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Monday, October 27, 2014

Stone Wins First Approval

Brewer lays on pressure, hinting it could still build elsewhere.

Posted By on Mon, Oct 27, 2014 at 4:00 AM

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Richmond City Council unanimously approved an economic development package worth $7 million for Stone Brewing Co. on Monday night.

The vote came quicker than some council members would have liked: Several balked at being asked to weigh the package before they had more details about the overall deal, which, in addition to the economic development incentives, calls for the city to invest $31 million to build Stone a brewery and restaurant.

But Stone officials pressured council to act quickly, saying they have a “plan B location” for their new brewery and hinting that they’d reconsider Richmond if City Council delayed its vote until next month.

“We have to know if we’re on,” Craig Spitzer, Stone’s chief financial officer, told council Monday afternoon during its informal meeting. “We want to leave here knowing that this project is moving forward at this stage.”

Six residents spoke in favor of the project. No one spoke against it.

Under the contemplated deal, the city would take out general obligation bonds to finance construction of the brewery and restaurant. Stone would pay that money back over 25 years in the form of lease payments.

City officials have presented it as a break-even proposal for the city. But the city’s financial adviser, Davenport, said in a draft analysis that the city faced a financial risk if Stone left the city after 10-15 years.

Councilman Jon Baliles, who represents the West End, said he understood Stone had deadlines related to its business needs. But, he said: “We have to answer to the people who elected us. … I’m just asking for a few more weeks.”

Stone’s chief operating officer, Patrick Tiernan, pushed back against the possibility of a delay, telling council he needed to begin site work in November. “I need an address to send $40 million worth of equipment to. … That’s our practical reality.”

Tiernan said he needed to start placing fermenting equipment “either here or our plan B location” in order to get operations up quickly enough to keep up for demand for his company’s beer.

The incentive package council approved Monday night is the first of 15 ordinances it will consider related to the Stone project, according to Lee Downey, the city’s director of economic development.

Stone said approving the first ordinance would signal to them that the city is serious about following through on the rest.

Councilwoman Cynthia Newbille suggested that if an issue arose with any part of the plan, council would be able to address it through future ordinances.

Saturday, October 25, 2014

Show Stopper

Theaters say they need help paying a $1.75 million tax bill they didn’t expect. But should officials have been surprised?

Posted By on Sat, Oct 25, 2014 at 4:00 AM

City officials and a representative of CenterStage’s parent group expressed befuddlement Thursday at receiving a $1.75 million tax bill for the Carpenter Center and Altria Theater.

They attributed their surprise to the intricacies of a complex corporate structure they set up to allow a nonprofit to benefit from federal historic rehabilitation tax -- a financial incentive program to encourage the reuse of old buildings. They’re asking the city to cover the bill.

Should the bill have been such a surprise?

The city and at least one member of CenterStage’s board and the Richmond Performing Arts Center -- the parent of the theaters -- ran into similar trouble 10 years ago.

The issue arose when they used a for-profit company to leverage the same kinds of tax credits to renovate the Maggie L. Walker Governor School. Maggie Walker was hit with a $1 million tax bill from the city. Like RPAC, the school said it was an unanticipated expense and couldn’t pay.

Bob Mooney - SCOTT ELMQUIST
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  • Bob Mooney

Bob Mooney, former chief financial officer of Ethyl Corp., was involved in both deals. In 2004, Mooney served on the board of the for-profit company that owned the school, Maggie L. Walker Renovation Limited Partnership. He brought the unpaid tax bills to the attention of the Regional School Board, according to an article in the Times-Dispatch.

In 2008, he was a key executive in the establishment of CenterStage, serving as its volunteer director and then chairman of the board until 2013. His signature is at the bottom of nearly every financial document created during the establishment of the organization, according to a review of documents on file at Richmond Circuit Court.

When the Maggie Walker issue came up, the city explained it was unable to legally waive the tax bill. It’s unclear how the city resolved the issue, but according to the city assessor, James Hester, the property was transferred to a non-taxable entity after the five years it took to recoup the tax credits.

As with Maggie Walker, a public school, it isn’t intuitive that the city-owned Altria Theater and Carpenter Center would be required to pay property taxes. But state law requires tax payments on public property when it’s leased to a for-profit company, in this case RPAC, a public-private partnership created so the project would be eligible for the historic tax credits. Neither nonprofits nor municipalities are eligible for such tax credits.

