City attorney memo: Bull Street deal could be 'detrimental'

COLUMBIA, SC (WIS) - WIS has obtained a memorandum that shows Columbia City Council went against its own attorney's advice and voted to approve the Bull Street Development Agreement.

In a memorandum dated July 8 and addressed to Mayor Steve Benjamin and members of City Council, city attorney Ken Gaines writes he has an "ethical duty to advise that the Bull Street Development Agreement, as currently drafted, exposes the City of Columbia to significant legal and financial risks which could be detrimental to the City of Columbia."

On July 9, the City Council approved the deal in a 4-2 vote to develop the former home of the state's mental health hospital into housing and retail spaces.

A local study conducted found the project could pump more than $1 billion into the local economy.

The vote came after a 7-hour public hearing.

Leading the charge to approve the deal was Benjamin who issued a strong warning at the hearing.

"This deal will die today if we don't move forward," said Benjamin.

Councilwoman Tameika Isaac Devine called for a delay in the vote to give the city more time to investigate exactly how much money the city would be on the hook for and where that money would come from. It was a sentiment shared by at least one other council member, Leona Plaugh.

A Greenville development company helmed by developer Bob Hughes was awarded the deal.

Plaugh was especially concerned with how the city would hold up its end of the deal by paying $70 million towards the project. That sentiment was shared the day before in the July 8 memorandum from attorney Gaines.

"Does the City have a definitive approach or plan to provide the significant levels of funding required under the Development Agreement," asked Gaines.

"Most Development Agreements require the Developer to fund infrastructure, exact dedications of lands, pay fees to offset impacts, or perform in some way not ordinarily available to a local government under its zoning and development ordinances," Gaines wrote. "In this case, it is the City promising to provide the infrastructure funding, with the developer obtaining vested rights."

In conclusion, Gaines issued a warning, saying the city would be "liable for funding more than $50 million in as little as three years. We have not yet seen a plan that can provide these funds for the infrastructure the City is contracting to provide."

"For this reason, we do not recommend that the Bull Street Development Agreement be approved or made effective as currently drafted until the Council has identified one or more definitive funding sources with readily available funds to meet the City's obligations under the agreement, and is satisfied the potential liability for damages to the developer is an acceptable risk," Gaines wrote.

Councilman Moe Baddourah also questions the funding sources.

"We haven't identified the actual source of the funding and how we're going to fund this and now it's a liability issue for the city since we signed the contract," said Baddourah.

But city officials and Councilman Brian DeQuincey Newman says that's not the case.

"We could issue a general obligations bond," said Newman. "We have for some of the projects that are maybe tourism-related. We could look at our hospitality tax and our accommodations tax again. At one point, council considered tax incremental financing district as well."

In a memo we obtained from the bond attorney, they point out the city only issues between $4.5 and $5 million of general obligation bonds over the next 3 years because of other debt. State law does permit the hospitality tax to be used to finance tourism-related buildings or facilities and infrastructure.

"The reality is we use a combination of finances to accomplish lots of tasks for the city and this project," said Newman. "The Bull Street project is no different from any other development."

Still, council members Baddourah and Plaugh told us funding should have been secured first.

"We have to pay for the water and sewer infrastructure and then the parking garages and the baseball stadium," said Baddourah.

Baddourah also says the incentives for the developer, like the city attorney pointed out, put the liability on the city.

"The developer, the only way that he's obligated in the contract, he can build a 120,000 square feet building and receive a $50 million bonus," said Baddourah.

Meanwhile, Newman says the discussion for this project was not rushed because it had been ongoing since he joined council in 2010.

"A great deal of time has gone into this, and it was important to get this deal done to move the city forward," said Newman.

As for Mayor Benjamin, he released a statement late Monday evening to respond to the release of the memo.

"I find it regrettable that a member of City Council would anonymously, unethically and possibly illegally release a document in an attempt to mislead the public," said Benjamin. "I assume this is what we can come to expect during campaign season."

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