Tuesday, March 8, 2011

CCR 03-08-11: Got Kool-Aid?

the Controversial Committee Report

“We don’t raise sacred cows...we just butcher them.”

For several months, readers have received CCR reports and ZAP!s regarding the Entertainment Center and the many issues still plaguing this voodoo financed concept. Readers have also seen several investigative reports by Brett Shipp of Channel 8, WFAA-TV. And Brandon Formby of the Dallas Morning News has chronicled the project over the last couple of years.

What seems to be a constant in all the reporting is the unwavering support of the project by the mayor, city council and city administration...regardless of the information or reports presented. Mercy, how much Kool-Aid does it take for these folks to drink before they overdose?

Since the CCR reports have been somewhat superficial (with regards to specific numbers and events) and “cat kicking” in nature, maybe the time is ripe to consider some cold, hard detail. The following is from the web site of a candidate for mayor of Irving. (Hint: He is not the incumbent that has been sipping the Kool-Aid.)



Joe Putnam

The proposed Las Colinas Entertainment Center is planned to be located on an eighteen-acre tract in the Urban Center adjacent to the new Convention Center.

It is planned to consist of a 600,000-square-foot five-level building with adjacent concessions and restaurants.

Originally proposed to be a 300,000-square-foot facility, present plans call for a 5,200-seat performance hall, 12 live music stages, 11 full-service restaurants (3 inside the building and 8 outside), 5 bars inside the building, 5 live music facilities, 22 box suites, 21 hospitality suites, 12 luxury hotel rooms, 7,500 square feet of retail space, and 1,200 parking spaces.

The center will be a city-owned facility, although record ownership will be in the Irving Entertainment Center Development Corporation.

The operation and management of the Entertainment Center will be by an entity called the Las Colinas Group, L.P. The City has entered into a 100-year lease with the Las Colinas Group, L.P., consisting of four twenty-five year terms.

The net rental to Las Colinas Group, L.P., is zero. Although the lease provides for a $1 million annual rental payment, the Las Colinas Group receives a property tax exemption of approximately $1.5 million a year.

All operating revenues belong to the Las Colinas Group. The concessions will be operated by companies owned by Billy Bob Barnett, the principal promoter of the scheme. The Las Colinas Group, L.P., itself contains involvement by Las Vegas gambling interests.

The operation of the Entertainment Center is dependent on, and primarily involves the sale of alcoholic beverages. The promoters require net alcohol sales of $47,745,374 each year from the bars and concessions to support the entertainment activities. That is 33% of all net revenue and 60% of all food and beverage sales.

In order to permit the unlimited sale of alcohol in the Entertainment Center, on October 22, 2009, the Irving City Council adopted an amendment to Irving's R-AB ordinance which exempted and removed the Entertainment Center, as well as the Convention Center, from the restrictions of Irving's R-AB ordinance, which limits alcohol sales to 40% of total sales.

It is the October 22, 2009, amendment to the R-AB ordinance which places our entire R-AB ordinance at risk and exposes Irving's neighborhoods to the likelihood that bars will be permitted throughout Irving if other mixed beverage permit holders demand equal treatment.

The City's share of the construction cost of the Entertainment Center is $200-$205 million. To date the City has spent just over $22 million for architects, engineers, consultants, and attorneys. And a recent audit has revealed that $4.2 million of that amount was spent illegally.

In order to obtain the $200-$205 million needed for construction, the City will have to sell $270-$290 million in bonds to account for reserve bonds and capitalized interest. The City's debt payments are projected to be $22.3 million per year.

In order to make the revenue bond payments, the City has identified the following revenue sources: 2% Hotel tax, $3 parking tax, 10% ticket tax, state and city sales tax, state alcohol tax, City alcohol tax, and state hotel tax. In addition the City will be required to pledge the entire 7% Hotel tax that currently funds the ICVB, the Arts, Historical Preservation, and the Convention Center.

A recent study has shown that the City has overstated potential revenues by over $11 million. It is inevitable that all or most of the 7% Hotel tax pledged to the Convention Center debt will be diverted to the Entertainment Center, which means the entire Convention Center debt will be paid by property taxes.

When there is a default on the Entertainment Center bonds, the promoter, the Las Colinas Group, will not be affected at all. They have neither assumed any of the debt nor pledged any of their revenues for payment of the bonds. They will simply keep operating. For 100 years.

And we can't even be sure we have the final figures. Originally, the City was going to contribute $120 million and the promoters $80 million. Now the City is at $205 million, and the promoters have dropped to $50 million.

The promoters haven't come up with their $50 million, even though they had a December 31, 2010, deadline to do so. Under the Development agreement, as a result of the promoters' default, the city Council was authorized to terminate the agreement with the Las Colinas Group. This is what should have been done.

However, on February 3, 2011, the City Council extended the Entertainment Center funding deadline to December 31, 2011, giving both the City and the Las Colinas Group more time to obtain funding. This City Council action was disgraceful. The project should be canceled.

While a few Las Colinas promoters might benefit from the project, citizens of Irving will see bars in their neighborhoods, loss of ICVB, Museum, and Arts funding, more taxes, more public intoxication and DWIs, and increased prostitution.

In fairness to the CCR readers, Mr. Putnam is also the lead individual of Irving Taxpayers Opposed to Illegal and Wasteful Use of Tax Payer Money that filed the law suit against the City of Irving regarding the voodoo financing for the Entertainment Center project. Of particular note at this stage of the law suit-game is that the Texas Attorney General has also joined the fray regarding the legality of tax funds to be collected by the city and pledged to the Entertainment Center. The matter is still in the Appeals Court for the Fifth District of Texas and briefs are still being filed. It may be months before this matter is heard by the Court of Appeals.

One has to wonder how incumbents running for re-election will be able to put a positive spin on what appears to be a train wreck that has already happened. Is it even possible?