By Paul Goldman
RICHMOND, Va. — Without a corrupt flaw in state law, the Mayor’s Shockoe Bottom proposal would not be possible. What follows then has proved eye-opening when I explained it, whether to citizens, radio personalities or top state officials.
Moreover, WHAT I AM ABOUT TO TELL YOU IS NOT A SECRET AT ALL, indeed it is well known to key elected, business and other leaders of this city especially City Councilmen Jon Baliles, Charles Samuels and Chris Hilbert the apparent swing votes on the Stadium deal.
What is the corrupt flaw in state law?
Ironically it started out as reform! The Economic Development Authority, little known to the public but a household word to real estate and other developers, was created by the Richmond City Council by a 1972 ordinance. Back then, the EDA used the name Industrial Development Authority. But Mayor Wilder sacked the board and changed the name in part due to its terrible reputation.
Why did the state legislature pass laws allowing localities to create an EDA? They had complained about the need at time to move superfast to snare a development project. So they needed a way, on occasion, around the normal public competitive bid and other procedures.
State law therefore allowed Richmond to create an EDA as a legally non-city agency even though the Council picks all the board members, the Chief Administrative Officer runs the EDA for the Mayor and the EDA can’t issue any bonds without City Council approval. Legally, the EDA board runs the EDA operations on all its development projects as it sees fit, except as otherwise restricted in state or city or federal law, Section 15.2-4909. Technically, the EDA bonds are not city bonds. BUT THERE IS A CATCH!
THE CORRUPT FLAW:
If you insisted on the Shockoe proposal it being done fairly and above board according to normal competitive bid and other procedures, the Mayor’s plan is DCB, it can’t pass the “smell” test I used to help kill the 2005 Shockoe Plan when advising Mayor Wilder.
THEY WANTED A SWEETHEART DEAL. I said no way.
BUT BINGO! Using the EDA allows that happen…LEGALLY!
By making the Mayor’s plan “all or nothing” in terms of the Bottom, Boulevard, etc, this allows all the $hundreds of millions to be run through the EDA without using the city’s public competitive bid process or state public bid process. The EDA gets to dole out contractors by whatever means it can legally choose. .
Indeed, by using the EDA, it is impossible for any other development company to actually compete against the EDA for this key role.
Second, EDA Stadium bonds are NOT subject to the City Charter rules giving the people a right to vote them UP or Down if they so choose.
Third, since EDA bonds, standing alone, would make the project too expensive even for a sweetheart deal, the Mayor’ proposed in February to use the “moral obligation” bond concept cooked up by Watergate conspirator John Mitchell.
How does that work relative to the EDA bonds? The EDA stadium bonds have to be repaid with interest from projected project revenue. But this is risky to bond holders since if the EDA is wrong, the bonds would default. So the Mayor – others have used it too – wants the City Council to say the city recognizes a “moral obligation” to pay off the bonds, creating so called “Moral Obligation” bonds. While this “moral obligation” pledge is not legally enforceable, everyone in the bond business knows Richmond’s credit rating would go into the toilet if they ever let the EDA bonds default.
So while not “legally” enforceable, it is in effect a de facto guarantee.
SO HOPEFULLY YOU NOW SEE THE CORRUPT FLAW IN STATE LAW.
By using the EDA for a purpose never truly intended, you have created a “legal” way to funnel potentially $hundreds of millions of PUBLIC MONEY to a handful of private special interests with political connections to top city politicians.
OTHERWISE: Why use the EDA since it has no particular expertise in stadium construction oversight, the city’s chief administrative officer is doing all the negotiations, and the City Council has to okay the issue of the bonds?
The EDA is strictly a paper vehicle here to allow the $hundreds of millions to be doled out through cronyism to friends and family of the politically connected.
Paul Goldman is in no way affiliated with WTVR. His comments are his own, and do not reflect the views of WTVR or any related entity. Neither WTVR nor any of its employees or agents participated in any way with the preparation of Mr. Goldman’s comments.