If you haven't got your hands on a print copy of Sunday's News & Record, steal one somewhere and read Greensboro Mayor Nancy Baracat Vaughan's article, City Handles Incentives Effectively. In it she writes:
"While economic development has been a major priority for the council, we have been careful to not use or take funding away from other city departments, programs or services. Instead, we have worked with staff to develop new programs such as the "Big Box" initiative, designed to lure new business to retail areas that need revitalization and that function as a loan instead of an incentive."
For starters: I'm not falting the "Big Box" initiative per say. After a lot of research I believe it to be a good program. Marty Kotis, a friend of mine and first recipient of a loan through the "Big Box" initiative borrowed upwards of $800,000 and landed a Roses Department Store right away in his shopping center at Cone and Summit. Now me being a liberal and all I'm not much of a fan of the folks who own Roses but it has worked out well for East Greensboro.
The problem with Mayor Vaughan's statement is this: The "Big Box" initiative did in-fact take away from other city departments, programs or services. The "Big Box" initiative was funded from the economic development bonds upon which the City of Greensboro is paying interest on each and every day at 2006 Bond Rates until said bonds are paid off in full.
Mayor Vaughan is correct that a loan such as the loan to Kotis Properties is not an incentive. Tyler Mulligan of the North Carolina School of Government confirmed to me that according to North Carolina law, loans made at market rates are not incentives.
The city will make approximately $53,000 profit on the loan to Kotis Properties its first year, and over $300K in the life of the loan. The interest rate is approximately 6.5% (compared to 1% for other programs). The loan is guaranteed by real estate and personal guarantees. And from Marty Kotis himself:
"The objective of the program was backfilling vacant big boxes and revitalizing areas, not necessarily job creation."
You see, Nancy likes to obscure the facts. Don't blame Marty, Nancy. He was defending you and himself when he wrote in in response to Amanda Lemhert's article a couple of weeks ago. You, Nancy, are the one who obscured the facts, not Marty. That's why I call Marty my friend for even though we don't always agree he doesn't obscure the facts.
Speaking of obscure, now lets do a bit of obscure math, shall we? Let's say that instead of taking Marty's $800,000 from the City's economic development bonds upon which the City of Greensboro is paying interest on-- money that could have been used for real economic development development-- the City of Greensboro had instead taken the money from the City of Greensboro's Rainy Day Fund which is purported to have somewhere upwards of $30 Million Dollars sitting around collecting less than 1% interest.
Now you do the math. Marty is paying 6.5% interest on money that the City of Greensboro is paying 2006 Bond Rates on vs Marty could be paying 6.5% interest on money that the City of Greensboro has sitting around in a savings account collecting what? 1%? If we're lucky. If that's not ineffective handling of the taxpayers' money then I don't know what is.
Stay tuned for Part 3 when Nancy Baracat Vaughan takes a flying leap.
Please continue reading Incentives In Greensboro: Part 3.
