Rec center payments to be divided
Friends of Recreation will pay its one-third share of the cost of a new Seaview Park recreation center in four payments over the course of the construction, instead of paying all of its share up front.
Earlier this month, the Town Council approved an agreement with Friends of Recreation that replaces a 2016 agreement in which the fundraising group pledged to provide its share in advance.
Friends of Recreation and the Mandel Foundation each have pledged to pay one-third of the cost of the center, up to $5 million each. The town will pay the remainder.
The project has been estimated at $11.1 million, but a so-far undisclosed bid from contractor Hedrick Brothers this spring was higher than the estimate. and town staff is negotiating to bring the price down before presenting it to the council next month.
If approved by the council, Hedrick Brothers’ price will be a “guaranteed maximum price” for the project, shielding the town against cost overruns.
Michael Ainslie, vice chairman of Friends of Recreation, told the council that the group has raised $4.3 million, including $2.5 million in cash and $1.8 million in pledges. If the $11.1 million estimate holds true and the group’s share is $3.7 million, it would have to borrow against the pledges to hand over its full share up front. Ainslie said dividing its share into payments would allow it to avoid paying interest on a loan.
The group looked to the Mandel Foundation’s payment schedule as an example of how it could dispense its funds, Ainslie said. Under the plan, Friends of Recreation will pay 40 percent of the guaranteed maximum price once the contractors are hired, Ainslie said. Three subsequent payments of 20 percent will be paid once construction is 40 percent, 80 percent and 100 percent complete.
Construction is planned to begin this summer and be finished by the end of 2019.
Ainslie said the group will escrow the cash it has received. He provided a letter from Cheryl Culp, senior vice president at Northern Trust Co., saying the bank had committed to a line of credit for Friends of Recreation, “to be secured by completed and signed pledges,” so the group would have enough money to meet its obligation to the town.
“We have 100 percent financing against our pledge cards, which won’t probably be called upon until the 80 percent mark, so we will avoid paying interest until the end of the project,” Ainslie said.
But council members Julie Araskog and Bobbie Lindsay said the Northern Trust letter wasn’t legally binding and that they couldn’t vote for the payment agreement without seeing documentation protecting the town and its taxpayers from financial liability should donations fall short of the total amount pledged.
“I’m concerned with the lack of specificity,” Araskog said. “What if someone drops out? Who is guaranteeing it? How many pledges are signed? Are they notarized?”
Araskog and Lindsay dissented in the 3-2 vote to approve the agreement, even though the approval came with the condition that Northern Trust provide the town a letter committing the bank to loan Friends of Recreation the money for any balance due to the town, with the signed pledge cards as collateral.
Ainslie said Tuesday that the town since has been given that document, which includes terms of the loan agreement. At the July 10 council meeting, Friends of Recreation also will provide a letter stating the cumulative amount of all signed pledge cards and Northern Trust will provide a letter stating it has agreed to provide that amount of money, he said.
Of the 95 families or organizations that donated to the group, about 25 gave in the form of pledges, Ainslie told the council. Among those were the Mary Alice Fortin Foundation; Matt Smith, who is president of Friends of Recreation; Bob Wright, chairman and CEO of the Palm Beach Civic Association; and the Fanjuls.
“All are stalwart leaders in our community,” he said. Council President Danielle Moore noted that the Friends of Recreation donors were listed in the council meeting documents.
“It makes me sad to think our council would not have faith in the people who are on this list,” said Moore, who is on the board of directors at the Fortin Foundation, which is named for her late grandmother.
Before the vote, Town Attorney John Randolph, responding to questions from Lindsay and Araskog, said he saw no risk in the council approving the new agreement with Friends of Recreation before it had the bank’s commitment letter. “All this resolution does is allow it to be paid in payments instead of all up front.”
Councilman Lew Crampton, who voted in the majority, said, “I trust the pledge process. I trust the individuals. The details will be revealed. I have a measure of confidence.”