News: CJ Exclusives

Officials in mythical Mayberry may nip problematic project in the bud 

Gene Clark, treasurer of the Citizens for a Transparent Mount Airy, says the city shouldn't subsidize private businesses such as the proposed Spencer's Redevelopment project. (CJ photo by Don Carrington)
Gene Clark, treasurer of the Citizens for a Transparent Mount Airy, says the city shouldn't subsidize private businesses such as the proposed Spencer's Redevelopment project. (CJ photo by Don Carrington)

MOUNT AIRY — The Barter Theatre, which has operated since the Great Depression, reportedly draws 160,000 people a year to the charming mountain town of Abingdon, Virginia. Officials in Mount Airy — who already traffic on the celebrity of native Andy Griffith and the mythical town of Mayberry — think they should risk tax money to move an offshoot of the Barter Theatre into the Tar Heel State. 

The city plans to redevelop an abandoned textile mill into a boutique hotel and apartment complex anchored by the southern branch of the Barter Theatre. The city secured $1 million associated with the project from the General Assembly for water and sewer improvements.  

But the plans have run into trouble.  

Barter Theatre officials seem reluctant to move forward, and the process of getting the water-and-sewer grant has raised ethics concerns. 

The Spencer’s Redevelopment project hopes to transform the Spencer’s Mill property — a century-old textile manufacturing site vacant for more than a decade — into a mixed-use project. Mount Airy has capitalized on Griffith’s fame with regular festivals, along with stores and attractions based on “Mayberry,” the setting of the popular 1960s television series. 

Moreover, the way the city landed an earmarked appropriation in the most recent state budget may have ethical if not legal problems. Former state Rep. Bryan Holloway, the city’s registered lobbyist, also lobbies for a nonprofit firm, the Resource Institute. Resource Institute was set to receive $100,000 from the Mount Airy City Council if the city got the $1 million water and sewer appropriation, records show. Any sort of commission for lobbyists who obtain funding from the General Assembly is illegal. 

The project faces other challenges. Significant local opposition exists to using public money to fund the complex. Even though the Local Government Commission, which approves issuing debt for local projects, has set an early December date to review Mount Airy’s proposal, the city doesn’t have a feasibility study of the project. 

Along with the Barter Theatre, the Spencer’s Redevelopment project would include a boutique hotel, an 80-unit apartment complex, and a dinner theater. The total project is expected to cost more than $50 million. Proposed funding from the city and Surry County is up in the air. 

In 2017, the Golden LEAF Foundation approved a $722,500 grant for the water and sewer for the project. The Golden LEAF website states: “This grant provides funding to the City of Mount Airy to improve water and sewer infrastructure necessary to support the redevelopment of the Spencer’s Mill facility and to serve nearby businesses. The City of Mount Airy is working with developers to create a multi-use center at the mill that includes lodging, dining, 80 market-rate apartments, and a business center. The total planned private investment is projected to be $28.5 million and is expected to create more than 110 permanent jobs.” 

But redevelopment has lagged.

In March, city officials met with staff of the LGC, headed by State Treasurer Dale Folwell, to discuss the project. The meeting was informal. According to Folwell spokesman Frank Lester, the staff indicated the LGC wasn’t likely to approve borrowing for the project as presented. City officials were told to come up with another plan — which depends in part on the feasibility study. It’s being prepared by the Development Finance Initiative, part of the UNC School of Government. 

DFI spokeswoman Marcia Perritt told Carolina Journal the study may be ready in early November — a few weeks before the city goes back to the LGC. 

Why the short timetable? A story June 5 in the Mount Airy News says the Barter Theatre’s involvement may be necessary to make the project work for private investors, including hotel owner Dana Bryson. Bryson, owner of KZ Hotels and Services, “plans a 90-room four-star hotel, using historic tax credits available for mill site rehabilitation. She frequently has cited the need for a ‘demand generator’ such as the Barter to provide customers for her lodging establishment,” the newspaper said. 

If the project isn’t approved by Dec. 31, the historic tax credits Bryson mentioned would expire. 

A commission for lobbying? 

According to City Council meeting minutes, in September consultant Charles Anderson submitted a $100,000 bill to the city of Mount Airy for his role in securing $1 million for a water and sewer line extension project. State law prohibits contingency payments tied to lobbying efforts. Anderson disputes his invoice was a contingency fee for obtaining a grant and says he doesn’t lobby. 

Anderson works for the Resource Institute, a Winston-Salem-based consulting organization operating as a nonprofit. The appropriation appears to be related to the Spencer’s redevelopment, but Holloway told city officials the money could be used for any infrastructure project. 

The bill came as a surprise to some council members, the Mount Airy News reported, because they thought the appropriation resulted from Holloway’s lobbying work. 

The agreement between the city and Resource Institute was signed in July 2017. It requires the city to pay Resource Institute 10 percent of any grant it helped the city obtain. Such an arrangement appears to violate state law. Charles Anderson isn’t registered as a North Carolina lobbyist, even though City Council minutes state he lobbied for the money. 

N.C. General Statute 163A-305 states, “Contingency fees prohibited. No individual shall act as a lobbyist and receive payment for lobbying that is dependent upon the result or outcome of any legislative or executive action.” 

The law also states, “Any payment to a lobbyist in violation of the section is subject to forfeiture and shall be paid into the Civil Penalty and Forfeiture Fund.” 

Jane Pinsky is director of the N.C. Coalition for Lobbying & Government Reform, a “nonprofit organization dedicated to promoting good-government policies.” Pinsky said the contingency fee claimed by Resource Institute “doesn’t pass the smell test. If Mr. Anderson did lobby for this grant, he should have registered as a lobbyist.  State law prevents lobbyists from working on contingency fees. Something just doesn’t seem right,” she said. 

