Five Syllable City

The government bailout trend sweeping the globe reached Atascadero last week. The developers of the Colony Square project, Jim Harrison and Peter Hilft, are looking to the city for financial assistance to enable them to proceed with their stalled job. You may recall that, at the city council meeting on May 27, the council refused a request by the same developers for a direct cash investment by the city (in a decision with which I agreed; see June 3 posting entitled “Speaking of ‘Catalyst Projects’”). Returning at the December 9 city council meeting, Jim Harrison presented a new request for financial assistance from the city, this time for 1.5 million dollars which the city would put at risk in the manner of a guarantor. With that amount posted as cash collateral by the city, the project would apparently qualify for approximately 9 million dollars in bank financing that the developers need to proceed with phase one of the project-the phase that includes the movie theater. In accordance with the staff recommendation, the city council, acting as the Redevelopment Agency, unanimously authorized the staff to go ahead and attempt to conclude terms on which the transaction could proceed.

It is hard not to be biased in favor of action to get the Colony Square project moving. We are all anxious to cover over the excavation scar that the project has put on the city’s face at its busiest and most prominent intersection. It would also be difficult to find anyone in Atascadero who does not want to get the movie theater up and running in the downtown area. Having a multi-screen cinema back in operation would provide a major psychological lift for the people of Atascadero; during my recent campaigning activities, one of the most frequent questions I heard was directed to the subject of when Atascadero will have a movie theater again. A multiplex will also bring immediate economic benefits to the city by attracting people into the downtown area who will become potential customers for shopping, snacking and dining establishments there. Given these realities, I am, like most Atascaderans, favorably predisposed toward any initiative aimed at getting the movie theater promised by Colony Square built as soon as possible.

Still, we cannot let our enthusiasm about this endeavor blind us to financial reality and the need to make sure that our interests are protected. However anxious the city council and staff may be to see phase one of Colony Square move ahead, they should not lose sight of their responsibilities as fiduciaries for the citizens of Atascadero. Just as the federal government should not be unconditionally handing out money to failing private enterprises in its bailout activities, the city should not be unconditionally committing its funds, or taking any more risk than absolutely necessary, to aid this undercapitalized private sector project. Atascadero cannot afford to lose 1.5 million dollars, especially in this time of financial hardship, when the city is suffering from severely declining tax revenues and is living off of its reserves. The point is that, even though we all want a movie theater back in town as soon as possible, we must remain mindful that this is a business transaction involving a request by private developers for a large amount of scarce taxpayer money. City officials should pursue the transaction in a prudent, businesslike manner, solely for the benefit of the people of Atascadero.

Let me now address the proposed terms of the transaction from the perspective of one who has been involved in dozens of secured bank financings, as both an attorney and a principal. With regard to the transaction terms, assistant city manager Jim Lewis was careful to say at the December 9 council meeting that the deal points remain to be worked out. Still, he offered us considerable detail about how he expects the transaction to proceed. The way that he explained it, the city’s 1.5 million dollars will not be drawn down by the bank lenders unless and until there is: 1) a default by the developers in repaying their bank loan, and 2) a deficiency in satisfying the loan from the proceeds of a post-default sale of the project.

In assessing the city’s risk in this deal, while it is not unrealistic to foresee that the first condition will materialize, and that the inadequately capitalized developers of the Colony Square project will default in repaying the bank loan, the second condition appears less likely to occur. If the current appraised value of over 13 million dollars is to be believed, a post-default sale of the project should be expected to yield enough for the banks to cover the 9 million dollar amount of the loan without any need to draw against the cash collateral being put up by the city. Of course, appraisals are not always entirely reliable, even in the best of times; in this period of declining commercial property values, this appraisal should be carefully scrutinized to make sure that it is impartial and is based on realistic market analysis.

If the project appraisal is trustworthy, and if the default procedure is as Mr. Lewis expects, then the risk of the city having its 1.5 million dollars taken by the banks should not be unacceptably large. Nevertheless, provision for that contingency has to be made in the contract documents, as it has to be spelled out what exactly will happen if the city’s money is applied to satisfy the developers’ indebtedness to the banks. On that point, if there is a default and the city’s cash is taken, it would be advisable for the city to have the option of either: a) accepting a carried interest in the project, on terms to be spelled out in the documents but which include the right to force a sale of the project to replacement developers if the banks cannot or will not require such a sale; or b) obtaining indemnification from the development company, Mr. Harrison and/or Mr. Hilft, for any and all amounts taken from the city’s cash collateral in reduction of the developers’ indebtedness. With that kind of provision having been made, the city’s exposure to the risk of losing its money and having this project fail will at least be minimized, if not eliminated.