Mooney says in an email that the "facts and circumstances between the Maggie Walker Governor’s School are significantly different than those of the Atria Theater." Mooney says the primary difference is that the city owns the Altria and Carpenter theaters and leases them to RPAC, whereas the title to Maggie Walker was transferred to a private company.

On Thursday, Mayor Dwight Jones’ office signed off on the request that the city cover the theaters’ tax bill. The mayor’s chief of staff, Grant Neely, told a City Council committee Thursday that making the group pay its bill would lead to dramatically increased ticket prices and “deny access to a lot of folks.”

Asked if the city received poor legal advice in setting up the deal, Jones’ press secretary, Tammy Hawley, said the corporate structure was standard. She said a “change in the assessor’s office seems to be what led to the recent billings and a clarification on how the property taxes were to be treated under certain circumstances.”

But the city assessor took a different view, saying the requirement is plainly laid out in the state code. “It’s been there for 40 years for anyone to read,” Hester told a City Council committee Thursday.

City Councilman Parker Agelasto said he couldn’t understand “how one might think they wouldn’t be required to pay real estate taxes from a private entity.” The request for a financial bailout seemed to put the city in a position where it’s “skirting federal law,” he says.

Council members Kathy Graziano and Ellen Robertson appeared more open to the proposal, but made it clear they weren’t willing to make it an annual arrangement.

“I feel these entities might have been a little misguided in real estate law,” Graziano said.

Council is scheduled to vote on the proposal at their meeting Monday.

Thursday, October 23, 2014

Theaters Ask for $1.75M Bailout

CenterStage seeks more city money to pay unexpected property tax bill.

Posted By on Thu, Oct 23, 2014 at 9:00 PM

The parent group of Richmond CenterStage holds the largest delinquent property tax bill in the city.

Richmond Performing Arts Center, with a board chaired by Dominion Resources Chief Executive Tom Farrell, owes $1.75 million to the city in unpaid taxes for leases it holds on the Altria Theater and the Carpenter Center downtown.

Representatives of RPAC said Thursday they didn’t know they’d be liable for real estate taxes on the buildings when they leased them. RPAC was created as part of a public-private partnership to leverage federal historic tax credits to renovate the two theaters.

RPAC officials are asking the city to give them $1.75 million, which they say they’ll immediately give back to the city in the form of a tax payment.

Mayor Dwight Jones’ office signed off on the request. Jones’ chief of staff, Grant Neely, told a City Council committee Thursday that making the group pay its bill would lead to dramatically increased ticket prices and “deny access to a lot of folks.”

Dolly Vogt, the local head of SMG, the company hired by RPAC to operate the theaters, went further, telling council she couldn’t raise ticket prices or rents for the local nonprofit groups that use the space, such as the Richmond Symphony and the Virginia Opera.

“These nonprofits are already barely limping by,” she said. “This would be such a hardship on us.”

Style recently reported on a recent increase in rents, for which CenterStage's resident companies held a fundraiser in the form of a fall preview.

City Council members were lukewarm on the proposal. “I can’t understand how one might think that they wouldn’t be required to pay real estate taxes from a private entity,” 5th District Councilman Parker Agelasto said.

The management of the theaters is complex. The Altria Theater is owned by the EDA, while the Carpenter Center is owned by the city. Both are leased to RPAC, which hires SMG to manage operations and turns to the nonprofit CenterStage Foundation to oversee educational programs and fundraising.

Because both theaters are owned by an entity of the city, they wouldn’t be liable for real estate taxes. But state law requires tax payments on public property when it’s leased to a for-profit company, in this case RPAC. Neither nonprofits nor municipalities are eligible for the federal historic tax credits used to finance the projects.

Therese Evans, the senior vice president of RPAC, told council that when the group worked out its financials prior to both renovations, it never occurred to officials that they’d be asked to pay real estate taxes.

Neely, from the mayor’s office, called it a technicality.

Agelasto took a different view, saying the request put the city in a position where it’s “skirting federal law.”

Council members Kathy Graziano and Ellen Robertson appeared more open to the proposal, but made it clear they weren’t willing to make it an annual arrangement.

“I feel these entities might have been a little misguided in real estate law,” Graziano said.

The second highest delinquent real estate tax bill in Richmond is $264,000, owed by a company called Platinum Management, according to a list compiled by the city.

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