The estimated price tag for a downtown event center has increased by $4.8 million over initial estimates in a draft report from the city’s financial adviser to Rocky Mount city staff.
In a prior report, the Chicago-based consulting firm AECOM Technical Services estimated the total costs for a 5,000-seat downtown event center would be $37.2 million.
But in a draft report submitted to city staff on March 12, the city’s financial adviser Davenport & Co. states that another $4.8 million would need to be spent on land, working capital, general contractor fees and contingency and project management costs.
Rocky Mount City Manager Charles Penny met with staff last week to discuss Davenport’s report, which outlined five different possible funding scenarios, including one that involved foreign investment in the project.
Penny said Davenport’s information is for staff use, and he said the event center funding options in Davenport’s report are only suggestions that he may or may not incorporate into a recommendation to the City Council.
“I might end up not recommending the project move forward at all,” he said.
Penny is scheduled to make a presentation to the council at 2 p.m. Monday at the Committee of the Whole meeting. The public is invited to attend, but public comment will not be taken at the meeting, which is scheduled to be held in the committee room on the third floor of the Frederick E. Turnage Municipal Building at 331 S. Franklin St.
Members of a citizens’ group that is questioning whether the city can afford the project, The Community Council, were not happy to learn the projected cost has increased.
“If the cost of construction has increased by as much as $5 million, that’s additional cause for concern,” said Skip Carney, who owns a local advertising firm. “The big question, though, is how will we pay for the new debt and operation losses? It sounds as though we’re looking at around $4 million per year in negative cash flow, and that’s going to impact every citizen in this area.”
He said he hopes that one of the options involves private investment by a company with expertise in operating such venues.
“If they can find a company like that, it would increase public confidence in the project,” he said. “I’m looking forward to hearing the details on the financing report Monday afternoon at City Hall.”
With grant money from PNC Bank, the city hired AECOM to conduct a feasibility study for a new downtown event center, which is proposed to bring in events such as concerts and conventions. AECOM is recommending a multipurpose facility with approximately 5,000 seats and an additional 15,000 square feet of event space for gatherings such as meetings and banquets.
Davenport’s draft report states that the estimated net operating loss, which does not include debt service, would be $624,000 in the first year, and decrease each year until it is $382,000 in the center’s 10th year of operation.
Davenport’s report lists different funding options that could help pay for the center.
One is EB-5 Funding, a federal program that provides a visa to foreign investors in exchange for an investment in a commercial enterprise in the United States. It requires a minimum investment of $500,000 in a Targeted Employment Area that creates or preserves 10 full-time jobs per investor for U.S. workers over a two-year period.
Another option is a public-private partnership lease, which is a partnership with a private developer who would agree to finance, build and maintain the facility in exchange for a long-term operating lease with the city.
The city could look to a banking institution to provide some or all of the funding for the project, Davenport’s report states. That could include a traditional long-term bank loan of 10 to 15 years, a short-term loan of seven years, a bank letter of credit backing a variable rate loan or variable rate bonds, or bank participation by purchasing bonds as part of a public sale of special obligation bonds.
“PNC Bank has expressed a willingness to discuss potential funding options,” Davenport’s report states. “However, due to the evolving regulatory environment and nature of the project, PNC is not able to commit to any of the above mentioned funding options at this time. PNC would like to continue discussing ways to partner with the city on the project funding.”
Installment contract financing is also an option, the report states. It requires the pledge of an asset being financed through bond issuance.
Another option, the report states, is special obligation bonds, which would be paid back with existing sales tax and occupancy revenues or other sales and use taxes associated with the center.
New Market Tax Credits might also be considered, the report states. They are issued through a federal program designed to spur new or increased investment in low-income communities. The program provides tax credit incentives to investors for equity investments in certified Community Development Entities.