Carrboro Arts and Innovation Center: Smart Public-Private Partnership?

Note: I posted this blog entry on my personal website on Sunday, January 4th, 2015, but opted to share it here as well at the invitation of OP editors. While I'm eager to learn what others think about the proposed Arts and Innovation Center and the numerous, interesting issues related to the proposal at hand, I'm not contributing this piece to start or stoke a debate between me and OP readers and contributors. I'm just throwing it out there as a thought piece.  My mind might change.  So might the proposal.  Who knows?  (It's Carrboro!)  Looking forward to reading other people's comments and ideas, and to hearing from residents, business owners, in-town workers and others at the public hearing or beforehand. The BOA already is getting really thoughtful comments by email as a result of the broadly-distributed notice of public hearing.  Hope you'll consider weighing in as well.

At Mayor Lavelle’s suggestion, the Board of Aldermen will hold a public hearing on January 20th to get feedback on a proposed “Arts and Innovation Center” and something similar to a synthetic Tax Increment Financing (TIF) scheme to pay for it. (I say similar, because in this case public financing would be repaid with new tax revenues generated by a not-yet-approved hotel, as opposed to the incremental increases in property tax revenues that a TIF or synthetic TIF implies.) Read about the proposal and the public hearing here.

Because the town would substantially finance and own the building, the partners who are proposing the project have built into their narrative the words “public-private partnership.” People like me love to use those words to signify cooperation, “win-wins,” and other non-partisan kinds of things. In all cases, however, the word partnership needs to be taken quite seriously.

In this particular case, however, town government has been asked to entertain and pay for a high-risk plan that it has had no substantive role in designing, and to consider it under some ‘urgent’ conditions that could set the town up for failure right out of the gate. As some Aldermen have noted, this doesn’t feel like partnership. It feels like manipulation.

Fiduciary Duties of the Partners

It’s fair to say that the Board of Aldermen have received some mixed messages from the ArtsCenter and Kidzu, the two non-profit partners that would benefit most from the deal.  Neither seems to be driving the conversation from a position of strength or certainty. I’ve heard from one ArtsCenter board member that he personally “doesn’t care” if the building gets built--the ArtsCenter can always just function in place. (This same board member told me that the ArtsCenter, which has a reputation for regularly operating at a deficit, doesn’t have a comprehensive business plan.) I’ve also heard from one Kidzu board member that she’d have no problem with the interactive children's museum owning a building outright, as long as the price is right. If that’s the case, why not start there, rather than with a complicated partnership with another non-profit that lacks a comprehensive business plan?

Both these comments are disconcerting to me. Non-profit board members have fiduciary responsibility for their organizations and their financial stability, but there is no evidence that these two boards have made the case internally—much less externally—that the proposal on the table makes the best business sense for them, their stakeholders and their long-term sustainability.

For our part, the Board of Aldermen has a fiduciary responsibility to the taxpayers. Part of this duty is to provide economic development financing only when there is a fully-vetted “but for” argument—meaning, but for public financing, the capital or economic development deal would not work, and the resulting opportunity cost for the town would be too substantial to ignore. In all cases, such an investment needs to be right-sized and, in my opinion, needs to ensure the economic benefits are shared by the people who need those benefits the most: people who need the good jobs, higher wages, increased property values, lower taxes, or infrastructure improvements generated by the development.

I hope the public hearing will help us all better understand the concerns and boundaries inherent in each partner's fiduciary duties, including aversion to financial risk.

What Should Be on the Table?

I also hope the public hearing will help us better understand the true (rather than supposed) benefits of the proposal, whether further conversation should be scrapped, or whether some other iteration of public-private financial partnership could be the better way to go.

Without additional public input from people independent from the proposed financial partners, I cannot support the proposal as is written now.  I think all of the following need to be put on the table as negotiable:

• Objectives of the project
• Location for the project
• Timeline for development, from raising the financing, to transition plans for partners, to breaking ground and opening the doors
• Budget parameters
• All available options for public and private financing—especially the latter
• Architecture, including choosing the design firm and determining the shape, size, and appearance of the building
• Tenants, financial partners, and standards for their sustainability, business plans, and board composition
• Ownership structure, and thus governance structure, for the building
• All pro forma calculations and assumptions
• Parking and infrastructure—and who pays for it

In other words, unless the public overwhelmingly demonstrates otherwise on January 20th, I think we should start the conversation from scratch with the ArtsCenter and/or Kidzu boards, and perhaps additional, stronger or more certain partners.

Some Other Questions to Consider

The notice of public hearing outlines some fundamental questions the Board of Aldermen has for the public. Here are some of my own:

• What should be the future of the Carrboro Century Center if the town chooses to participate in this venture? (Food for thought: Carrboro’s Vision 20/20 document which is considered “policy” on most days, can be found here. I’ve compiled cites pertaining to the Century Center here.) Bear in mind the town also owns an empty condo downtown that is valued in excess of $500,000.
• Currently recreation and parks investments constitute 7% of the town’s budget, or $2.2 million in 2014-15. This includes just over $500,000 in capital funds. Is there a trade-off that could help pay for the cost? For example, could the town make adjustments to its recreation and parks budget, such as outsourcing arts programming to the partners involved in the Arts and Innovation Center?
• The proposal asks us to borrow against future tax revenues generated by a not-yet-approved new hotel downtown. Are there other capital improvements that the town could pay for with that tax revenue that otherwise won’t get paid for? What does this mean for the individual taxpayer?
• The building would require a great deal of accessible parking, especially for parents with young children. Would a traffic and parking analysis demonstrate that another site would be better than the one suggested on the corner of Main and Roberson Street?
• Racial equity questions are looming large in policing, but also as relates to economic development strategies, including affordable housing and job creation. If this building and partnership concept were designed to meet the town’s goals to advance social and economic equity, what would it look like? Who else would be involved in the visioning?

I’m looking forward to hearing from the public on January 20th on these and other important questions. Ultimately I’m confident the town will make a good decision—but only with the guidance and good input from a diverse public. Please join in!