Tuesday, March 31, 2009

Springfield City Council: All the Blame, Little Credit, and Tacos for Lunch

The buck stops at the City Council but the City Council gets no bucks

I had to miss last Tuesday's City Council luncheon so, after today's luncheon, I went to the Clerk's office and picked up the materials Internal Auditor April Lathrom passed out at last week's meeting.

Lathrom had reported, of the 53 recommendations made by the State Auditor, all but two have been addressed.

In her letter to the "Honorable Mayor and Members of the City Council," Lathrom wrote:

"The only two items that require further follow-up action are the recommendations related to the economic development policy on incentives offered to developers and improving the funding status of the Police and Fire Pension Fund. The City is in the process of developing a comprehensive economic development policy, and as you all know, the City continues to explore ways to improve the funding status of the Police and Fire Pension Fund."

The State's Audit Report of the City of Springfield had recommended:

"City Council should refrain from pledging taxpayer funds to assist developers in obtaining financing for projects. In addition, proposals should be solicited for services provided by developers, and agreements should be clear with regard to the use of restricted city funds. Further, City Council should review future development projects to limit the city's financial exposure."

The response from the Director of Economic Development Mary Lily Smith came last Tuesday (March 24, 2008). Smith said an economic development policy was being developed that would address the circumstances under which certain incentives should be used. The report issued by Lathrom also said the policy would be used to evaluate private developer's requests for public assistance.

In addition, The Chamber of Commerce and the Springfield Business and Development Corporation are working with the City to provide a "SWOT" (strengths, weaknesses, opportunities, and threats) analysis of the Springfield market from a "site locator perspective." The SWOT analysis is planned to assist the finalized policy currently being developed by the City.

Several issues were noted under the "Downtown Development" section of the State Audit Report, dated December 2007. Among them were some interesting facts about historical and current events on the Heer's deal.

> "The city pledged $1.5 million in public funds to assist a developer (Vaughn Prost) in obtaining private financing to purchase the Heer's Tower and subsequently paid approximately $3.3 million to purchase the developer's loan and foreclose on the property."

> "In the agreement with the second developer (Kevin McGowan)...if requested by the developer and approved by the Convention and Visitors Bureau (CVB), the city agreed to consider pledging a portion of the city's hotel/motel tax. Since city code requires the hotel/motel tax monies to be spent solely to promote tourism, it is unclear how the city intends to ensure compliance with city code if these funds are pledged to one developer."

The auditee's (City's) response to the 2007 State Auditor's recommendation included the following statements:

"The Heer's Tower was a glaring blight on downtown and its continued presence in that condition was an impediment to additional private reinvestment.

The pledge of City collateral accelerated millions of dollars of work being completed on the building and was made only after a third-party legal opinion stated unequivocally that the City had full legal authority. The City also ensured it had adequate security against the loss of the pledged collateral, including the right to ownership of the building....

...The City...made the decision after multiple opportunities for public comment and approval in open session...."

As noted in the September 12, 2007, issue of the "Community Free Press," the night the City Council approved the City's purchase of the bank loan and foreclosure on the Heer's building, there were 5 speakers. All of the speakers were opposed to the City Council's approval of the purchase of the bank loan and foreclosure.

On another note, the millions of dollars of work, done on the building due to City assistance in obtaining financing for Vaughn Prost for the project, may all be lost today. The Heer's building is not currently being renovated and has lost much of the window covering (mostly plywood and plastic) which once kept the rain and the wind out of the building, allowing the elements to erode any improvements Prost may have made to the building years ago.

In short, just as it was in 2006, 2007, and 2008, the Heer's Tower continues to be "a glaring blight on downtown." Does its continued presence in that condition continue to be an impediment to additional private reinvestment? Who knows? Currently, "the City" isn't talking out of that side of its economically developing mouth.

A recent "Springfield News-Leader" article made clear the sentiments of Director of Economic Development Mary Lily Smith today, and they have not changed much since the response included in the audit report. From the News-Leader article:

"If Springfield wants to compete with other cities for jobs, it must be able to offer some incentives, she said.

"Cities small to large offer basic incentives, like tax incentives and enterprise zones," Smith said.

She said the new economic development policy makes clear that the City Council has discretion in offering incentives.

"It's up to the council to say 'yes' if the project is of great benefit to the city or if the project wouldn't happen without the city's participation."

Smith is right. It is up to the City Council to say yes or no to "incentivizing" economic development.

Such incentives seem to have worked well for Heer's building redevelopment, after all.

But, let's examine our City Council's responsibility.

To use a Manleyism, "the experts," such as the Director of Economic Development, and other City staff, recommend for approval the projects they feel are "of great benefit." How convenient is it for the "expert" to then lay total responsibility for failure (or success?) at the feet of the City Council to whom the "experts" sold the project?

Clearly, if the buck stops at the desk of our all volunteer City Council, because they approve or deny the "expert" recommendations of City staff, with all their "expert" resources and prepared presentations, they are long overdue for a raise or, at the very least, prime rib rather than tacos.


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