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Park Theatre funding trouble
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The Park Theatre Group is still trying to secure a loan for renovation of the historic Main Street building. One option has fallen through, but group members are still hopeful.
“We had hoped the city could help secure funding,” said Sandra Haynes, president of Park Theatre Group. “It doesn’t appear they will be able to do that at this time. We are looking for other ways to secure the money we need. It’s not over.”
City officials have had legal counsel looking at two options — getting the loan for Park Theatre renovation, or guaranteeing a loan obtained by the Park Theatre Group.
They were told Tuesday night by legal counsel the city cannot do either, unless it adheres to state law.
“We looked for every opportunity to assist with the funding,” said city attorney Tim Pirtle. “However, there were two insurmountable objects in the path of the project as it is presently being presented. Those obstacles both arise from the same fact.”
The fact is Park Theatre Group hired APEX Construction to oversee restoration without using a competitive bidding process.
“If the city funds, or the city lends its credit to funding the project, state law requires bidding be done,” said Pirtle. “It simply cannot go forward in the way proposed without competitive bidding, both on the project itself and the funding mechanism.”
When a municipality wants to undertake a project, state law requires it to request bids and accept the lowest, but best, bid. That same law applies even if the city only wants to guarantee a loan.
Pirtle says MTAS (Municipal Technical Advisory Service) attorneys sent the city and Park Theatre Group a letter stating “in no uncertain language” what they want to do cannot be done without competitive bidding. The same word came from Tennessee Comptroller of the Currency, which oversees fiscal policies of cities or municipalities.
“If the project goes forward with city funding, or with city credit lent to the funding, then you will have to comply with those requirements of the law,” Pirtle said. “There is no exception. You simply can’t do it the way it’s proposed. We looked under every rock for any exception. It’s public money and it has to go through that process.”
“In order to do that, we would have to start over,” said Haynes. “We don’t want to do that, unless we can’t find any other way to secure the loan. We would lose thousands of dollars spent on an architect.”
If Park Theatre Group cannot find another means of securing the loan and agrees to allow the city to bid the project out, the city would have two avenues available for funding, says city administrator David Rutherford:
• Obtaining 12-year capital outlay notes with a low-interest rate. Debt service on $1.5 million is $160,000 a year.
• A bond issue, which can be done for up to 20 years, will have annual payments around $100,000.
In both options, Park Theatre would have to cover annual expenses, as well as pay debt service.
“Can it generate a revenue stream large enough to pay operating expenses and debt service?” asked Rutherford. “If it doesn’t, you will have to pay it out of general fund dollars. Do you want to subsidize the theater? You don’t have to answer me tonight. Just think about it.”
Rutherford says there is another “fly in the ointment.” If the city goes with a bond issue, citizens can call for a referendum to prevent the city from funding Park Theatre renovation.
“I wasn’t here when the pool fiasco went over, but some of you were and you remember,” Rutherford said. “If support is there in the community, we don’t have anything to worry about with the bond issue.”
The situation was not what officials wanted to hear.
“There’s nobody on this board who wants this thing to move forward more than I do,” Vice Mayor Everett Brock said of comments from other board members about how much they want to help Park Theatre Group with renovation. “The problem is funding. The way they want to do it is just not legal.”
If Park Theatre Group can figure out a way to secure funding for renovation without the city’s help, it can still move forward with the project. Because the property is owned by the city, Park Theatre Group cannot use it as collateral on a loan.
“That’s the problem we are trying to get around,” said Haynes. “The city owns the building and we cannot use it as collateral. We will continue to look for alternative measures for funding.”
The legal situation does not effect the city’s donation of $150,000 through the Industrial Development Board. If Park Theatre Group can secure funding on its own, those dollars will be allocated.
“We know officials see the value in this project,” said Haynes. “The project is not over. We will continue to look for ways to secure funding, as I’m sure the city will. I’m still optimistic we can get this done.”