DAUPHIN COUNTY
The Harrisburg Midtown Arts Center is in financial straits, but a federal stimulus incentive could put the project on track for an August completion, co-owners of the center said.
HMAC last year defaulted on a $667,000 mortgage with Susquehanna Bank, according to legal papers filed by Susquehanna in Dauphin County Court.
But the owners still plan to open two music halls, an art gallery, film office/studio, restaurant, community pool and retail area for musicians to sell merchandise, said lohn Traynor, a co-owner of the facility at 1110 N. Third St. Traynor said he and the other owners have put more than $1 million of their own money into the project because they believe in the Harrisburg arts community.
On April 6, the Dauphin County commissioners gave the owners another chance to finish the arts and music centerwhen they approveda$2.2 million tax-exempt bond incentive for the project.
The bond allocation is enough to finish the project, and now Susquehanna is willing to refinance its loan with HMAC, said K. Jameson Lawrence, an investment banker who helped put the deal together and became a co-owner of the center in February. Susquehanna had issued HMACs owners a sheriff sale's notice earlier this year, but onApril 14, the bankpostponed the sale, according to records obtained from the Dauphin County prothonotary's office.
Traynor announced the project in early 2007, and it was to open in the fall that year. HMAC is in the former Police Athletic Building, the original part of which dates to the mid- 19th century.
Ballooning costs delayed the project substantially, he said. For example, the partners had estimated it would cost between $75,000 and $125,000 to install an elevator in HMAC, but it will cost $270,000, Traynor said. The owners also have to spend extra money to maintain architectural standards enforced by the city's historic district.
Originally, the owners thought the project would cost $2 million, but it will be more than $4 million, he said. The arts center will not only be ahub for the arts, itwill provide sorely needed jobs in the community, he said. Traynor said HMAC will employ between 40 and 60 people.
To take advantage of the stimulus tax savings, earlier this month the commissioners declared the county a recovery zone, which gave the county the power to dole out roughly $3.2 million in taxexempt bond opportunities to private entities such as HMAC.
The commissioners gave HMAC 120 days to obtain bonds, said August "Skip" Memmi, executive director of the Dauphin County Department of Community & Economic Development. If HMAC doesn't get the bond(s) within the 120 days, then the allocation goes back to the county, he said.
"At the end of the day, all the county commissioners did is to see if there is anyone willing to borrow $2.2 million in taxable bonds," Memmi said.
HMAC owners are shopping the bond market in search of $2.2 million in tax-exempt bonds, which means whoever loans the $2.2 million to the owners can do so without paying federal taxes on the bond issue, Lawrence said. The lenders also can write down the bond issue on their taxes. These incentives make the bonds extremely attractive in the market, he said.
"That is a huge savings to (lenders)," Lawrence said.
Lenders of tax-exempt bonds often give borrowers a reduced interest rate because of the exemptions they receive, said Lawrence, CEO and managing member of Baltimore-based investment banking firm BVFR & Associates. The firm also has an office in Lemoyne, Cumberland County.
The federal government allocated to Pennsylvania $331 million in stimulus incentives, known as Recovery Zone Facility Bonds. The state Department of Community and Economic Development allocated the facility bonds to municipalities based on unemployment calculations.
Municipalities with 100,000 or more residents qualify for the bonds. The federal government also allocated to the state tax-exempt economic development bonds for nonprofit organizations. The federal government issued $15 billion in recovery bonds nationwide, Lawrence said.
The facility bonds only can be used to start and finish projects. They cannot be used to pay down debt and must be allocated to shovel-ready projects by the end of the year. This means a project should be identified by July to realistically make it shovel-ready by Dec. 31, Lawrence said. Municipalities that don't use their allocations can transfer their incentives to other municipalities, he said. Projects have to be finished within three years.
Dauphin County gave most of its allocation to HMAC because it was the only private company to approach the county and it is a project that would add to the burgeoning Third Street corridor in Harrisburg and to the county's arts and culture environment, DiFrancesco said.
HMAC is talking with three banks who are interested, Lawrence said. He would not disclose who they are.
Lawrence said he became interested in the project after he visited HMACs Stage on Herr for the first time in December. Stage on Herr is the only wing of the facility that is open. It opened last year and is a bar and music venue that also serves as an art gallery. Stage on Herr hosts an eclectic array of local and national acts. Lawrence, Traynor, Gary Bartlett and Chuck London now own the center.
"I saw lawyers, politicians and bartenders all enjoying conversation and enjoying live music. I thoughtitwasafluke,butwhenI went back, itwas the same," Lawrence said. "I saw an interesting, diverse vibe. That's what excited me. It felt like being in New York, downtown Baltimore or the art district in Philly. Harrisburg is a capital city and deserves no less."
[Author Affiliation]
BY ERIC VERONIKIS
ericv@journalpub.com
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