Let me add that the default procedure described by Mr. Lewis in his presentation at the city council meeting is unlike any that I have encountered in many years of involvement in secured bank financings. Invariably in my experience, when there is a default on a bank loan secured by both cash and real property, the banks draw down the cash collateral first, before they resort to the cumbersome, expensive and often unpredictable process of foreclosing on and selling the real property. So if this deal is structured in the way Mr. Lewis said it will be, it will mark a departure from typical bank lending practice. Perhaps the banks are willing to make such a departure in this case due to the fact that they are providing the loan under the Community Reinvestment Act of 1977, or maybe because a municipal corporation is the party posting the cash collateral. In any event, let us hope that this is the way the transaction will actually be arranged, and that the city’s cash will not be touched unless and until a bank-forced sale of the project results in a deficiency in satisfying the loan. If not, then the city’s pledged cash collateral will be subject to seizure promptly after a default by the borrowers in repaying the loan. In that situation, it will be even more important for the city to have reserved as many rights as possible in the event of a default, to protect against the risk of loss of the taxpayers’ 1.5 million dollars and collapse of this project.

With the proper protections in place, this transaction will be a benefit to the entire community. I encourage our fiduciaries to go forward with it in a cautious, businesslike way that minimizes exposure on the part of the city.

Last Friday, December 5, it was announced that the city of Atascadero’s appeal to FEMA had been decided. The city had appealed FEMA’s initial determination to pay only about 15 million of the approximately 26 million dollars claimed to rebuild the Rotunda building. In its ruling on the city’s appeal seeking more than 10 million dollars, FEMA agreed to grant only about 166,000 dollars more. That outcome obviously represents a setback. It is but one battle, however, and certainly does not spell defeat in the overall campaign to secure federal funding for the restoration of the Rotunda.

As I said at the city council meeting on December 9, the impending arrival of the new administration in Washington brings with it additional opportunities for the city to get federal support in rebuilding the Rotunda. According to news reports, the infrastructure program planned by the Obama administration will make funding available for the retrofitting of public buildings, particularly for the purpose of equipping them with more efficient heating and cooling systems. Through this program Atascadero ought to be able to find money to fund the work needed on the Rotunda’s HVAC system, for which FEMA has denied about 4.3 million dollars sought by the city. The rest of the infrastructure program should be studied as well, to find out whether the program offers additional prospects to obtain federal money to use in reconstructing Atascadero’s Rotunda building.

Similar funding opportunities might also be found in the Obama administration’s proposed economic stimulus program. Since the program contemplates supporting public works projects which are likely to boost economic activity and promote growth, the Rotunda project would seem to be a strong candidate for inclusion. Rebuilding the Rotunda, especially as some kind of attraction, will draw pedestrian traffic into downtown Atascadero and give a big boost to the effort to redevelop Atascadero’s central business district. Based on this, a cogent argument can be made that reconstructing Atascadero’s historic Rotunda building is a classic example of a public works project that deserves federal support as part of the economic stimulus program. On that topic, during the county board of supervisors meeting on December 9, it was mentioned that Senator Barbara Boxer had asked the supervisors for a list of projects in San Luis Obispo county that would be good candidates for inclusion in the stimulus program. In responding, the county should put reconstruction of the Rotunda building at the very top of its list. Not only will the project provide needed stimulus to economic activity in Atascadero, but it will also preserve one of the county’s most distinguished historic structures.

After I made the preceding points at the December 9 city council meeting, the city manager responded with assurances that the staff is on top of these matters and is in the process of preparing to pursue funding for the Rotunda project from the federal infrastructure and stimulus programs. In that regard, we need to strike while the iron is hot. Upon the arrival of a Democratic administration in the White House, the California congressional delegation will become more influential than it has been in years. Before they get too long a list of other requests, both of California’s Democratic U.S. senators, and possibly the Speaker of the House, should be made aware of our very worthy public building project in Atascadero and asked to lend their support to its inclusion in the infrastructure and stimulus programs. Assistance should also be sought from Representatives McCarthy and Capps. The point is to pursue these promising federal funding possibilities assiduously, and not leave all of our eggs in the FEMA basket, in the quest for financing to restore the Rotunda.

