INC NEWS - Arts center funding raises concerns (Herald-Sun)

[John Schelp]

"It seems we're juggling a lot of balls together.
We're adding a couple more in and starting to reach a
point where I'm uncomfortable that we're going to drop
one." 
--Mike Woodard, Durham City Council


Arts center funding raises concerns
By Ray Gronberg, Herald-Sun, 25 June 2006    

A city councilman isn't happy about plans to take some
of the money needed for Durham's planned performing
arts center from a fund for downtown revitalization
projects. 

City Council's pending decision to take $200,000 a
year from the downtown fund and apply it to the annual
debt payments for the 2,800-seat theater is troubling
because it means Durham property owners will be
subsidizing the project directly, councilman Thomas
Stith says. 

The move would contradict the city's original intent
to draw tax money for the project only from an
occupancy tax on hotel rooms and could create pressure
to increase the annual allocation of property tax
revenue to the downtown fund, Stith said. 

"We said the occupancy tax would be the only public
money involved in it, and now we're potentially adding
monies to it from the public coffers," Stith said. "If
in fact we're going to do that, then we need to be up
front and disclose that that's what we're doing." 

Business leaders, however, are supporting the
allocation. The arts center is "exactly the type of
project that fund was set up to accomplish," said Bill
Kalkhof, president of Downtown Durham Inc. 

Kalkhof said city administrators consulted his group
before proposing the allocation and now have support
for it from DDI's board of directors. 

Board members believe that, much like the Durham Bulls
Athletic Park has done, construction of the arts
center will stimulate further private investment in
downtown Durham -- to the ultimate benefit of the city
and its residents. 

"There's a tremendous catalytic effort to these
projects that's not lost on our board of directors,"
Kalkhof said. "A number of people who sit on the board
are people making major investments in downtown
Durham. Those folks and the people financing their
deals are excited about this project." 

City administrators estimate that the money from the
downtown fund will enable them to borrow $2.6 million.
Their interest in tapping the fund emerged after the
cost estimate for the project rose over the last month
from $32.5 million to $44 million. 

Officials had the lower figure covered but had to go
back to the drawing board after engineers adjusted the
cost estimate to account for massive rises in the cost
of materials and labor. The estimate was also affected
by the city's decision to change the project's
construction manager, substituting Skanska USA
Building Inc. for Turner Construction Co. 

Skanska's staff of engineers and cost estimators
disagreed with Turner's about the effects of inflation
in the global construction market and about some of
the assumptions built into the design of the theater,
city officials said last week. 

Administrators believe they have the latitude to use
$200,000 a year from the downtown fund because they
hadn't previously accounted for the impact of the
follow-on phases of the American Tobacco project on
city revenues, Finance Director Ken Pennoyer said.
They also believe more money will flow into the fund
from parking fees and interest. 

That revision, however, has provoked questions from
the council, and not just from Stith. "It seems we're
juggling a lot of balls together," councilman Mike
Woodard said last week. "We're adding a couple more in
and starting to reach a point where I'm uncomfortable
that we're going to drop one." 

Stith also wasn't happy about the sudden move to
replace the construction manager, though he'd never
been happy with the initial selection of Turner, a New
York City firm. The move raised questions about
whether the city was "working efficiently and
effectively," he said, adding that he hoped
administrators came back to the council on Aug. 7
"with a clear financial understanding of what this is
going to cost and ? viable ways to fund it." 

Administrators also have to work out a title problem
with the North Carolina Railroad, which they recently
discovered owns a 10-foot-wide strip of land along the
northern edge of the project site, off South Mangum
Street, and the right-of-way of Vivian Street, a
public street that parallels the edge of the arts
center property. 

The problem surfaced after lawyers found that deeds
dating back to the 1880s gave the railroad a
previously unknown interest in the area. 

Railroad officials have said they're willing to give
up their stake in the project and give the city an
easement to Vivian Street if the city agrees to
restrict the use of Vivian to emergency vehicles and
pedestrians only. Its terms specify that no public
vehicular traffic would be allowed on Vivian Street. 

Administrators were willing to go along with that, but
the council so far won't take the deal. Members
believe full use of Vivian Street is needed to
accommodate drop-offs of children, handicapped patrons
and the elderly. 

"We have to have vehicle drop-off ability,"
councilwoman Diane Catotti said. "Think about the
Carolina Theatre when we have all the school buses
lined up outside. We don't want that on Mangum
Street."