Wells Fargo: GBAD Deal Too Risky

After countless hours and thousands of dollars spent on legal advice, the Greater Boise Auditorium District learned their bank was no longer interested in making a loan.

Wells Fargo Bank backed out of an agreement last month to fund a $24 million construction project that centered around a new ballroom in a building being constructed by the Gardner Company.

Turns out the big boys at Wells weren’t up for a $24 million risk on an unsecured loan to finance what GBAD sold to the Idaho Supreme Court as “a single year’s lease with annual renewals.”

The bankers offered to spring for 65%, but GBAD lawyers said they needed 100% or it was back to the drawing board. Idaho’s constitution requires a two-thirds approval from voters for debt that exceeds a single year revenues. To avoid citizen scrutiny (rejection) GBAD sought “judicial confirmation” for a convoluted annual leasing scheme with yearly renewals. They lost twice in Fourth District Court, but won on appeal to the Supremes with the lease deal which involved an unsecured $24 million loan from Wells through the Capital City Development Corp. which is Boise’s urban renewal agency.

Latest plan is a deal with U.S. Bank to sell some sort of bonds under the same terms the court approved, using the CCDC to act as landlord. They are hoping for a 3.25% interest rate over 20 years of annual leases with a “non-appropriation” clause that allows the District to walk away at the end of any single year lease.

“I cannot imagine any investor willing to lock themselves into bonds at 3.25% for 20 years, especially when the payback is unsecured risk that can be cancelled at any time,” said Frazier.

Since GBAD has no authority to levy property tax and the hotel-motel room tax is their only source of revenue (except user fees) Frazier reasserted his position that the cleanest method of financing would be voter approval at a bond election.

Comments & Discussion

Comments are closed for this post.

  1. Some people need a little prison time for conspiracy to commit fraud.

  2. chicago sam
    Jan 21, 2016, 8:19 am

    Projects that are unlikely to get a reasonable return on investment such as Librarys and Ballrooms which are only pushed thru without broad public support have a very difficult time getting financing. Nampa Library in another Gardner orchestrated venture had to pay substantially above market rates with a balloon payment at the end to even get financing. N o local bank would touch it as Librarys don’t earn a lot of money and repossession–what would that be worth? Same with Ballrooms. Wishful thinking and developer and banker profits should not be the driving force for these projects.

  3. Dam* the voters – full speed ahead!

  4. Rod in SE Boise
    Jan 21, 2016, 11:28 am

    If it really is a lease then Gardner Company should get the loan as part of the construction. Shouldn’t that be obvious to anyone?

    EDITOR NOTE–What is NOT obvious is that Gardner has “condominiumized” the building. That means the floors owned by BSU and GBAD/CCDC are TAX FREE. If Gardner owned the building they would have to pay property tax. At current rates $24 million would yield more than $400,000 in taxes for city, county, ACHD, schools, etc. As it is, there will be no tax revenues from these GOVERNMENT parcels.

  5. Bieter Bieter
    Jan 21, 2016, 3:56 pm

    The bank is doing us a huge favor, thank you!

    This article from last week predicting the sky will fall if we don’t spend spend spend.

    Did you see all the big money names in that article? Wow they’ve got a lot of big ideas for our money. They should simply fund these ideas themselves… they’ve got enough money. I wonder why they won’t do it?

  6. Yossarian_22
    Jan 21, 2016, 5:55 pm

    This is good news! The jobs that might be created by Team Dave’s GBAD are a pittance to what we need. It’s all novel niche downtown daydreaming crap like the JUMP (Jacked Up Municipal Playtoy}. It’s a giant romper room for making up visions of flying appliances that will dazzle and delight the senses. I wanna know where the foodbank door is down there. Maybe they will invent a replicator and convert all the recycling waste into croissants. I’m still waiting for the landing pad for the Space-X rocket that comes next month. Dave will be out there with his signal flags, waving it in.

    I’ve lived here for all of my 53 years, and I remember when this town thrived and it didn’t need any fancy shiny buildings to create jobs or get stuff done. We had sound money and honesty and good business relations. We all got along. Now, we are told that we have to wait for the Google class to deliver our future. You can’t eat electrons.

  7. If Mr Tom Gardner wanted the project to proceed he could guarentee the loan and take the risk.

    The fact that Mr Tom Gardner will not take on the risk it proves that there are two significant parties that do not think the deal will cash flow. Thus they want the tax payers – via public entities (BSU and GBAD) to take ALL the risk.

    I read today that Mr. Tom Gardner was said to have spent $425,000 doing a study on another project just down the road. That is just BS. No developer is going to spend that kind of cash to do a study. A good developer could get a good evaluation for less than $50,000.

    The more I hear about Gardner the less confidence I have in him or his company.

  8. Bieter Bieter
    Jan 23, 2016, 12:37 pm

    Has the Idaho center ever made money? It’s getting old enough to tear it down and replace it. Quick, someone do a study and make promises to the Nampa mayor of a shower of new tax money for him/her to roll in.

  9. PLEASE call your legislators and tell them to OPPOSE any and all LOCAL OPTION tax efforts.

    If you want to pay more taxes rather than having a local option tax just write your checks and send them to Mayor Dave!

    Also the ONLY people that gain from urban renewal are the builders like Tom Alquist.

    In the short term the public pays the price because not tax money is collected. In the long term the city finds it needs higher levies to support the developments and to keep them viable going.

    Either way the public pays and the developer runs off with the money.

Get the Guardian by email

Enter your email address: