While the City Council approved a contact with the nonprofit Myriad Gardens Foundation to take over management of the park at its May 31 meeting, Ward 2 Councilman Ed Shadid expressed skepticism about that arrangement and a subsequent provision in the contract that would transfer to the city the deed for land previously purchased by the nonprofit group, in exchange for forgiving a nearly $4.2 million loan.
The loan, issued to the foundation from the city’s Economic Development Trust, has not yet been wiped off the books, and the land has not yet been deeded over to the trust — the Economic Development Trust was considering the measure at press time.
Foundation officials said it got a good deal on the land, and deeding the land to the city in exchange for the loan being wiped off the books is the best move to help usher improvements to the gardens and the city.
BUILDING THE FOUNDATION
The Myriad Gardens Foundation is a nonprofit organization established in 1981 in support of the Myriad Botanical Gardens, providing capital and operating funding, increasing public awareness and support, and promoting horticultural, educational and administrative standards for the park.
Project 180, a major downtown streetscape refurbishment paid for through the tax increment finance (TIF) district surrounding Devon tower, also provided funding for the renovation of the Myriad Gardens. The increased maintenance and operating costs would have fallen entirely to the city had the Myriad Gardens Foundation not stepped up to take over management, former Assistant City Manager Cathy O’Connor said.
At the May 31 City Council meeting, members approved a 25-year contract with the foundation, giving the nonprofit management of the Myriad Gardens park. The goal of the agreement is to reduce the city’s funding obligation to one-third of the total cost, with the foundation picking up the rest through revenue-generating activities, such as an ice-skating rink and a restaurant, and an endowment for the park set up through contributions to the foundation.
However, Shadid questioned part of the contract between the city and the foundation stating that a loan of around $4.2 million from the city’s Economic Development Trust to the foundation would be forgiven, and the land that had been purchased with the loan would be deeded over to the trust.
The foundation purchased the socalled Vitagraph property, located at 123 S. Hudson Ave. adjacent to the Myriad Gardens, from Hudson Reno LLC in September 2010.
The Oklahoma County Assessor’s Office puts the market value of the land at around $1.4 million, slightly less than what Hudson Reno LLC paid for it in 2001 when it purchased the land from Fred Jones Properties LTD Partnership.
The property, which has three buildings on it, is nearly an acre and houses a restaurant and the Indian Exploration Company, among other businesses.
COVER THE DIFFERENCE
The foundation got a $4.2 million loan from the Economic Development Trust, which used money from the two tax increment finance districts downtown: TIF 2 and TIF 8, also known as the Devon TIF. The property was to be used for office space and housing of maintenance and operation equipment. However, under the terms of the sale, Hudson Reno LLC, which is managed by Richard Dunning, sold the property for $6.9 million, receiving nearly $4.2 million from the foundation and making a charitable donation of the $2.8 million balance to the foundation. Dunning is CEO and president of Indian Exploration Company, a former member of the Oklahoma Judicial Nominating Commission and currently sits on the University of Oklahoma Board of Regents.According to Myriad Gardens Foundation tax documents filed with the Internal Revenue Service, the multimillion-dollar donation is nearly 20 times the amount the foundation pulled in for charitable contributions and grants during the last fiscal year.
The sale contract also states that the foundation will commemorate the donation by installing permanent signage at the property or in the gardens.
Dunning did not return phone messages from Oklahoma Gazette.
The amount paid by the foundation, coupled with the gifted amount from Hudson Reno LLC, puts the total sale price of the property at $6.9 million, records show.
Shadid said this concerned him because it would likely inflate the prices of other area properties that the city may purchase in the future, both as part of the Core to Shore plan and because of MAPS 3 projects, which include a separate park south of downtown. The MAPS 3 convention center subcommittee recently recommended a site in the immediate vicinity of the Vitagraph property, just south of the Myriad Gardens.
“The (comparative market analysis) is being artificially elevated,” Shadid said. “There’s no asterisk that says its $4.2 million; it actually says it’s been sold for $6.9 million.”
Furthermore, Shadid said $111,000 in interest owed on the loan from the Economic Development Trust will not be recouped by the city if the loan is forgiven, and questioned whether the city needs ownership of the property. If the city does need to have ownership, Shadid said, it should have gone through the eminent domain process.
“Do we need that property? The people going to be working on the Myriad Gardens are city employees who already have offices, why does the city need a property on Hudson and Reno for $4.2 million?” Shadid said. “And if the taxpayer does need that property, don’t we have a mechanism in place for them to get it, that being eminent domain?” Shadid also said council members should have more time to go over documents before contracts show up on the agenda for approval. He introduced a resolution addressing the matter at the May 31 council meeting that was postponed until the July 19 meeting.
However, if the Economic Development Trust approves the deal to take the land and forgive the loan, it would clear the debt off the foundation’s books and allow the city to use the property for future development opportunities, said Jim Tolbert, Myriad Gardens Foundation chair emeritus.
“The only person raising questions is Councilman Shadid,” Tolbert said. “It’s unfortunate only because the partnership created by this transaction is extremely useful to the community. This is something very desirable from the city’s standpoint and the community standpoint, and, over the long term, I think it will reduce the city’s financial exposure on the gardens.”
By the trust taking over ownership of the property, the foundation would not be a party to negotiations or receive any of the benefits of development opportunities that may arise, essentially streamlining such processes for the city, Tolbert said.
During the transaction between the foundation and Hudson Reno LLC, there were two appraisals: one on behalf of the foundation and the Economic Development Trust, and another on behalf of Hudson Reno LLC, Tolbert said.
While the foundation and trust’s appraisal said the property was worth at least the nearly $4.2 million that would be paid for the property, Hudson Reno’s appraisal put the amount closer to $6.9 million, Tolbert said, so the difference between the amount of the loan and Hudson Reno’s appraisal was considered a donation.
Whether Hudson Reno LLC actually claimed the donation as a tax deduction is not known, Tolbert said, but such deals are not unusual. The foundation and the city got a fair deal, he said, considering more than $1 billion has been invested in the area surrounding the property over the past few years.
Myriad Gardens Foundation Chairman James Pickel said the property was not acquired last year with the hopes of the Economic Development Trust turning around and taking ownership.
“I think it was always the intention that the Myriad Gardens Foundation would be the owner because they would be the occupant,” Pickel said. “The city parks department would be using it, but now that the foundation’s role has changed, as far as taking over management of gardens, it probably changed a little bit of the dynamics.”
The ultimate goal of the foundation is to turn the Myriad Gardens into one of the premiere urban parks in the country, said Leslie Batchelor, an attorney for the foundation. “It seems so unfortunate to me there’s a negative cast on the transaction,” Batchelor said. “The foundation and ultimately the city were able to acquire a great piece of property that is strategically very, very important to Oklahoma City.”
As to whether the nearly $2.8 million donation to the foundation included in the mortgage agreement was aboveboard, Batchelor and Tolbert both said the issue was between Hudson Reno LLC and the IRS.
“That’s really not my business, that’s between the seller and IRS,” Tolbert said. “My experience is the IRS can take care of themselves.”
above The so-called Vitagraph property, 123 S. Hudson Ave.