Since then-state Auditor Adam Edelen released his agency’s critical review of the downtown wrap project in December, much has changed.
The county last week sold $30 million in bonds related to the project, Bowling Green Hot Rods owner Jerry Katzoff signed off on paperwork that will formally make him the project’s developer starting Feb. 1 and numerous measures are in place to make sure the project’s past troubles are not repeated, officials said.
Issues with the project came to light last year as contractors filed liens against then-developer Mills Family Realty, saying they were unpaid for work on the wrap around the downtown parking garage known then as Hitcents Park Plaza and now named Stadium Park Plaza. Lawsuits followed, and MFR was removed as the developer. The state audit found the project was plagued by mismanagement, a lack of oversight by government officials, confusing and contradictory agreements among the parties involved and overspending.
Warren County Downtown Economic Development Authority Chairman Doug Gorman said the authority has reviewed its processes in light of the issues, and “every one plus has been taken care of.”
The bonds last week were sold to national brokerage firm Merrill Lynch, Pierce, Fenner & Smith Inc. Of the $30 million, most will be divided for three uses: about $25 million to pay off existing bonds, $2.1 million for any buildout needed for new tenants and $1.68 million to pay a settlement with the contractors. The remainder has been used for costs related to the bond sale.
Officials said they have addressed most of the issues identified in the audit, but comparing the project from when it started and now can be misleading.
“This is a whole different deal (that’s) hard to compare,” said authority attorney Scott Bachert, who since he was hired by the authority about one year ago has been instrumental in drafting the new agreements. What was once a $20 million-plus building project is now a development effort.
“Katzoff is now stepping into a completed building,” Bachert said, and the new legal agreements reflect that new reality.
As for the audit’s general finding of lack of oversight and confusing agreements: “I think some of the things the auditor has pointed out ... it is now clear as to who is responsible” for approving things such as disbursement requests, Bachert said.
Disbursement requests now need approval by both the city and county. “We (previously) had some confusion as to who would be doing what,” he said.
Now that Glasgow’s Alliance Corp. has also completed its term as the Tax Increment Financing District master developer, there are fewer agreements and contracts required.
“There’s only one agreement between Katzoff and the county,” Bachert said.
We “no longer have separate agreements with the authority and city that might conflict with lease agreements with the county,” Warren County Judge-Executive Mike Buchanon said in an email. The “agreement is clear and all parties acknowledge and clearly understand that bond money cannot be used for working capital or operating expenses.”
“The project now stands on its own,” Gorman said. “That is a giant thing (which) eliminates any conflicting agreements.”
Other changes include:
•Two representatives from Bowling Green city government – Commissioner Melinda Hill and Chief Financial Officer Jeff Meisel – have been appointed to the authority board. On Friday, Warren County Fiscal Court approved placing County Treasurer Greg Burrell on the authority board as well.
“This will provide better oversight and accountability over the project, and lends further transparency,” Buchanon said.
•Rent and TIF tax revenue will be collected by a new trustee – Old National Wealth Management. U.S. Bank was the previous trustee, and the audit reported that the trustee deposited funds into an incorrect account. Those issues and lower fees offered by Old National led to the change in trustees, Bachert said. Having the rent payments go directly to the trustee helps assure “strong accountability,” Buchanon said.
The rent and tax revenues will be used to pay off the bond with the city of Bowling Green agreeing to also guarantee that the bonds are paid off.
•The audit cited the Mills family’s inexperience as developers as a major issue. Officials have repeatedly touted Katzoff as an ideal and experienced partner. He and his Manhattan Capital LLC investment firm have a national portfolio that includes baseball teams, restaurants, apartment complexes and a mixed-used development in Reno, Nev., that, like Stadium Park Plaza, is adjacent to the baseball stadium in that city.
What Katzoff gets in the deal is a long-term payoff and a chance to enhance his current businesses in and adjacent to the wrap: Mariah’s restaurant, 6-4-3 Sports Bar and the Hot Rods, as well as any other businesses he may open in the building. He also has the first option to complete the unfinished portion of the wrap – a project he would have to finance and would then control.
Katzoff previously said he will finish the wrap, either with office space, residential development or a combination. When the bonds are paid off – now scheduled for 2038 – Katzoff will then own the wrap. The authority will maintain ownership of the parking garage. Katzoff will need approval from the city and county on the use of the $2.1 million available for tenant buildout.
“We have a high degree of confidence in (his) plans for the (wrap) project, and he has demonstrated a commitment to this community through his past investments, his current ongoing investments, and his planned future investments. We feel very fortunate that he has agreed to take over this project, and continue to invest in Bowling Green,” Buchanon said.
Katzoff “has the skill set and past experience to make this project a success,” Gorman said.