After the Show 

Questions raised in the wake of City Council’s $1.75 million tax bailout to Richmond CenterStage.

click to enlarge Officials for the Richmond Performing Arts Center say they didn’t realize they’d have to pay real-estate taxes, and the city paid their bill.

Scott Elmquist

Officials for the Richmond Performing Arts Center say they didn’t realize they’d have to pay real-estate taxes, and the city paid their bill.

City Council voted to give $1.75 million to the parent group of Richmond CenterStage last week so the theater group could pay its real estate taxes. Representatives of the Richmond Performing Arts Center said they weren't supposed to be billed.

The mayor's office, which endorsed the deal, called it a paper transaction that would cost the city nothing and have the sole effect of wiping out the group's tax bill.

But not everyone bought that. Council members Parker Agelasto and Chris Hilbert voted against the deal, saying there were too many unanswered questions to proceed.
More questions have surfaced since the vote. Here are a few:

1. Whose fault is this?

None of the principals is eager to assign blame. The city suggested that the bill came as the result of a change in the assessor's office. The city assessor, James Hester, noted that the tax bill was the result of a state law that's been on the books for 40 years. So who made this mess?

"CenterStage's lawyer should have seen this coming and provided for it and been aware of it," says Tom Kasper, a federal tax credit syndicator who's worked on projects in Richmond and across the country. "As City Council members are saying, how are we learning about this five years later? This is a fundamental aspect of doing these deals with nonprofits."

Full disclosure: Kasper says he met with CenterStage officials when they were setting up the deal but wasn't chosen to syndicate the tax credits.

He insists that in the right hands, the deal could have been structured to avoid the real-estate tax issue.

Who was CenterStage's lawyer? Legal documents that set up the structure of the tax-credit deal for the Carpenter Center on file at the city courthouse indicate they were prepared by Richmond-based law firm Williams Mullen. Asked Monday about the firm's involvement, a spokeswoman says she's unable to comment on client matters.

2. Does the transaction really cost the city nothing?

Over the weekend, Councilman Parker Agelasto alerted reporters that the deal approved by City Council last week will leave a $255,000 hole in the city's budget. That's because the assessor's office included the tax payment expected from the Altria Theater in his revenue forecast for the current fiscal year.

Because the city essentially has forgiven that tax bill, Agelasto says, it needs to find the money elsewhere in the budget.

The mayor's office wasn't impressed by Agelasto's concerns, calling his argument "theoretical." Tammy Hawley, the mayor's press secretary, says the change "can reduce surplus projections, but does not put us in a shortfall status."

3. Why did the assessment drop?

A Style reader wrote in to ask why the assessed value of the Carpenter Theatre had dropped from $26 million to $15.5 million. "That should help RPAC a bit more," the reader said, punctuating the email with a winking smiley-face emoticon.

The assessor says he recently made the change, but it's the value at which the theater should have been assessed all along. The property just never received any attention, he says, because it was erroneously classified as tax-exempt.

"It was worked out at the new cost," Hester says. "They didn't apply a depreciation equation to it" that would be applied to all newly renovated properties in the city.

Hester says the adjustment in assessed value is reflected in the tax bill the theater group received that the city agreed to cover.

4. Does CenterStage pay for itself?

The chairman of CenterStage's parent group, Dominion Resources Chief Executive Tom Farrell, told City Council that CenterStage is "probably the only public performing arts center in the country that pays for itself because of the way it's been operated."

In fact, the organization that he heads receives $500,000 annually from the city to support operating costs. The city also contributed millions of dollars to the renovation of both theaters the group operates, most recently $14 million for the renovation of the Altria Theater.

Jay Smith, a spokesman for CenterStage, says Farrell wasn't trying to say the theaters receive no city support. But he says there's some truth to Farrell's claim, at least when it comes to the $500,000 annual contribution from the city. Smith notes that shows at both venues generate $800,000 a year in city admissions taxes, plus $100,000 annually from taxes on food and drink sold in the venues and from the venues' business licenses.

"It is clear that the city is getting a great return on its $500,000 investment," Smith says.

Fair. But if you add in the millions of dollars that the city has put into the renovation of the theaters, Farrell's claim that CenterStage "pays for itself" becomes more difficult to justify. S

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