9/26/2006
Should Appleton sue The Big Picture for $1.6M?
This Wednesday, Appleton’s Common Council is going into closed session to “confer with legal counsel concerning strategy to be adopted by the body with respect to litigation in which it is or is likely to become involved regarding The Big Picture.”
Secret goings-on that we won’t know about for now – if ever. The discussion comes about surely because The Big Picture, http://www.bigpicturetheater.com/ Appleton’s own single, large-screen theatre, is failing. Perhaps failing to pay its bills, and perhaps failing to pay its taxes.
I don’t know about the Big Picture’s total liabilities, but I do know Big Picture Properties owes you and me (well, the city) $1.6M bucks.
And while we’re talking about it, I wonder when Richmond Terrace http://www.richmondterrace.net/, will be the subject of a committee closed session. (It’s the huge retail/residential building on the southeast corner of Richmond Street and Packard in Appleton.) That project still owes the city about $6.5M. The payments are current – but it must be deep pockets funding the expenses, as occupancy is almost non-existent.
Why do businesses want to borrow money from the city? Well, first of all, it’s relatively cheap money – especially given the city’s high credit rating. But more importantly, it gives the developer a property tax holiday for the full life of the loan – usually 15 – 20 years.
Why do cities loan businesses money for their construction projects in the form of Tax Incremental Financing (TIF)? TIF monies are supposed to be used to spur redevelopment – redevelopment in areas where real estate is relatively expensive – like aging downtowns.
Here’s the problem. When the city makes the decision to approve a loan – in the case of Richmond Terrace, a huge loan – the discussion is based more on what good the project will do for the city – and NOT on the absolute risk of the investment. Innately a political board – and not bankers, the Common Council cannot and does not always do a good job analyzing risk. And of course, in hindsight, that’s the real problem with the two projects mentioned here – both teetering dangerously close to failure.
Jo Egelhoff, FoxPolitics.net
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