Exactly two weeks after approving a $50,000 allocation for a financial adviser to help them develop a local Barter Theatre branch, Mount Airy officials have given the nod to another $50,000 expenditure for the same purpose.
And based on discussion during a meeting Thursday night, this could be just the beginning of hidden costs surrounding the $13.5 million theater representing the first outside expansion of the Barter since its founding in 1933 in Abingdon, Virginia.
The Mount Airy Board of Commissioners voted 3-2 on March 1 to approve an agreement between the city government and Barter Theatre. It calls for constructing a 500-seat state-of-the-art facility on former Spencer’s industrial property downtown which is owned by the municipality and also will include a new hotel and upscale apartments.
Barter Theatre officials plan to stage at least 250 shows per year in Mount Airy, beginning in the summer of 2020.
But before that can happen, city officials must work out financing details for the project they have said will require borrowing about $7 million on a long-term basis to cover construction and other expenses.
The bulk of the $13.5 million cost of building the theater is expected to be offset by various tax credits reducing that to an estimated $3.6 million, but other funding will be needed for infrastructure and additional expenses.
“Salt in my wound”
The approval of the first $50,000 allocation for the financial adviser services came later during the same March 1 meeting when the Barter agreement was finalized.
Fast-forwarding two weeks, the additional $50,000 expense for those services was a surprise late addition to the agenda for Thursday’s night’s council meeting.
It was disclosed then that the initial $50,000 was for Phase I work, with the later allocation of the same sum needed for a Phase II segment.
It was approved in a 4-1 vote, with Commissioner Jon Cawley dissenting. He also had voted against the Barter agreement on March 1, due to concerns about the city’s ability to pay for the theater project without a major property tax hike — and his disposition had not improved Thursday.
In addition to being asked to designate $50,000 more for a financial adviser, the commissioners learned that the initial $50,000 cost for Phase I actually could be $75,000 instead. Yet some good news emerged with a revelation that the price range for Phase II is put at $25,000 to $50,000.
“We’re talking about all these costs, and every time we do, it rubs salt in my wound,” Cawley said Thursday night.
Legal expenses incurred by Mount Airy from a Charlotte law firm hired to facilitate the Spencer’s redevelopment also have greatly exceeded original estimates. And officials learned Thursday that more unannounced fees will be incurred for a tax credit attorney, among others.
Cawley said these kinds of added costs exemplify what he has feared all along regarding the Barter Theatre, “that I anticipate to see throughout this project.”
The North Ward commissioner charged that it has been plagued by a lack of planning.
“This is our problem,” he said in relation to hearing about some unexpected expense. “We always learn that at the 11th hour.”
Cawley said information about all the costs involved should have been known before the March 1 vote on the Barter pact.
“But we couldn’t wait.”
Adviser services explained
City Finance Director Pam Stone detailed Thursday night what the pair of $50,000 expenditures will provide.
Phase I of the financial adviser function basically will include assembling financial information about the city and its ability to repay loan or bond funds. The adviser will aid Mount Airy in working with the Local Government Commission, a state agency that must approve financing packages for such projects.
The Phase II services will involve making the Barter Theatre package attractive to lenders and helping to develop requests for proposals to those institutions, while coordinating schedules for required public hearings and additional key steps.
Cawley said it seemed to him that the Phase I services will include passing on to the Local Government Commission much documentation already generated by the city staff.
“They’re going to be using a lot of what we’ve done,” Stone agreed.
“That’s my point,” said Cawley.
However, discussion Thursday night indicated that much more will be involved on the part of the financial adviser.
“It’s going to be complicated,” City Attorney Hugh Campbell said of negotiating through a maze of governmental red tape and other requirements.
“Not just comparing Quicken Loans to Wells Fargo,” he added.
“It does involve more than just asking the bank (for a loan),” Stone said.
(City officials have discussed one 40-year funding plan to pay for the Barter Theatre project offered through Surrey Bank and Trust, involving a USDA community facilities loan. However, Campbell reminded Thursday night that a vote had not occurred on that option.)
No firm has been selected to provide the financial adviser services, with City Manager Barbara Jones telling the commissioners that conferences have been held with three prospective ones.
“We do have a company in mind,” Jones said, identifying it as First Tryon Securities in Charlotte.
Mayor David Rowe acknowledged the situation with the financial uncertainties near the end of Thursday night’s meeting, saying that much of the problem is due to the city government entering an unfamiliar realm with the Spencer’s redevelopment.
“When you’re in uncharted waters, sometimes you run into sharks, and I think that’s what we’re getting into with these additional costs.”
The mayor believes progress is being made toward what some have termed the most important economic-development effort in Mount Airy history.
“We’re learning the ropes the hard way,” he said.
“But we’re on the move anyway.”
Tom Joyce may be reached at 336-415-4693 or on Twitter @Me_Reporter.