Winston-Salem Alliance helped secure

Winston-Salem Mayor Allen Joines signed an agreement with Billy Prim, owner of the Winston-Salem Dash minor league baseball team, to assign Prim’s real estate development company, Brookstown Development Partners LLC, options to purchase 38 properties in the immediate vicinity of the downtown ballpark site on Dec. 15, 2006, nearly a year before the city council approved a resolution to invest $12 million in the construction of a new home for the Chicago White Sox single-A squad.

Earlier this month, the city council unanimously approved a deal to secure an additional $15.7 million in financing to complete construction on the downtown ballpark after a lengthy public hearing. The Joines said the Winston-Salem Alliance did not own any properties that were eventually consolidated by Prim for the downtown ballpark project.

“We paid for some option monies to help the properties be assembled,” Joines said. “It was to try to assemble the land for the ballpark itself.”

Other members of council knew that the option monies had been paid out. “We let the city council know the ballpark was being proposed, and we were trying to assemble land for the ballpark,” said Joines.

“The option payments were made by the Millennium Fund and it was simply done to help secure the ballpark to prevent the city from having to pay for options.”

Winston-Salem City Councilwoman Wanda Merschel, who serves as chairman of the city’s finance committee, said Joines made her aware of the Winston-Salem Alliance and Millennium Fund’s activities regarding consolidation of properties in the area of the ballpark site on behalf of Brookstown Development Partners.

Merschel said she believes Joines informed her of the arrangement with Prim prior to Dec. 15, 2006. “I was aware that it was going on…. If the mayor said it was 2006, I’m sure he has the date correct,” Merschel said. “We knew the alliance was working as a gap financier. My recollection is the alliance never took title to those properties; my understanding is they took title to properties further up Brookstown, closer to Burke Street.”

Merschel said she believes the Winston-Salem Alliance owned properties at the corner of Brookstown and Burke and sold them to Prim’s development company.

Merschel said she had no reason to believe Joines benefited financially from any transaction with Brookstown Development Partners.

Merschel, who represents the city’s Northwest Ward, said she did not view Joines involvement in securing options on properties to assist in the development of the downtown ballpark as a conflict of interest. However, considering the mayor has voted on all proposals related to the city’s financial commitment to the downtown ballpark, she acknowledged that some could perceive it as a conflict of interest.

City Councilman Robert Clark, vice-chair of the city’s finance committee, said he was aware of Joines’ involvement in helping secure options on properties on behalf of the Winston-Salem Alliance prior to Dec. 15, 2006. Clark, who represents the city’s West Ward, said he understood the Millennium Fund had purchased two downtown businesses near the intersection of 4th and Broad streets to make way for another planned development that never materialized. Clark said those acquisitions were unrelated to the ballpark.

Clark said he didn’t view Joines participation in the securing of properties on behalf of Brookstown Development Partners as representing a conflict of interest.

“I don’t see it because we’re not in the development business and we’re not participating with Brookstown Development,” Clark said. “The Alliance is not in the development business. I’m sure they would like to get rid of [the purchased properties].”

City Councilman Dan Besse said generally speaking, the council was aware that the Winston-Salem Alliance was trying to facilitate the construction of a downtown ballpark in 2006. “I think Allen did a memo to that effect as an FYI that the Alliance is trying to help facilitate on a downtown ballpark project,” Besse said. “I think it’s been known for a long time that Allen’s day job is president of the Winston-Salem Alliance and from time to time, there maybe overlap between projects they’re working on and city projects. He needs to be very careful that those situations are disclosed and there is no private benefit to him.” Besse said he did not see Joines’ participation in helping secure properties for Brookstown Development Partners as a conflict of interest.

In 2002, Joines and the Winston-Salem Alliance introduced the Millennium Fund, a $45 million fund aimed at creating investment in downtown revitalization and supporting economic development projects throughout the city. The Millenium Fund contributed $1 million to the city’s initial $12 million investment and kicked in $1.3 million in the latest deal to help Prim secure an additional $15.7 million. Joines said he did not see a conflict of interest between his role as mayor and his role as president of the Winston-Salem Alliance “because there’s no effort to hide that from the city.” “It was done to save the city money to have to pay for options,” Joines said. Financial records of one transaction between a property owner and Brookstown Development Partners reveals that CB Richard Ellis, a commercial real estate broker based in Greensboro, originally secured the option in 2003 before assigning it to the Winston-Salem lliance. A check for $500 made out to the property owner reflects that the Millennium Fund made the payment. Joines said neither the Millennium Fund nor the Winston-Salem Alliance made money on the ballpark development project.

