The partners developing Electric Works face more obstacles to securing a $23 million loan guarantee from local officials than might be apparent at first – or even second and third – glance.
Josh Parker, a partner in RTM Ventures, has written a letter to the Allen County Fort Wayne Capital Improvement Board asking for it to co-sign a loan to keep the project alive, but a board member said Thursday that's not how it works.
“I think they're trying to shortcut the process,” Don Steininger said Thursday. “They're going to have to go through the process if they want to change terms of the agreement.”
RTM Ventures, the partnership developing Electric Works, has an economic development contract with the Fort Wayne Redevelopment Commission.
Based on that contract, the Redevelopment Commission last year asked the Capital Improvement Board whether it would promise to pay off $45 million in bonds to support Electric Works.
When the Capital Improvement Board approved that request in November 2018, it directed the Fort Wayne Redevelopment Authority to prepare to issue the bonds.
The total cost – estimated to be more than twice the amount raised – would be paid by the Capital Improvement Board using the income stream created from the 1% food and beverage tax Allen County restaurants collect.
Each entity's role is determined by legal restrictions that limit what the boards can do.
So, although the Capital Improvement Board would have to pay for it, the legal agreement is between the Redevelopment Commission and RTM Ventures. It's up to the Redevelopment Commission to request money from the Capital Improvement Board.
Parker, who addressed a Tuesday letter requesting the loan guarantee to Jim Cook, chairman of the Capital Improvement Board, said he and his partners aren't clueless about the process. They're trying to answer every question of everyone involved in moving the deal forward and said he doesn't see an advantage to dealing with each entity separately when they need an answer fast.
John Stafford, a consultant to the Capital Improvement Board, is no stranger to complicated financial deals, and this one strikes him as a doozy.
“I'm not sure Josh's (request) is even viable, based on the legal authority of the CIB,” he said Thursday.
Stafford spent hours Wednesday and Thursday meeting with lawyers to discuss the possibilities. It's both a legal and a policy question, he said, whether two separate agreements can be entered into, as Parker has proposed.
The developers' request is for the Capital Improvement Board to guarantee a $23.1 million loan they need to refinance their mortgage on the former General Electric property and pay invoices from architects, attorneys, engineers, consultants and others who have worked on the project so far.
Rubenstein Partners of Philadelphia has offered to make a $23.1 million loan prior to closing on the project if its money were guaranteed by the Capital Improvement Board. But, so far, Rubenstein hasn't committed to the deal, Parker said.
If the project's financing falls apart and the Capital Improvement Board has to pay out $23.1 million, it would obtain full ownership of the Electric Works property. An independent appraiser hired by the construction lender determined the property's value at more than $41 million.
Paying off $45 million in bonds or paying $23 million to the lender is an either-or proposition, Parker said. There's no scenario where the Capital Improvement Board would be called on to pay both.
Because of that, Parker sees them as two separate deals that can be spelled out in two separate contracts. That would alleviate the need to rework the existing economic development agreement with the Redevelopment Commission.
Local officials aren't so sure.
Nancy Townsend, the city's redevelopment director, wasn't available for an interview Thursday, but provided a statement.
Townsend said the city is committed to the terms of the amended economic development agreement now in place.
“The local public funding partners are collectively reviewing the most recent request from the development team,” she said. “It's not clear at this time what will happen next.”
Christopher Guerin, president of the Fort Wayne Redevelopment Commission, said his group has to coordinate its response with the Capital Improvement Board.
“It's their money and our contract, so both of those things have to align,” he said.
Guerin said a computer glitch had prevented him from seeing Parker's letter as of Thursday afternoon. As a result, he wasn't sure whether city and county officials would need to sign off on any contract changes – or whether drafting a second contract is viable.
But he was aware of some of the letter's contents.
“What they are proposing is a proposal,” Guerin said. “That doesn't mean it isn't subject to change in a lot of different ways.”
Acting in the best interests of taxpayers is the principle guiding the Redevelopment Commission and the Capital Improvement Board, he said.
Guerin doesn't believe the developers' deadline will force the groups to make a decision before they're ready.
“The developers have had a tendency, which I don't particularly appreciate, of laying it down,” he said, adding that they've presented “take-it-or-leave-it” scenarios before. “I'm not sure that's always the best approach when dealing with municipalities and institutional funders.”
The Redevelopment Commission could respond to Parker's proposal with a counter-proposal, Guerin added.
Parker said the developers are doing everything they can to work within the public-private partnership to bring the deal to closing. If that includes reviewing a counterproposal, they'll do it.
But, he added, “time is of the essence.”
“If there's a counterproposal,” he said, “we need to hear it yesterday.”