At the end of the last year, local officials struck two deals with Nationwide Realty Investors to retire debt associated with the 2012 purchase of Nationwide Arena. The original deal was built on casino tax revenues that never materialized. The new ones rely on diverted property taxes and hotel revenue.
Emails obtained by WOSU through a public records request suggest there was a connection between the latest Nationwide Arena deal and Columbus Crew’s new stadium.
Last summer, weeks after plans were announced to build a downtown stadium for the newly-saved Columbus Crew soccer team, the project went quiet. Negotiations over a key parcel of Arena District land stalled.
That land was owned by Nationwide Realty Investors (NRI). Some in city hall clearly saw a link between that stadium deal and a new effort to refinance Nationwide Arena.
The Nationwide Arena Sale
To get a handle on this, let’s go back to 2012. The tax-payer funded Franklin County Convention Facilities Authority purchased Nationwide Arena for more than $44 million.
It was a controversial move after voters rejected a half-cent sales tax increase in 1997 to pay for an arena. But then-Auditor Hugh Dorrian insisted one thing above all else: local tax revenue won’t be used for the arena.
“Let’s say, as long as I’m alive, I’d strenuously object to such an option,” Dorrian said at the time. “That is not an option under the current agreement.”
Apparently times change.
I recently caught up with Dorrian, who didn’t want to be interviewed for this story. But Dorrian said that, because he wasn’t party to the new agreement, he didn’t want to “condemn” the deal. He added if it was good enough for his successor, it’s good enough for him.
Dorrian’s successor is Megan Kilgore. She took over as auditor in 2018, and she worked in Dorrian’s office when the city and county bought the arena. Kilgore says the deal has been fraught from day one.
“I can’t remember a time in my tenure here at the city and even in the private sector wherein there were not discussions about Nationwide Arena, and its capability and its solvency basically,” Kilgore says.
The casino revenues meant to pay down the $44 million arena have never come close to the initial projections, Kilgore explains. NRI has never received a payment for the facility, and the interest on that debt has only grown.
By the end of 2019, the total debt was more than $64 million.
Although the terms of the initial deal place the risk of default on NRI, Kilgore worries the city and county might be called upon in the future if nothing was done.
“The city and the county routinely had been called to the table to help right that ship,” Kilgore says. “And so an honest fear of mine was at some point if the city and the county and others were to do nothing, what would the city be called to do in future years?”
The Crew Stadium Connection
In an email from last July obtained through public records request, Columbus Mayor Andrew Ginther’s chief of staff Kenneth Paul hinted at a quid pro quo, connecting a new arena deal to the stadium land sale.
“Crew needs certainty as to closing of city transactions with NRI in order to stay on track” for stadium construction, Paul wrote. Later, about the city deal tied to the arena, he wrote that “our belief is that NRI may not accommodate if they do not have passage.”
At another point in the email, Paul said taht deals between NRI and the city or the convention facilities authority must be completed as a condition of closing the deal to acquire land for the stadium.
The anticipation is real. The new future of @columbuscrewsc is on the horizon in #downtowncolumbus. #crew96 #forcolumbus pic.twitter.com/R0unW5D7On
— Downtown Columbus (@DTColumbus) February 5, 2020
NRI vice president Brian Ellis declined to comment about a possible connection between the deals.
The mayor's chief of staff now says he was mistaken, noting at the time he believed city legislation was “critical for virtually all of the projects in the Arena District, including the stadium site.” He goes on to say that in fact, the arena financing deal wasn’t completed until months after the stadium sale concluded.
Kilgore rejects a connection as well.
“I think there’s a great misnomer that the conversation about Nationwide Arena only emerged as part of Confluence Park and the new Crew (stadium). It’s absolutely false,” Kilgore says.
What’s In The Deals?
NRI’s deal with the city restructures what are known as TIFs, which are districts where property taxes are diverted to a special fund, typically to reimburse public infrastructure investment. The twist is that NRI can claim up to $65 million from that fund to pay for the arena.
In effect, the company gets a rebate on its future property taxes in the arena district.
Chris Connelly, a public finance attorney with the Taft law firm, says that’s unusual but completely legal.
“This strikes me as a creative, legally sound, solution to a problem that was just going to get worse,” Connelly says. “It’s certainly not the norm in the TIF world, but the TIF laws are flexible enough to allow you to do things like this.”
Separately, Franklin County Convention Facilities Authority president Don Brown says his organization agreed to make a lump sum payment of $51.5 million to NRI in 2029.
“We struck a deal and the terms of that deal allow us to basically settle the loan for 50 cents on the dollar or there abouts,” Brown explains.
That still doesn’t sit well with Bret Adams, a local attorney and critic of the Nationwide Arena agreement.
“That wasn’t the deal,” he says. “They were supposed to be paid back with casino revenues they took that risk, and they took that risk that that loan could be in default, and it’s not fair to leverage the Crew Stadium and that’s exactly what they did in order to get that money back.”
The TIF restructuring wasn’t without controversy on City Council. President Shannon Hardin prepared an op-ed that was never published defending his vote, saying that “the Columbus of 2040 shouldn’t be saddled by unpaid debts of our forefathers.”
President pro tem Elizabeth Brown was one of three to vote against the measure.
“TIFs are supposed to use tax dollars generated from an area to improve that area and increase economic development, and I did not think that that deal met that standard,” Brown says.
Shayla Favor and Rob Dorans also voted no. All three are fresh off an election campaign in which their challengers relentlessly attacked the city’s use of tax incentives. Brown says that race had nothing to do with her vote.
Between the city and convention facilities authority, NRI could collect more than $116 million over the life of the deals.
