Tracking code caldwell guardian

Wednesday, August 6, 2008

TVCC Project Raises Questions About Long Term Debt for Taxpayers

THE GUARDIAN attended the Chamber of Commerce Lunch at the College of Idaho yesterday and learned about the new TVCC campus to be built in Caldwell.

The plan to get this Oregon based campus up and running is a financial maze of convoluted ownerships and leases and lease purchase agreements. To the best of our knowledge here is the scoop:

1. The East Caldwell Urban Renewal District owns the land for the project.

2. Norfleet Development LC (Butch Gilliland) will build the building and improvements on urban renewal property and lease the building back to the urban renewal district.

Typically, these contracts have a clause that say taxes will be passed through to the lessee should the issue arise. There will be taxes due on the PRIVATE COMMERCIAL RENTAL building under Idaho Law. A very good deal for the developer, as he will get a guaranteed rent for his building, a guaranteed buyer, TAX FREE during the life of the lease arrangement.

3. TVCC will lease the building at a highly reduced rate while the urban renewal district (funded by property taxes) does the heavy financial lifting on the deal with full "lease/purchase" payments to Norfleet for the building and improvements.

4. At the end of the East Urban Renewal District life there will be a balloon payment to Norfleet for several millions of dollars for the balance due on the cost of the building and the improvements. A long term debt by any other name is still a LONG TERM DEBT.

5. Concurrent at the end of the urban renewal district life, a deed for the property, buildings and improvements will be handed over to the city of Caldwell. A PURCHASE WITHOUT PERMISSION OF CALDWELL CITIZENS. Caldwell will then become the landlord to TVCC.

6. Mayor Nancolas has assured THE GUARDIAN that this is under a simple annual lease and the urban renewal/city can walk away at the end of any years renewal time on the lease (known as a "non-appropriation" clause). However, the lease payments apply to the purchase price so this is in reality a "purchase". Think Canyon County Decider's and the Jerome property "lease deal" and the mess the Commishes found themselves in over this transaction.

Questions arise about how Article 8 section 3 of the Idaho Constitution applies to this project and long term debt for taxpayers. It appears that public assets are being pledged as security for the lease.

Who owns the land once the building is built?

If the developer owns the building then he is liable for property taxes under Idaho Law without regard to who occupies the property. (Same situation happened in Boise with some Fire Stations under the Brent Coles Administration.) The entity holding title is on the hook for property taxes unless both parties agree to have the "lessee" (urban renewal district, city of Caldwell, and TVCC) pay the taxes.

If there should be a default by either the urban renewal district or the developer, who will own the land/buildings/improvements?

This project has all the earmarks of the Ada County Courthouse on it. Property taxpayer's are going to be on the hook if and when the deal tanks.

The real question here is ...why is this not getting put up for a bond election? THE GUARDIAN can think of no school project that has been built without a bond election. Secondly, how does the yet to be constructed, but bond election approved College of Western Idaho fit into the scheme of things?

Right now TVCC, based in Ontario, Oregon, is fully funded by student tuition fees by local students. The plan is to keep it in that mode by the TVCC people. The murkiness of this comes into play with the financial arrangements and cross ownerships and lease underwriting by the city of Caldwell and the "alter ego" of the city, known to you as the Caldwell East Urban Renewal District.

It will be interesting to see the actual draft and final documents on this matter. Details will be provided when they show up.

THE GUARDIAN welcomes and will provide space to the "Decider's" of this project if we have any of this incorrect. THE GUARDIAN was offered the contract AFTER it is scheduled to be signed on the 27th of this month--which is far too late to shed the light of public scrutiny on a convoluted financial deal worthy of Fannie, Freddie, The Idaho Housing and Financial Association and the big city of Boise and Ada County politicos.


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