Hurwitz Calls For Reconsideration Of Fillmore Deal

County Executive Leggett’s announcement of "final" lease terms between the County and Live Nation Worldwide, Inc. marks a new stage for the decision-making on a live music venue for Silver Spring. Now, the matter moves squarely under the oversight responsibilities of the Council.

Until now, despite the best efforts of I.M.P. and many others in our community, the County’s executive branch has worked essentially behind closed doors with the two private parties who will most benefit from the venue and proposed public subsidies for the venue. I.M.P. and other potentially interested parties were never invited to or even told of these closed door negotiations, and we were not allowed to participate in them. All proposed final terms under which the County would acquire the land from the block’s developer, LDG, Inc., and then would build and lease the land to suit Live Nation, have been negotiated privately, without competition, and without the sanitizing effects of government in the sunshine.

No one can be proud of this closed process or look to it as a model of good government. It has resulted in the executive branch giving greatest priority to confidential negotiation of the two private parties’ desires, while dismissing strong public voices and institutions like the Silver Spring Citizens Advisory Board, and ignoring concerns and recommendations by government officials, representatives, newspapers and community members. It also is obvious that the economic impact analysis that the executive branch has prepared contains very significant economic cost omissions and is improperly skewed to try to justify the deal. This inexplicable process is in stark contrast to the County Executive’s admirable pledge in his inaugural address of a year ago to "make every effort to establish a highly inclusionary, transparent form of government. Those affected by our decisions must be involved from the very beginning, not when assumptions about projects have hardened into stone."

We question the role of the developer in a closed process that requires an eight million dollar initial taxpayer subsidy, grants hundreds of thousands of dollars of annual rent subsidies to the operator for three full decades, and also appears to require zoning and other concessions to the developer. Both the process and the announced deal inevitably bring various forms of attention on the "how, why, what and when" of this transaction–precisely because it has been negotiated behind closed doors and without public disclosure of the tradeoffs the County’s executive branch has made in the rush to get the transaction and related political issues behind it. We also note that the County Executive had justified the closed-door process in part because the negotiation was "three-way" among the developer, Live Nation and the County, but the County’s announcement provides no details at all about the executive branch’s deal with the developer.

Additionally, no one can honestly claim that this closed-door negotiation has nevertheless yielded the best, or even a good, result for the County and its citizens. The fact of the matter is the executive branch never requested expressions of interest by various competitors or joint ventures that would want to build and/or operate a first-class venue in Silver Spring (possibly without any public subsidy), never obtained competing offers, and likewise never received competing best and final offers. Without that open and competitive process, one is only left to guess what a fair, competitive and arms-length deal would look like.

What could real competition do? Clearly a lot: the mere presence of I.M.P. outside of the closed doors caused Live Nation to drop a demand for an option to buy the venue at an outrageously low price. Yet, the executive branch has created the perception that I.M.P. somehow is at fault for making a late entry into a closed door process it was barred from entering. It is impossible to be late for a proposal process that did not exist.

With the late Friday announcement by the County Executive that the County "has reached agreement" on lease terms with Live Nation, the Council now has at least two choices before it. It can ratify the County Executive’s action and create a lower standard for County land transactions, in violation of previous County standards and possibly in violation of law. Or the County Council can decline to accept the Executive’s action and fortify the principle that if private profit-making parties seek or need public funding for their transactions, they must obtain it on an open, competitive and transparent basis.

Re-embracing an open, competitive and public process does not need to involve a continued empty space at the facade of the former J.C. Penney site on Colesville Road, and it does not even mean Live Nation will not be the ultimate operator of the venue.

For example, the City of Miami Beach conducted an open competition, one that involved three competing parties, full disclosure, public hearing and debate, and a process to solicit best and final offers—with the full process open and available to any person who wished to look at it on the City’s Web site (see link). The result of that open process was a ten year lease to Live Nation for a Fillmore, on terms involving no public subsidy, over $1 million per year in rent, and a $3.5 million investment by Live Nation into a City-owned auditorium.

In the case of Silver Spring, the Penney’s site is extremely valuable. Given its location just across from the Round House, AFI Silver, and the ambitious redevelopment of City Place getting underway, given that private development is occurring all around the developer’s property, and given the fact that maximum development of the developer’s overall parcel would require construction of a public amenity, we are certain that a market value analysis would show the highest and best use of this part of the developer’s parcel to be a performing arts facility, with or without public subsidy, and that the most profitable action by the owner (short of receiving public subsidies or assigning the benefits of public subsidies to others) would be to build that venue as soon as possible. That’s why I.M.P. offered to negotiate with the developer for a transfer of the land in exchange for building the Silver Spring Music Hall as their public amenity free of any public subsidy.

At a time when County public services may be cut due to substantial County and State budget shortfalls, we think it is improper to appropriate public funds to pay for a private transaction that involves no public input and no competition. With the announcement of the County Executive’s final action seeking endorsement of this private, non-competitive deal, I.M.P. urges the Council and other decision-makers to stand up for an open public process in the awarding of public funds, and we will continue to seek to be the operator of a Music Hall in Silver Spring.

Sincerely,
Seth Hurwitz
Chairman