Seth Rosen / Charlottesville Daily Progress
Published: March 10, 2008

Second in a three-part series

When the Charlottesville Parking Center announced last year that it was looking to sell its valuable assets - the Water Street garage site and a surface lot next door - Charlottesville officials saw a potentially lucrative and important opportunity.

Before making a decision on whether to try to purchase the lots, city officials concluded they needed a better gauge of their value and help with determining whether it would be a smart investment. City staffers interviewed two consultant firms, and signed a $200,000 contract last August with Williams Mullen.

But that $200,000 contract never came before the City Council for a vote and the public was not made aware of the expenditure. While councilors endorsed the idea of a study in a closed meeting, they were not informed of the contract's price tag before it was signed.

City officials had little trouble paying for the hefty contract: They simply allocated the money from a "strategic investment account," a fund under the auspices of the economic development office that at the time had a balance of about $4.5 million.

The history of the parking center survey demonstrates the often opaque nature of the city's investment fund, a sector of the Charlottesville budget that has largely avoided the public microscope in recent years. Last spring, when many homeowners were clamoring for greater tax relief, the city stowed away in the account $1.65 million for use on yet-undetermined economic development projects - or more than 3 cents on the real-estate tax rate.

The account's defenders say that having $4.3 million set aside for development opportunities is critical to spurring investment in the city and to attracting and retaining large-scale employers.

"It's smart to have a certain amount of money reserved in order to respond to opportunities that might come along," said Aubrey Watts, the city's economic development director.

Yet with the city manager requesting $154,500 next fiscal year to bolster the fund, some in the community are demanding that its use be publicly vetted and that officials do more to explain why so much money is needed in the account.

"As a taxpayer, we all have a right to ask: 'What are you doing with our $4 million if you are not spending it in one year-'" Cheri Lewis, a member of the city's Planning Commission, said. "It shouldn't just be an endowment fund with our taxpayer dollars."

Charlottesville's mayor acknowledges that the management and use of the investment account could have been more open in recent years.

"There hasn't been as much transparency in the fund as there should be and there hasn't been enough public discussion of the size and intent of that fund," Dave Norris said.

Investment opportunities

The development fund was created in the late 1990s to ensure that even in the midst of an economic downturn the city would have funds available to help lure businesses and attract investments.

In the spring of 2002, SNL Financial became one of the first beneficiaries of the account when the company received a $2.5 million loan to retrofit a building just off the Downtown Mall. Without the loan, SNL would likely have moved to a site in Albemarle County or elsewhere in the country, depriving the city of a major employer and a source of tax revenue, Watts said.

The SNL deal is an example of how the fund is supposed to be used, officials contend. In the future, officials say they could draw down from the account to build public infrastructure, such as sidewalks and streets, or purchase parcels to assist a business relocate.

It's impossible to predict when someone might come forward with a proposal, officials contend, so it is important to have millions of dollars available. For example, when the city loaned Coran Capshaw $3.4 million to build the Pavilion, the money came from the development fund account.

"We don't know when someone is going to want to locate a business here or dramatically improve something, and we can't say we will wait to issue a bond or to get money," Watts said.

Councilor David Brown believes the city should put even more money into the account. In the coming years, the city will likely want to influence the type of development that comes to West Main and Water streets, Brown said, as well as attract businesses to the Martha Jefferson Hospital site once the facility moves to Pantops.

"We could sit back on all these projects and let the market do its work, but that's not proactive planning where you can get what the community wants," Brown said.

Lack of transparency

While the council publicly voted on the SNL and Pavilion deals, most of the expenditures from the fund over the past two years have taken place out of view of Charlottesville taxpayers.

The city has spent $175,000 to date on building a meeting space in the Market Street garage to be used by the Charlottesville Community Design Center and other community groups. But city staffers rather than councilors made that decision, and councilors were not informed of the final cost.

There was no formal discussion between city officials and councilors about spending $45,000 on an ongoing downtown parking study. And though council endorsed the idea of starting a technology incubator program, city staff withdrew $75,000 from the account for such a purpose without a council vote on the amount or project specifics.

One of the few projects that was publicly vetted sparked some controversy. At the tail end of a lengthy meeting last year, councilors gave the OK to spend $160,000 on a design competition for the city-owned and CPC-owned surface parking lots on Water Street. But the item was not on the council's formal agenda and, therefore, residents did not have the chance to read about or comment on the proposal.

The design competition proved popular, with 63 entries coming from across the state, nation and world. Councilor Brown noted that the process generated many creative concepts that make the site more attractive to potential developers.

However, others excoriated the city for spending so much on a contest that might not matter, because the purchasers of the CPC-owned lot will do whatever they want with it. If their had been a public hearing on the competition, critics say, there could have been debate over the merits of spending that $160,000.

"We have so much money that we have city staff committed to spending money [on the competition] without any public hearing or vetting of the process," said Rob Schilling, a former Republican city councilor. "I think it is totally inappropriate."

Watts insists that city staff has not tried to conceal the expenditures from the public and points out that the council does not review every city contract before it's signed.

"There was certainly no effort not to" be transparent, he said. "But maybe in the future we have to be a lot better at it."

Mayor Norris, for one, agreed that staff and council should be more transparent about how the investment account is used.

"I'm not opposed to using the funds, but we need to shed some sunlight on it," Norris said. "Otherwise, it does raise questions in peoples' minds about what are these pots of money sitting around City Hall."