(RADTIP is the 2.2 mile road construction project along the French Broad River in the River Arts District for which New Belgium was a catalyst. The Craven Street improvements and projects were part of the economic development deal the City made to incentivize New Belgium to choose Asheville. Some of the Greenways are part of the RADTIP project).
$31 million = 32 Percent
That represents approximately 32% of the debt that City taxpayers will be paying for.  These priorities, like Greenways, are no surprise when many of the City leaders (both present and in the past 4 years) are cycling enthusiasts.  (Our city manager, Gary Jackson, is a professional cycler with a local team and many council members are avid cycling enthusiasts).  Greenways were budgeted a mere $1.7 million in 2013.
 
 
The Real CIP
The remaining projects are the standard city maintenance and capital improvement projects such as affordable housing, sidewalk improvements, park maintenance and building maintenance, etc.  This is the real CIP.  That amount is $64 million which is what the City taxpayers would have been paying for if the City had not dramatically increased its Greenway budget and approved the 2.2 mile road project along the French Broad River.
 
The $64 million of normal capital improvements project is actually on pace.  In 2013, the City's total capital improvement project 5 year budget was $53 million, a $7 million increase over 2012.  Three years later, an $11 million increase is on track.  The CIP budget got way off track when the RADTIP project, Craven Street improvements for New Belgium and Greenways were added.
 
 
Ignored Projects
What is also disconcerting are some of the projects that have been on the books that have not been completed to date and instead keep rolling forward each year:
  • Asheville Art Museum - In 2013 the City raised the tax rate on citizens to raise $2 million for the Asheville Art Museum renovations.  This money has yet to be spent and is still on the books.  More on this issue in a later article.
  • Dr. Grant Southside Center Phase II was on the books 2012.  It was originally budgeted at a mere $350,000.  However, it disappeared after FY 2013 and has not been seen on a CIP budget for FY 2014, 2015, or the most recent 2016 budget.  It could have been lumped into what was then called "Southside Improvements".  It recently came back up in the headlines because it was one of the projects identified for the $74 bond referendum at a cost of $4.65  million.
  • Eagle Market Street has been on the books since 2014 at a budget of $3.9 million.  It keeps getting rolled to the following year.
  • Charlotte Street Improvements was added in 2014 and is budgeted to get some improvements to the tune of $1.2 million.
The City passed a $74 million bond package this past November which will cover the amount of municipal debt the city needs to finance these projects.  It had to do so because, in its own words, the budget was "at capacity" but why?  The necessity of the bond referendum was driven by the additional $31 million it needs to complete the greenways and road projects in a 2.2 mile stretch of road along the French Broad River in the River Arts District. Would taxpayers have approved of a bond package for that? With recent County revaluations showing 30% and more in property values, can taxpayers afford more? 

CAPITAL IMPROVEMENT PROJECTS TO BE DEBT FINANCED
NOTE: The following is a list of capital improvement projects that have been identified by the City as needed "debt financing".  These amounts are exclusive of grants, meaning even with getting grants, they will require financing by the City.
For full description of each project, see the City's budget, beginning at page 140.
Amounts to be debt financedPrior Years20162017201820192020DEBT FINANCING SUM: Not including prior years
14 Riverside Drive $34,365$205,046$0$0$0$239,411
Affordable Housing $0$750,000$2,000,000$0$2,000,000$4,750,000
Broadway Vaulted Sidewalk $250,000$0$0$0$0$250,000
Carrier Park Improvements $250,000$0$0$0$0$250,000
Cedar Street Bridge Improvements $0$280,000$0$0$0$280,000
Charlotte Street Improvements $0$0$0$200,000$1,050,000$1,250,000
Chunns Cove Bridge Rehabilitation $0$0$0$0$500,000$500,000
Clingman Forest Greenway$6,870$76,025$1,110,680$0$0$0$1,186,705
Craven Street Bridge$0$0$180,000$280,000$0$0$460,000
Craven Street Improvements$3,159,130$2,452,148$0$0$0$0$2,452,148
Craven Street Kiosk$2,036$206,000$0$0$0$0$206,000
Eagle Market Place$1,028,695$1,821$2,869,484$0$0$0$2,871,305
Field Turf Replacement $0$600,000$600,000$600,000$600,000$2,400,000
Fire Station #14$529,976$0$1,853,424$1,000,000$0$0$2,853,424
Fire Station #14 Engine $0$0$600,000$0$0$600,000
Five Points Roundabout $162,975$1,220,698$2,225,050$0$0$3,608,723
Fleet Replacement $3,000,000$3,000,000$3,000,000$3,000,000$3,000,000$15,000,000
French Broad River West Greenway $275,778$394,773$386,885$0$0$1,057,436
Greenway Connectors 0$24,000$0$0$0$24,000
Hazel Mill Sidewalk $0$85,000$332,000$0$0$417,000
Hendersonville Road Sidewalks$405,685$596,702$218,0000$0$0$814,702
I-26 Connector $0$0$0$0$1,000,000$1,000,000
Jean Webb Boatramp $0$0$6,500$0$0$6,500
Livingston Street $250,000$210,385$770,081$0$0$1,230,466
McCormick Field$344,253$170$71,863$0$0$0$72,033
Neighborhood Sidewalk Program$8,613$215,000$356,387$360,000$360,000$360,000$1,651,387
New Leicester Sidewalks Program $11,200$168,000$546,800$0$0$726,000
Asheville Art Museum Capital Improvements $0$2,000,000$0$0$0$2,000,000
Park Facilities Project $150,000$800,000$600,000$600,000$600,000$2,750,000
Parks Maintenance Relocation$108,745$80,000$866,255$0$0$0$946,255
Radio Infrastructure$702,430$3,930,000$1,509,570$0$0$0$5,439,570
Replacement Engine $0$600,000$0$0$0$600,000
Replacement Ladder Truck $0$0$1,400,000$0$0$1,400,000
RADTIP$1,280,926$4,179,389$9,310,239$3,488,691$2,887,363$0$19,865,682
SCBA Replacement project $1,050,000$0$0$0$0$1,050,000
Streets & Sidewalks Program$350,000$2,000,000$2,000,000$2,000,000$2,000,000$2,000,000$10,000,000
Swimming Pools $36,335$798,665$1,250,000$0$0$2,085,000
Thomas Wolfe Renovations $0$300,000$200,000$0$0$500,000
Town Branch Greenway $252,151$489,893$356,353$0$0$1,098,397
Underground Fuel Tank Repair $45,000$45,000$0$0$0$90,000
Velodrome Safety $0$500,000$0$0$0$500,000
Beaucatcher Greenway (new in FY 2016)  $989,484   $989,484
Debt Financing Totals $19,505,059$33,806,846$21,402,360$9,647,363$11,110,000$95,471,628
By Mari Peterson: Research and Data for Asheville Unreported

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