“The Millennium Fund and the Winston- Salem Alliance are both non-profit organizations that cannot make money on projects,” Joines said. “They are set up to assist in economic development projects like this one. We helped with the downtown research park, we helped with the Goler Clinic. Because these are non-profit projects, no one on the boards or the Alliance or the Millennium Fund can benefit personally from any project. It actually costs the organization money to do these projects.”

“Companies are formed for the purpose of buying land because if word leaks out, the price would quadruple overnight,” Helms said. “They buy it with assignable contracts because at that point in time, they don’t know if they’re going to build a development there.”

Helms said North Carolina real estate law does not require a broker to disclose to a seller if what kind of development is planned for an area at the time they option the property, but there are exceptions.

“If the person who’s doing the assembling is licensed as a real estate broker and they’re going to be doing the buying, they have to disclose that fact,” Helms said. Prior to the city council’s vote on Prim’s proposal June 17, a public hearing took place in council chambers. Due to the high number of speakers that signed up, the hearing was continued from June 15. Don Flow, chairman of the Winston-Salem Alliance, and Nathan Tabor, president of the Forsyth County Young

Republicans, both spoke during the public hearing. Tabor voiced his opposition to Prim’s proposal during his remarks to the city council.

“This issue is about personal responsibility,” Tabor said. “If this was a private business you would be bankrupt; you would’ve cost everyon their jobs.” After learning of the Dec. 15, 2006 agreement between Prim and Joines on Monday, Tabor said Joines vote in favor of Prim’s proposal represented a “clear and distinct conflict of interest.”

“I’m not accusing anyone of any wrongdoing at this time, but it’s the appearance of lack of transparency that’s troubling,” Tabor said. “There’s always so much distrust in our public figures, so let’s clear the air and show there was no wrongdoing here.” The public’s call for greater transparency and accountability led to the city making several revisions to Prim’s original proposal, City Manager Lee Garrity said. Garrity told the council during the June 15 meeting that Prim and his partners had agreed to increase the debt service reserve for the city’s loan to $1 million. Also, the city increased the interest rate charged to Prim to 5.5 percent; required the developer to pay 25 percent of net revenues from an office building to be constructed on the ballpark property; and stipulated that city funds could only be used for land payments and hard costs related to construction. The revised deal strictly prohibits city funds from flowing directly to Prim or any of his partners, past or present.

The revised deal also stipulates the city must receive title to the land set aside for a parking lot, and that arrangement supersedes a lien on the property by Regions Bank. The new deal requires public disclosure monitoring of how the city’s money is being spent and the formation of a citizen oversight committee. All payments of city funds must be approved by the citizen oversight committee and must go through a lending institution. The developer must make regular reports and those reports must be made public record. In addition, the developer must provide the completed stadium free of charge for two public events a year; Prim and his partners must commit to using local and minority contractors and vendors and they must recognize the historic Watkins Street neighborhood and Winston-Salem baseball legend Ernie Shore with displays and plaques.

Also, if Prim sells or moves the team, he will be considered in default on the city’s secured loan, Garrity said. In return for its investment, the city gets the title to the land immediately and will own the stadium at the end of the loan’s 25-year term. The agreement also stipulates that Prim secure a separate banking consortium loan of $15 million to go toward total construction costs.

That loan would be secured through stadium revenues and personal guarantees of Prim and his investors. Don Flow, chairman of the Winston-Salem Alliance, also spoke at the June 15 public hearing. He strongly encouraged the city council to continue the construction of the ballpark.

“If the financial system did not have a nuclear meltdown, we wouldn’t be here tonight,” Flow said. “Billy Prim is not a bad, greedy person that’s trying to take advantage of the system.

Instead of everyone trying to find fault and blame everyone, we need to complete this stadium for the future of our city.”

Karen Kovacs contributed reporting for this story.

‘We let the city council know the ballpark was being proposed, and we were trying to assemble land for the ballpark. The option payments were made by the Millennium Fund and it was simply done to help secure the ballpark to prevent the city from having to pay for options.’— Winston-Salem Mayor Allen Joines