By JOHN HOWELL
The city received a nearly-half-million-dollar windfall
yesterday in the form of a check from the Small Business
Administration.
The money in 2003 taxes and the first two quarters of 2004
property taxes on the former 124-acre Rocky Point Park property
didn’t come as a surprise to Mayor Scott Avedisian.
Avedisian said yesterday that he had been going back and forth
with the SBA on the issue of taxes for some time.
What makes the payment unusual is that the SBA is a federal
agency and could have well argued that it is exempt from taxes.
Mark Hayward of the SBA said, however, that the SBA is the
receiver for Moneta Capital Corp., and, on that basis, it could
have been argued that the taxes were owed to the city. He said, in
the spirit of being a good neighbor, the SBA decided to make the
payments.
When the SBA sought court designation as receiver for the
property, it paid about $1 million in back city taxes.
This time the decision to pay may have more to do with the
threats of the City Council than it does with administrative
negotiations. Or, it could also be said that the two worked in
tandem even though that has not been the mode of operation between
the mayor and City Council President Joseph Solomon.
Solomon recently called for the tax collector to place the
former park property up for a tax sale. Such an action could have
put a cloud over the purchase and sales agreement between the SBA
and Vanderbilt Capital LLC, the company that plans to develop 350
units of residential housing on the property overlooking
Narragansett Bay, or another party should the court receive a bid
of $25,750,000 or more.
Solomon said he pressed for a tax sale knowing the city’s
fiscal situation, and because the SBA is not the sole owner of the
property, it was unfair not to have them pay their fair share of
taxes.
Vanderbilt, with an offer of $25 million, was the high bidder
in a two-hour telephone auction for the property held last fall.
But for the deal to be finalized, it must be approved by the
Federal District Court.
Last month the SBA filed two lengthy purchase and sales
agreements with the court for the property. The deal was split
into two agreements so as to give Rocky Beach homeowners, whose
homes are on leased land, the option to acquire the land. The
homeowners will have 180 days after court acceptance of the
purchase and sales agreement to commit to the offered price of
$11,250,000.
Placing the property up for a tax sale could have thrown a
wrench into the SBA’s efforts to recover loans made to Moneta
Capital Corp. and further delayed any future use of the park
property. As it is, Vanderbilt and its manager Arnold Goodstein of
Summerville, SC, have 18 months since approval of the purchase and
sales agreement to obtain the necessary federal, state and city
approvals for the project. At the point the required approvals
have been obtained, the property would be conveyed to the
developer. That point may not come until 2008, as the agreement if
approved by the court as submitted, gives Vanderbilt an additional
two years in options to obtain the regulatory approvals.
“Time is running and hopefully we’ll have a dispensation from
the court in a short time,” Hayward said when asked how long it
might be before the developer could begin the process of gaining
regulatory approvals. In addition to the Department of
Environmental Management and Coastal Resources Management Council,
the project will need City Council approval as well as the nod of
the Planning Board, Zoning Board of Review and the Warwick Sewer
Authority to name a few.
“It was probably in our best interest to pay the taxes,”
Hayward said after handing a $498,485.90 check to the mayor.
While the purchase and sales agreement addresses the issue of
taxes, placing a burden on Vanderbilt during the permit period,
Hayward said SBA would be picking up the tab on payments through
the second quarter of the upcoming tax year. After that, Hayward
wasn’t willing to venture what would happen.
Avedisian did not see the welcome influx of tax revenue as
providing any relief to items cut from the budget by the council
in an effort to lower taxes. He said under the City Charter he can
only transfer funds in the last three months of the fiscal year.
Although the $25 million offer for Rocky Point exceeded SBA
expectations, Hayward said the sum would not “make whole” what
Moneta Capital owes. In addition to the park, the SBA had also
loaned Moneta funds for a shopping mall in Cumberland, a horse
farm in Middletown, a jewelry firm and developments in the Virgin
Islands.
He called Rocky Point “one small slice of a very large pie.”
But for Mayor Avedisian, the check received yesterday was a
chunky slice of pie that wasn’t a guarantee.