Returning to the subject of the FEMA appeal, l cannot fairly assess the merits of a second level appeal because I am not privy to all of the details about the factual and legal bases for the claim. In any event, the city manager reiterated the other night that it is his intention to take the appeal to the second and last level within FEMA. He said that the unsuccessful outcome at the first level was not that surprising due to the fact that the individuals who decided the appeal were also involved in the decision being appealed from. At the next level, however, the appeal is supposed to be adjudicated in Washington by a different group of FEMA officials. Based on this, the city manager believes that there is hope for a different outcome at the next level.

Even within FEMA, though, we should not rely entirely on the appeal. As I suggested at the council meeting on Tuesday night, the city should augment the ground war which the appeal process represents with an air war that involves trying to win over FEMA officials at higher levels. With Janet Napolitano becoming the new Secretary of Homeland Security, presumably a new Administrator of FEMA, and possibly other new appointees, will be coming into FEMA. Atascadero can make a strong case to the higher officials that the earthquake which struck our area in December 2003 inflicted major damage to our community by the destruction it caused to our signature building in the heart of the city, and that communities in our position must depend on FEMA to help us recover from such natural disasters. In the current environment, that argument should derive additional resonance from the reality that by helping Atascadero rebuild the Rotunda, FEMA will be doing something that promotes the administration’s objective of stimulating economic activity.

So the setback represented by the decision on the initial appeal to FEMA is far from a fatal blow to the efforts to fund the reconstruction of the Rotunda. At this point, however, we need to adopt a two-track strategy. On track one, relating to FEMA, we should take what happened on the first level appeal and learn from it in refining and improving the arguments to be presented at the second level. At the same time, we should initiate efforts to present our persuasive case for support to higher-ups within FEMA. On track two, outside of FEMA, we need to seek federal funding for the project from the incoming administration’s infrastructure and stimulus programs. The bottom line is that Atascadero has a compelling rationale for requesting federal support for the reconstruction of the historic Rotunda building. We just need to pursue the matter vigorously at all levels and by all available means.

The third Atascadero Art Tour will be held on Friday, December 5, beginning at 5:30. The event is centered in the downtown area. It showcases the work of some of the many artists who reside in Atascadero. Originated in 2008, this is an event of today and tomorrow, and not a hand-me-down from prior generations. For those who might be wondering, it shows that that some new things really are happening in our city.

I was out of town in May when the first Atascadero Art Tour was held. In September, I was glad to be available to participate in the second such event. My experience on that Friday evening came as a delightful surprise. There was street life and energy in the downtown area. Numerous establishments had remained open and were displaying various works of art by local artists. Groups of people were wandering from place to place on foot, checking out the art, enjoying wine and other refreshments, as well as each other’s company. Afterward a group of us had dinner at the restaurant in the Carlton, which was packed and buzzing with activity. The whole experience provided a glimpse of what is possible if more attractions are brought to Atascadero’s downtown to draw activity into the area.

The December 5 version of the Art Tour will take place alongside Main Street’s wine and wassail gathering and the city’s tree lighting ceremony. Together the three events should produce a level of activity and festiveness that promise to add up to a special evening for Atascadero’s downtown area and cultural community.

The Art Tour is the kind of event that deserves encouragement, support and participation. It is high-minded, youthful and forward-looking in its orientation. It also represents an example of Atascadero embracing the twenty-first century. Heather Young Curry’s resourcefulness in creating and organizing the Art Tour exemplifies the kind of initiative that Atascadero needs. Let’s reward her effort by turning out and participating. If my last experience is any indication, it will be a source of civic pride for all, as well as a real good time.

Essential to getting Atascadero back on an upward trajectory is adjusting our attitude. Regaining a positive self-image about our city is a necessary first step in creating the can-do confidence required to turn things around. Though the mood and image of our community have suffered recently from the various divisive challenges that we have been facing on an economic level, Atascadero is a healthy community filled with hopeful residents. Our situation, while ripe with challenge, is still one that most communities outside our region would envy. An objective assessment of what we have going for us in Atascadero provides cause for optimism about our long-term prospects. We just need to work with our advantages and focus on our opportunities with a “can-do” mindset.

Many local communities have faced economic challenges similar to ours in the past and have taken the necessary steps to achieve success. Many of you probably remember how Paso Robles transformed its image from dusty cow town to charming wine-country village and thriving business center. I can think of dozens of other cities, and many neighborhoods within cities, which also achieved dramatic turnarounds. While each of those successes was unique, what they all had in common was a desire to turn things around and a belief that it could happen-they had a can-do mindset.

