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Petition against performing arts borrowing gets OK from city

(Oct. 25, 2013) Launching off the success of the petition earlier this year against further paid parking, the local advocacy group Ocean City Taxpayers for Social Justice has been cleared to run a petition against the city’s plans to borrow $8.5 million for the construction of a performing arts facility at the convention center.

OCTSJ’s de-facto headman, Tony Christ – a local landlord and frequent critic of the city’s fiscal policies – received approval from City Solicitor Guy Ayres this week for the final language of the petition, which will oppose part of the ordinance authorizing the city to issue debt at the end of this year.

The approval came after several failed attempts by Christ, in which Ayres found the language of his proposed petition “insufficient to inform the voters” if the issue was, in fact, taken to referendum. The City Solicitor must verify any petition before signatures are gathered in order for the document to be legally binding.

In order to halt the bond sale, and have the matter go before the voters, the petition will have to garner 1,226 signatures, or 40 percent of the number of voters who participated in the last municipal election.

Late Wednesday, after several revocations, Christ was able to secure with Ayres language that would allow the petition to oppose only the $8.5 million in dedicated borrowing for the performing arts project.

Christ had previously submitted a petition against the entire $12.7 million bond authorization, but subsequently submitted a revision. Thus, contrary to previous reports, OCTSJ’s petition will not impact the $4.2 million in remaining borrowing assigned to other projects.

“We’re opposed in principle to the borrowing, but not to the rest of the projects,” Christ said. “The borrowing for the convention center, however, is the biggest chunk of the bond and the most onerous.”

The center will consist of a 1,200-seat, two-story theater capable of hosting full-scale dramatic presentations and concerts. Preliminary work was slated to begin this week.

The project was secured as part of a renewal of the city’s partnership with the Maryland Stadium Authority in operating the convention center. The state will be footing another $5.7 million for the construction.

One of the key arguments against OCTSJ’s position is that the project has a dedicated source of funding. The state authorizes a half-percent food tax on the city’s behalf, which can be used only for capital improvements on the convention center. The town takes in about $1.2 million in food tax per year, the exact amount it needs to cover debt repayment on the project.

However, Christ has pointed out, food tax revenue was down eight percent for August. If the city does not have enough in food tax to pay the debt service, it will default to using its general fund revenues, which consist mainly of property taxes.

However, the city’s annual food tax totals have been steady for several years.

“I appreciate Tony’s concern, but to hear him tell it, the sky is falling in,” said Peck Miller, a local developer and member of the city’s Cultural Arts Advisory Committee, which helped design the project.

“Yes, food tax was down slightly this summer, but we have over $7.4 million in food tax balance that we can’t spend on anything but this project,” Miller noted.

Given this dedicated reserve, it would be unlikely that the city would default on the project’s debt, unless the restaurant industry experienced a catastrophic collapse over a period of several years.

Regardless of the funding arrangement, Christ said the group was opposed in principle to spending public money on improving an amenity that already operates at a loss. The convention center required a $1.3 million subsidy this past fiscal year.

“It seems the rule is that if it loses money, it has to be publicly funded,” Christ said. “If this was a worthwhile project, why wouldn’t a private business done it already?”

The convention center is one of many operations the city maintains that does not make money in and of itself, but which creates an economic stimulus.

“We’ve seen a huge amount of development and economic growth because of things the city has done to draw people,” Miller said. “That’s the whole idea of a public-private partnership. There are things that can be done publicly that individual economies cannot.”

The larger debate, and likely the one which will determine the success of Christ’s petition, is the issue of whether or not the performing arts center will actually accomplish what it desires.

Earlier this year, the project came under fire after an internal spreadsheet from convention center staff was leaked, listing 33 events that would be adversely impacted by the renovation. Only nine of those events would be able to utilize the performing arts center.

With fixed seating, the theater will replace more flexible open-layout hall space, potentially hindering some large gatherings and trade shows. Groups such as the Epic Cheerleaders and the Maryland State Firemen’s Convention had expressed concern over the project, and local hoteliers and promoters said that the theater was too small to provide the size of bookings they required.

Since then, however, Convention Center Director Larry Noccolino has said that those issues have been resolved, and he is confident the performing arts center will be able to add new events without compromising existing ones.

But Christ is still skeptical.

“All of the goods of this project are entirely theoretical, but all the bads are finite,” he said. “That’s not the best way to do business.”

If OCTSJ’s petition is successful, it will throw a serious wrench in the city’s fiscal planning. The town is projected to have spent roughly $1 million out-of-pocket by the end of the year on the project, which it expects to reimburse with borrowed money after the bond sale. Further, it has already entered into contracts with design and construction firms for the upcoming work, which is anticipated to take until the end of 2014.

As such, City Hall officials have already come out with skepticism regarding the petition drive.

“Please listen very carefully when you are approached to sign this petition,” Councilman Doug Cymek wrote in a Facebook posting this week. “In the coming days you will hear the facts from the mayor and others that will be straight forward and to the point.

“Should Mr. Christ be successful with his petition it will undoubtedly be costly to the taxpayers of Ocean City,” Cymek wrote.

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