On Greensboro's GPAC (Tanger Center) Contract with the Community Foundation Problems II

"...the CFGG on behalf of the Private Donors will have to obtain financing to cover their share of the design and construction costs for the Tanger Center.

It is understood that both the City and the Private Donors may need to use a portion of the Tanger Center as collateral for that financing.

It looks like the Community Foundation

is transferring the risk of donor default to a non profit 

with no means to guarantee any shortfalls to the lender

making the city the guarantor of the donor money, 

including the interest on the financing.

The CFGG doesn't even actually have $5 million yet.

It is agreed that the ownership of the Tanger Center will vest in the City once the financing repayment obligations of the Private Donors [Not the CFGG] are satisfied, which is expected to occur no later than 10 years after the opening of the Tanger Center..."

http://www.greensboro-nc.gov/Modules/ShowDocument.aspx?documentID=23165
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If there is a shortfall of donor commitments, my reading of the contract says City of Greensboro taxpayers will be on the hook for the money, or the bank takes the property.

I believe City Taxpayers are guaranteeing the donor commitments and the loan, which could/probably will cost more than the city's $30 million stated investment.

It could cost $1 million, or it could cost $10 million or more.

If the private donors can't make an interest payment, City taxpayers will make up the difference, or the lender takes the property.

I believe the private donors need the center as collateral, because otherwise, they would not be in a position to guarantee the money.  The contract appears to imply that city is guaranteeing the donor money and interest on the loan.

No one at the city to my knowledge has seen where the money actually is.

To my knowledge, no one at the city knows what the money is invested in, and now the CFGG is saying they can handle the interest payments, with no skin in the game other than their reputation.

Last I heard from the city, the Community Foundation has not supplied the city with the binding commitment agreements.

If the city commits to make up any shortfalls, without knowing where the money is and what it's invested in, without seeing how the CFGG is going to come up with the interest payments, without reviewing the projections of returns on the assets to pay over the time frame, the city will have done a great disservice to our community.

If the city is going to be on the hook for the donor commitments and interest on the loan the Community Foundation sets up, the city's finance department needs to underwrite the deal, and be aware of the financial information, or be accused of dereliction of duty, which seems to be a trend lately.

Previously;

Very serious problems with the GPAC (Tanger Center) contract between the city and the Greensboro Community Foundation

http://hartzman.blogspot.com/2014/02/very-serious-problems-with-gpac-tanger.html