An interesting can-do success story is the city of Philadelphia. By the mid-1970s it was declining, overshadowed by the neighboring power centers of New York, 90 miles to the north, and Washington, D.C., 120 miles to the south. Philadelphia’s image fell so low that it became best known for being the butt of a lifelong series of cruel jokes by W.C. Fields, who famously said that his tombstone should bear the inscription “I’d rather be in Philadelphia.” Despite that image, Philadelphia always had fundamental advantages as a historic, graceful, European-paced, large city, with a diverse economic base. In addition, its location, close to America’s two greatest power centers was an important asset rather than a liability, especially for those institutions and individuals wanting easy access to those centers without having to be based in the midst of their hectic atmospheres.

When more effective, can-do government took over, Philadelphia’s rock-solid advantages reclaimed the recognition that they deserved. By the late 1980s, its negative image was gone and Philadelphia was seen to be one of America’s most livable, diverse, interesting and friendly big cities. Its business community also recovered, successfully negotiating the transition from a manufacturing-based economy to a service-based economy. Philly’s success wasn’t an accident. There was a turnaround built on a realistic recognition of the problems it was facing and a can-do attitude about overcoming those problems and bringing the city’s fundamental qualities back to the fore.

Atascadero has nowhere near the problems that Philadelphia once had. With our advantages and some can-do optimism about our potential and prospects, we will find it much easier than Philadelphia did to turn things around in the years ahead. In that regard, we will do well to remember that we have significant advantages which, if leveraged for the future and not just for the present, can help us achieve long term:
o We have residential areas that are world-class in terms of their topography, vistas, lot-sizes and high-quality, custom-home development;
o We have a climate that is unsurpassed, with mild temperatures, sunshine almost 300 days a year and just the right amount of marine influence;
o We have ready access to one of the world’s great coastal areas, fantastic nature preserves and vistas in all directions, two interesting neighboring cities, some of the best wine country anywhere, and clean air and minimal traffic;
o We are less than four hours away from two of America’s largest urban areas, providing easy access in both directions, yet leaving us remote enough to preserve a superior quality of life;
o Lastly, we have a distinctive historical legacy, as a planned city founded on a Utopian ideal in cattle and farm country, built alongside a picturesque creek, around a beautiful town square with architectural gems in our midst.

In the almost four years since my wife and I relocated here, a lot of people have reacted with curiosity that we would move from Manhattan to Atascadero. It never seemed at all strange to us. But we soon became practiced in explaining that, while we enjoyed our career-centered, fast-paced, city lives, we also spent a lot of time in beautiful rural communities in upstate New York and New England that have much in common with Atascadero. As time went on, we realized that we wanted to make a transition, while we still could, to a lifestyle that would give greater emphasis to savoring life’s finer things in the decades ahead.

When we decided to relocate, we felt free to go anywhere we wanted. Because most of our current business can be conducted remotely, by phone and internet, we had the choice to live anywhere in the United States. We both felt that the Central Coast of California offered more of what we wanted than anyplace else. On our initial visit to Atascadero, upon seeing the home that we eventually bought, our minds were made up immediately. Atascadero’s residential areas, with their large lots, oak- studded hills and stunning views, were some of the most beautiful we had ever seen. We felt privileged to be able to move to such a place, and so we joined the many others before us who were drawn to Atascadero by its unique beauty and lifestyle.

With the abundant natural assets and the amazing quality of life we all agree exists in Atascadero, we have great advantages favoring us in tackling our economic challenges. With those advantages, combined with a can-do attitude, we will get over the hurdles that we have to clear. I grew up in a family of modest means and learned that a can-do attitude and hard work are cornerstones to achievement. So when I have heard, all too often, in too many city meetings, the words “we can’t,” it has caused me to cringe. If we believe we can’t, we can be sure of one thing: we won’t, because we will have quit before we started. That has been happening in Atascadero lately to an extent that is unacceptable. It is time to throw off that kind of thinking and adopt the kind of can-do philosophy that recognizes what we can achieve if we put our minds to it and stop worrying about falling short. Personally, I can tell you that the achievements that I have recorded in my life-in scholarship, in building a successful law practice in the most competitive legal market in the world, in delivering results for my clients in complex transactions and hard cases-were all built on the aspiration to succeed at the highest level, combined with the confidence that by determined effort I could accomplish my goals. Similarly, our community can achieve its full potential by adopting high expectations, along with the can-do mindset that our efforts will enable us to realize those expectations.