Holloway told CJ he didn’t benefit from the fee his client Resource Institute was charging his other client, the city of Mount Airy. “I don’t care what the meeting minutes say. They are wrong. City Manager Barbara Jones does not understand the nature of lobbying. I don’t care if the city pays this invoice,” he said. He also said he hadn’t seen the agreement between the city and Resource Institute. 

CJ sent a copy of the law to Jones, who asked City Attorney Hugh Campbell to review. “Since you raised this issue, we have determined the invoice from Resource Institute is premature. Resource Institute has withdrawn it and we are contemplating a new contract with the organization,” Campbell said. 

City Council meeting minutes say Holloway is paid $1,000 a month by the city. He is also a registered lobbyist for Resource Institute and told CJ he gets $2,500 a month from that organization. He told the Mount Airy News in mid-September he wasn’t aware the city had an agreement with Resource Institute, and he didn’t stand to receive any of the $100,000. 

The Resource Institute’s website lists five staff members, including Charles Anderson, project developer and funding liaison. A report in the Mount Airy News said Resource Institute’s efforts have secured between $18 million and $20 million for greenway and stream restoration work in Mount Airy. 

CJ spoke by phone with Anderson and RI Board Chairman Michael Smith. “We don’t go to Raleigh and lobby. We write grants and administer projects. RI submitted an invoice for administration. Once Mount Airy determines they want us to do this, we will submit an invoice for 10 percent to cover our grant administration expenses,” Anderson said. 

“The timing of submitting an invoice was probably in error,” Smith said. “We did not expect them to pay it until we actually started administering the grant. There has been a degree of confusion in Mount Airy regarding this invoice.”

Smith said he informed Mount Airy officials “to rescind the invoice until they require our administrative services once a project is determined.” 

Role confusion 

A city resolution passed in July 2017 authorized a memorandum of understanding between the city of Mount Airy and Resource Institute. The resolution stated, “this agreement is specific to help secure funding for the Spencer’s Redevelopment Project Infrastructure.” 

But the MOU doesn’t connect the grants to the Spencer’s Redevelopment Project: 

Resource Institute has been asked to help secure and assist in finding funding for projects that the City of Mount Airy is wanting to implement over a period of time. Resource will aid in writing grants, research funding opportunities, and assist the city in other funding avenues as needed. Once those funds are in place and accepted by the city, Resource Institute will have completed its obligation for the grant(s). …

City of Mt. Airy will make payment to Resource Institute at the rate of ten percent (10%) of the total grant awarded to the city that Resource Institute has assisted the city in obtaining.

The agreement remains in effect until canceled by either party. 

The most recent state budget, approved June 1, directed the Division of Water Infrastructure in the Department of Environmental Quality to allocate money to four specific local governments for water infrastructure projects. Mount Airy received $1 million. 

Holloway made a presentation to the City Council July 7, summarized in these minutes from the meeting: 

“Bryan Holloway announced that $1 million has been appropriated in the State of N.C.’s budget for the City of Mount Airy to use for infrastructure. … The Governor did veto the budget yesterday, but today, the Senate overrode the veto and that will be overridden in the House next week.” 

Holloway thanked several state lawmakers from the area for helping secure the money, and Charles Anderson with Resource Institute. 

Jones thanked Holloway “for his hard work and communications.” 

CJ asked Division of Environmental Quality spokeswoman Cathy Akroyd about the process for delivering the $1 million to Mount Airy. “The process used for this project is just like the process used in any of our funding applications, from a post-award standpoint. Payments are done on a reimbursement basis only,” she said. “If payments requested do not meet established criteria, they will not be reimbursed. Every invoice is reviewed. There is an engineering report and plans and specs must align with it. There is a division follow-up through construction and inspection.” 

Another RI appropriation 

A story published in July by NC Policy Watch asked why the Resource Institute received a $5 million appropriation, or earmark, from the state budget for a beach nourishment study and design project. The story pointed out the organization had no experience in this area, also noting that since 2016, board members, employees, and contractors have contributed $116,000 to Republican lawmakers. 

Holloway told CJ he lobbied members of the General Assembly for the $5 million appropriation to his client Resource Institute. 

Local opposition, Barter balking? 

Local businessman Gene Clark is treasurer for Citizens for a Transparent Mount Airy, a group opposed to public financial support for the project. He told CJ his organization welcomes a theater and hotel, but it doesn’t want taxpayers to subsidize it. He said Mount Airy leaders should remember the failed Randy Parton Theatre in Roanoke Rapids. 

Randy Parton, Dolly Parton’s brother, invested none of his own money, the city borrowed $21 million, and state agencies added about $6 million to launch the project. City officials had bet on Parton’s ability to manage the theater competently and attract enough customers to cover expenses. 

Before the Randy Parton Theatre opened in July 2007, CJ documented questionable feasibility studies, unrealistic economic impact forecasts, conflicts of interest, lack of transparency, reckless spending, a marketing campaign that was never funded, and Parton’s lack of management experience. 

Ticket sales never reached expected levels, and Parton was kicked out of the theater in December 2007 when city officials said he was under the influence of alcohol. He never performed there again, and the theater largely sat vacant until July of this year, when the city sold the facility for $3 million, even though it still owed $15 million on the project. 

Meantime, the interest of the Barter Theatre — the anchor of the redevelopment project — isn’t a sure thing. Producing Artistic Director Richard Rose told CJ, “We are having active conversations with city officials and others involved with Spencer’s Mill. There may be pressures on the city and pressures on us to allow this project, but those pressures may be incompatible.”