Unrealized Gains in Downtown Fayetteville

There’s a debate going on right now in the halls of Congress about how to tax billionaires. Apparently, they’ve done well in the pandemic. Democrats want to spend Trillions on infrastructure, but they can’t spend money they don’t have without increasing the deficit. Billionaires have a ton of money, but they are very good at avoiding taxes, often by “sitting” on their assets. Under the current tax code, billionaires aren’t taxed unless they “realize” a gain in their assets by selling them for more money than they paid to get them.

For example, Elon Musk holds a lot of Tesla Stock. His Tesla stock holdings can quintuple in value in a few years. Musk doesn’t pay a dime in taxes unless he sells some of his shares. Billionaires like Musk can maintain their extravagant lifestyles by simply borrowing against their holdings. This borrowed money isn’t “income.” The short of it is you get to be filthy, greasy, grimy rich and not pay taxes.

Sounds nice, doesn’t it?

There’s a big tax bill that’s coming due at the end of this year in Cumberland County. The money our local government receives from this bill will be used to pay for local infrastructure, specifically, a baseball stadium. At least, that was the plan…

Stalled Development

Your local government spent close to 20 Million Dollars to “stimulate” economic development downtown by building a parking deck for private developers. They called it “Project Homerun.” The developers were to take the free parking deck and develop on top of it. It was supposed to be the tallest building in Fayetteville and look like this:

FayBaseball

The idea was sold as an economic “win-win” for the taxpayers and the developers. Fayetteville could build its baseball stadium on borrowed money, without having to raise taxes on its citizens. The city’s debt would be paid back over time from increased property tax revenues in the area around the stadium. A fun new way to borrow money called a “Synthetic TIF” (Tax Incremental Financing) was utilized.

Years later, the deal still feels synthetic. The deck is just a deck.

It’s going to be a deck for the foreseeable future, but we’ve still got a stadium to pay for.

Tax Bill Coming Due

The developers increased the cost of Project Homerun multiple times over the course of several years of delayed construction. In return for increased taxpayer investment, the developers “guaranteed” they would pay a certain amount in property taxes back to the city. In 2019, the developers agreed to a “Minimum Assessed Tax Value” of $45,000,000. Click “Download” to view the Agreement:

If the developers don’t pay by December 31, they’re breaching their contract with the citizens of Fayetteville.

But that’s nothing new.

Secret Investors

In my view, this one comes back to the “Golden Rule” of American politics: whoever has the gold makes the rule, be it Elon Musk or our “partners” in downtown Fayetteville. This principle of course, is undemocratic, and we tend to hate it as Americans. Still, we know it’s around us, all the time. We call it “Good Ol’ Boy” or give it some other name, but we know its there. I’m a lawyer and a politician’s son. Trust me, it’s there. In this case, sadly, we’ve made it the centerpiece of downtown Fayetteville.

This deal and others like it are facilitated behind the scenes, where money, power and influence are wielded outside of the public’s view. When you try to dig into it, you get lots of documents. But the documents are amended more often than they are enforced. You never know what’s really going on. You’re not supposed to.

Perhaps the most egregious mistake (be it intentional or not) our local leaders made in this case was keeping the identities of the investors a secret. I’m convinced that the majority of our City Council doesn’t know who they are. We can’t find out through public records requests. I’ve tried. When I asked Nat Robertson (the Mayor at the inception of this project) on his radio show if he knew who the investors were, he responded: “I know by rumor only.”

When a government is not transparent, it falls on our free press to investigate and publish the truth. We screwed that one up too:

“City risks aside, the idea in some quarters that the Prince Charles people are getting over is not true. This is a true partnership, to include the Woodpeckers, where the partners are hand-in-hand and will rise or fall together.”

https://www.fayobserver.com/news/20190410/our-view-prince-charles-investors-city-in-this-together

Do you see the absurdity of this editorial from 2019? Who are “the Prince Charles people“? Did you even bother to ask?

It’s funny we tolerate the lack of transparency in our public institutions because we don’t in our personal lives. As a practical matter, would any of you continue to do business with partners you don’t know? How about if they never do what they promised? Of course you wouldn’t. Neither would the Mayor or the members of the City Council in their own affairs. But when it’s someone else’s money at risk, they’re more than happy to go into the back room, shielded from the press and the public meetings law under the guise of “economic development,” just to get the short end of another deal with another mysterious LLC.

Can we not do this, this time?

Say “No” For Once

Our development partners, whoever they are, have failed to meet their contractual obligations at each and every turn in this multi-year saga. Each time they came back to the well, our City Council and Mayor obliged. It’s a near certainty that these developers are going to ask for another amendment in a few months when their 2021 tax bill comes due. They will probably blame Covid-19, even though the contract required that they begin construction on top of the deck in 2019, before Covid hit the United States. But reality doesn’t matter, only public perception, and it’s hard to perceive anything in the dark.

It’s time for our city leadership to stand up to these folks, in public. Enforce the contractual rights of the citizens of Fayetteville. We paid for this mess. If the taxpayers can’t realize our gains, at least let us recoup our losses.

In the meantime, I’ll keep shining the flashlight as far as it’ll go, and I hope you’ll keep reading.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s