All in all, we have the ingredients for another success story still to be written. Let us take stock of our advantages and not shortchange ourselves in estimating what we are capable of. Whatever the current image of Atascadero might be, the underlying realities are extremely positive. Let’s go forward with those positive realities uppermost in our minds. Our city’s turnaround in its government and commercial sectors will start in earnest when, as a community, we replace the negativity of today with the kind of optimistic, can-do attitude that our circumstances warrant. There is a lot to be done, but it will go a lot easier when we approach it with the confidence that comes from recognizing that Atascadero is capable and deserving of all the best that the world has to offer.

While the stalling continues with respect to plans for rebuilding the historic City Hall, some of us have been thinking about the kind of collection that would best be suited to display in a major museum there. I had an idea a couple of months ago which I have brainstormed with several individuals in Atascadero, as well as persons with whom I am acquainted in New York and the Bay Area who are knowledgeable about art. The reaction has been uniformly favorable. So I want to put the idea out there for more widespread consideration, in the hope that a seed will be planted which will take root in the months ahead.

Most of you are presumably familiar with my proposal to make the old City Hall into a major museum. (See the May 5, 2008 posting on this blog entitled “A Major Museum in the Old City Hall Building.”) That idea aims to take advantage of the architectural refinement of the City Hall by making it into an attraction around which we can focus the revitalization of downtown Atascadero. In order to create a major museum in the old City Hall, we will eventually need to recruit a world class permanent collection of art or artifacts to put on display there. I use the word eventually, however, because we would not necessarily require a permanent collection from the day the museum opens. For a few years, while we are assembling a permanent collection, the museum could feature works lent by private collectors or institutions such as Hearst Castle and other museums with items that space limitations prevent them from displaying on their own premises. The option to display loaned items gives us some assurance that we will have adequate time to put together a permanent collection that is right for our unique venue.

With regard to the kind of collection that would be right in the old City Hall, the idea occurred to me of creating a Utopian Collection. This theme would be ideally suited to Atascadero, as a community that was founded as a utopian community, and to the old City Hall, as a structure that was built to be the centerpiece of that utopian community. In addition to some selected artifacts from the original Atascadero Colony, the collection could include significant works of art depicting utopian ideas or scenes, historically important artifacts from utopian communities and societies around the world, rare books and original writings on utopian themes, and possibly even films focusing on utopian themes. With the wealth of diverse materials that exists on utopian-related subjects, putting together a world-class Utopian Collection to house in the old City Hall would be a fascinating and rewarding project.

Based on the preliminary research that I have done, there does not appear to exist anywhere else the kind of Utopian Collection of which I am speaking. If we were to assemble such a collection, therefore, we would have the advantage of being unique. Though there is not already an existing collection of utopian art or artifacts, the importance of the concept of utopia has received considerable recognition, especially in scholarly circles. For example, there is a Society for Utopian Studies, a Utopian Studies Society, a Utopian Studies Journal, a Utopian Visions website and the Arthur O. Lewis Utopia Collection of more than 4,000 rare books at Penn State University. The interest in the topic is understandable, as the idea of a perfect world or society has exerted a powerful influence over man since the beginnings of civilization, in both the west and the east. Utopian visions have inspired governments, religions, movements, societies and cults throughout history, and they continue to do so. Because of this, a major collection of artworks and artifacts on utopian themes could be expected to arouse considerable interest and draw many visitors to our showcase building in Atascadero. A big-time Utopian Collection could also excite the interest of some university professors in the Central Coast, who might be influenced by the availability of the museum’s resources to develop curriculums and scholarly centers devoted to utopian themes, adding further to the importance of the collection. In addition, schools throughout the area could use the museum and its resources to augment courses on social studies, history, literature, art, philosophy, sociology, political science and anthropology. And the commercial possibilities would be plentiful as well: Plaza Utopia, Utopian Village and Utopia Corners are just some of the positive images that developers might want to use in projects to be built in the surrounding area.

Those of us who recognize that the old City Hall can and should be rebuilt as a major museum need to give some thought to making it the site of the Utopian Collection. Showcasing a unique collection of utopian-themed artworks and artifacts in our architectural masterpiece would be a fitting way to bring life back not only to the old City Hall, but to Atascadero’s comatose downtown. As the site of such a Utopian Collection, we could be certain that Atascadero’s most important building has been put to its highest and best purpose.