|With Sale Closing Date Near, Richmond
Casino Financing Questions Linger
January 8, 2010
With sale closing date near, Richmond casino financing questions linger
Posted: 01/08/2010 03:19:35 PM PST
Updated: 01/08/2010 03:19:35 PM PST
Doubts about a developer's financing for a $1.2 billion hotel-casino resort in Richmond has a city official, once an avid supporter, recoiling, and is providing ammunition for a longtime opponent.
Developer Upstream Point Molate LLC has not supplied the city with biannual letters from a bank or financing partner, as outlined in its contract, to show it can cover project costs for the coming year. With six days to go before the scheduled closing date on the land sale, some are growing increasingly wary.
Support on the City Council, once firm, is now shakier.
Councilman Tom Butt is reversing his support because financing, design and other issues have not been resolved.
"Upstream has not made a written commitment to deal with these issues. Some of these issues need to be resolved not later but now," Butt said. "I will not support this casino. I don't think we know enough about it."
Upstream and the Guidiville Band of Pomo Indians are pitching a sprawling resort at the abandoned Point Molate Naval Fuel Depot near the Richmond-San Rafael Bridge. The resort would carry a 240,000-square-foot casino with 124,000 square feet of gaming, a conference center, nearly 1,100 hotel rooms, restaurants, shops, tribal headquarters and a shoreline park and trail.
The city in 2004 agreed to sell Point Molate to Upstream for $50 million. Part of that amount has been paid; the developer is to provide the remaining $35 million -- $5 million in cash and $30 million in a promissory note -- by the scheduled sale closing date, which is Friday. Some city officials and project supporters want to extend that date to finish negotiating some details.
Upstream and Guidiville originally teamed up with Harrah's Operating Co., but the groups separated because of differing visions. The developer and tribe found a new partner in the Yocha Dehe Wintun Nation, formerly known as the Rumsey tribe, which operates the Cache Creek Casino Resort in Yolo County.
The city has not received letters showing Upstream has funds to cover expenses for the coming year, which Mayor Gayle McLaughlin, an opponent, said puts the developer out of compliance. As part of the 2004 land sale agreement, Upstream is to provide letters each March and September from a financial partner or banks representing the developer or the financial partner showing sufficient funds. Upstream has supplied biannual project updates, but not the letters, city staff said. City staff also did not request the letters.
"He has not held up his part of the agreement. That, to me, is a big red flag," McLaughlin said. "I think that's been glossed over and is not being pushed."
Jim Levine, head of Upstream, insists project financing is not a problem.
"With a construction loan guarantee from Yocha Dehe, we're probably the most financeable project you could ever have right now," he said. "We've paid every single bill on time. Show me a development project that's done that and say we're not handling our finances properly. It's kind of a red herring."
In addition to the biannual letters, the developer must submit written certification from a bank or other financial entity, or other documentation. Tribes operate differently from businesses such as Harrah's, so Upstream is seeking an alternative method to prove it has the financing.
"Yocha Dehe is not the only private financing organization that doesn't disclose its books," Levine said. "We've already discussed with city staff and attorneys a mechanism that should work whereby a third party accounting firm is retained to review the necessary information to represent that there's available financing toward a note."
Upstream is assembling a financing plan that shows it can bring the project -- and thousands of jobs and millions in revenue -- to fruition. The plan includes a Yocha Dehe loan guarantee and equity guarantee, Levine said. He intends to deliver it in February.
The plan is a condition of closing, but the closing date is in dispute. Upstream believes a lawsuit filed by opponents Citizens for East Shore Parks triggers a provision in the 2004 deal that delays the closing date. The city, interpreting the contract differently, disagrees.
The City Council, with two members absent, could not agree this week on whether to extend the scheduled deadline to at least Feb. 15. McLaughlin opposed an extension. Councilwoman Maria Viramontes, who voted against a casino six years ago, argued for an extension because it would help prevent the disagreement over the closing date from escalating into a lawsuit.
Council members have hinted at calling a special meeting before Friday, when the full council is present.
Guidiville has filed one of two required federal applications so far. The first seeks to declare Point Molate restored tribal lands. The Pacific regional office of the federal Bureau of Indian Affairs in Sacramento confirmed that Guidiville has not submitted a fee-to-trust application, which also is required.
Guidiville is working on that, Levine said. Federal officials wouldn't be able to make a determination anyway until the environmental review is complete, he added.
The draft environmental impact report was released in the summer. The City Council must certify the document and is expected to hold hearings sometime this year.
"If they don't want the project, they won't certify the EIR," Levine said. "They don't need to drum up all this. I know a majority understands that (without the project) the city's going to be saddled with a lot of expenses they're going to have to bear. In this day and age, it's really hard to finance projects."
Staff writer John Simerman contributed to this report.