City Remains Confident in Civil Rights Museum Financial Structure

by Jeff Sykes

It wasn’t complicated when four young men walked in to the Woolworths on Elm Street in Greensboro back in 1960 and propelled what would become the Civil Rights Movement.

It was brave. It was maybe even dangerous. But it wasn’t complicated. They walked in and sat down and asked to be served, just like any other customer.

Preserving that legacy has turned out to be complicated. And expensive. And controversial.

Hardly any civic or business leader in Greensboro will deny that the International Civil Rights Center and Museum in downtown is important to the cultural legacy of the city.

But the question remains whether the ICRCM can sustain itself financially. Because of that, leaders of the museum asked the city last year for an emergency $1.5 million loan to meet its debt payments, preserve existing payroll and look at hiring a marketing coordinator.

Maybe the museum didn’t have anywhere else to turn. But in turning to the taxpayers of Greensboro, they opened themselves up to a level of financial scrutiny perhaps unexpected.

That played itself out last week when Board Chair Deena Hayes-Greene responded to a list of 15 questions posed by City Manager Jim Westmoreland at the behest of city council. In the wake of revelations that the city had forwarded the museum half of the $1.5 million without a signed loan agreement in place, the city attorney resigned and council directed Westmoreland, on the job a mere two weeks, not to loan the rest of the money until the agreement was signed.

More intriguing still, council directed Westmoreland not to sign the loan agreement until the museum had provided clarity on their corporate structure, their cash flow and how they had spent the first $750,000 of taxpayer money.

Westmoreland fired off a letter to Greene on Feb. 24, giving her until March 11 to provide answers.

Hayes-Greene complied with that deadline, but the answers to the questions left city officials hungry for more.

So the city manager was forced to send a second letter seeking clarification on 10 of 15 financial issues.

At times the answers seemed dis missive, often offering one word answers to requests for detailed insights, or using non-specific accounting language.

At one point the letter directs city council to explore the US Tax Code for clarity on the museum’s financial operations.

One of the most questioned aspects of the museum’s corporate structure is whether any of its principals are profiting from the museum. They city’s original question number eight asked if development fees were paid to the Museum landlord in 2009 or 2011. The ICRCM response is no, but tracks beyond the scope of the original question to explain that development fees, often lucrative in projects involving historic tax credits, were paid to the original owner of the building, Sit In Movement LLC. “In this instance, however, all development fees paid to Sit In Movement Inc., were put right back into the museum for construction, etc.”

The city asserts in its follow up letter that $4.5 million in development fees “were capitalized as part of the building.”

In the city’s original letter, question number one asks for an explanation of the roles and functions of the various LLCs set up and how cash flows between the various entities. The city asked for a flow chart outlining the relationships. ICRCM responds that

the set up was created by “highly specialized accountants and attorneys” and that the city attorney had already reviewed many of their financial documents. The city follow up letter again requests a flow chart (and provides an example) that “outlines the relationship of the multiple LLCs … along with how the monies are transferred between the LLCs.”

The city had originally asked for letters from financial institutions detailing the current status of the tax credits. The ICRCM response was to assert that they are “in complete compliance with all tax credit issues” and to invite the city accountant to verify payments. The city follow up again requests a bank letter and goes on to note that “Internal audit reviewed all provided documentation, which did not include these letters.”

Finally of note is that the city had requested an account summary showing any disbursements of the restricted portion of the city’s initial $750,000 loan to the ICRCM. The museum response was that it had included an “accounting sheet” to the city three weeks ago and that $172,674 remains. The city again requested a list of all disbursements made using city funds. The city asked that the listing include “payee, amounts, check numbers and dates.”

No one denies that the tax credit financing involved in funding the museum’s rush to completion is a complex amalgamation of limited liability corporations. Greensboro city officials emphasize that they have an understanding of the structure, but continue to push for deeper explanations from museum staff at the urging of city council.

In an interview this week, City Manager Westmoreland said that he is confident the museum staff is in compliance with the requirements of the tax credit laws and that the public money loaned to the museum was being used properly.

“There are certain things that have been defined and stated that they would spend the money on and we have knowledge and belief that they have done that according to what information they have provided us,” Westmoreland said.

The city is seeking the details of expenditures from its $1.5 million loan, Westmoreland said, in an effort to provide “an additional level of assurance that they have used the money according to how it is supposed to be used.”

The second set of responses from museum staff is due to the city on March 19. Westmoreland said he expects council to discuss the information and give him further direction on signing the loan agreement at public meetings on March 25 or April 1. !