Mayor Jim Kenney and Kevin Washo, Executive Director of the Philadelphia 2016 Host Committee, want Philly residents to stick around.

Mayor Jim Kenney and Kevin Washo, Executive Director of the Philadelphia 2016 Host Committee, want Philly residents to stick around.

Chris Krewson / Billy Penn

Philly taxpayers might be on the hook if the Democratic National Convention can’t raise the money

A contract law expert says the city would be on the hook for repaying the $15 million line of credit if the Host Committee can’t.

If the Democratic National Convention Host Committee can’t raise the up-to-$10 million it’s still seeking, taxpayer dollars could fill that gap.

The Host Committee, a nonprofit charged with fundraising to pull off July’s enormous political soiree in Philadelphia, is short on cash. After over a year of radio silence on its fundraising progress, former Governor and current Host Committee chairman Ed Rendell suddenly broke the news last week: Approximately $55 million has been raised largely in corporate contributions, although there is no way to independently verify that figure at present.

“When I was a candidate, I think of how much I raised in the last 60 days,” he told the Inquirer. “And $9 million doesn’t seem like a lot.”

The shortfall may explain why officials have until now been mum on their fundraising activity. By contrast, Cleveland’s Host Committee has been releasing their fundraising progress since last year.

Rendell pointed to a number of factors at play for his committee’s fundraising woes, including the city’s unwillingness to give millions of dollars up front to support the event, citing the school district’s budget crisis as a primary reason.

After Philadelphia was named the host city for the DNC in 2015, then-Mayor Michael Nutter held a brief press conference to announce the city was preparing a $15 million ‘line of credit’ to ensure enough funding for the political convention. The loan was quietly approved by The Philadelphia Authority for Industrial Development, passed by Council, and signed by Nutter.

In the wake of public ire over the surprise pricetag for Pope Francis’ visit, Nutter assured residents that this time “there were no city funds expended in play or at risk.”

The Host Committee, however, is not actually obligated to repay any of the $15 million it taps, but Philly taxpayers would be, according to Professor Pamela Edwards, an expert in contract law and capital financing projects at City University of New York. Edwards reviewed the emergency funding agreement for this story.

“The public would be on the hook if the Host Committee fails to make payments as agreed in this document.”

Edwards said that as part of a ‘service agreement’, “the amount still outstanding (not repaid) by January 2, 2017, will be converted to a term loan which is repayable by the City on January 2 and July 1 of each year from January 2, 2018 through July 1, 2022.”

“I don’t think that it’s unusual for the city to take responsibility for the expenses for the convention, but this is not the most transparent way of doing so,” she told Billy Penn.

The Host Committee is required to submit quarterly fundraising reports and the names of contributors to PAID, the public agency acting as liaison between the bank and Committee, as conditions of the loan agreement. The Committee is currently fighting a Right-to-Know request for this reporting, arguing that the information is proprietary, despite the possibility that the city might foot the bill.

In 2000, the city guaranteed a $20 million Commerce Bank loan for the Republican National Convention. The Republicans’ shindig didn’t meet the mark that year, but organizers paid off the $3 million loan a few months later. Their 2008 event in Minneapolis saw an unusually high funding surplus, and it doesn’t appear the line of credit was tapped at all; The Democrats’ 2012 convention also came up short. That year, Duke Energy, who floated its own line of credit in Charlotte, later forgave the $10 million debt after its Host Committee was unable to repay the company.

“The expectation has always been that if they have to draw on the line of credit that they (the Host committee) will pay it back,” Kenney spokeswoman Lauren Hitt said this weekend. “That expectation hasn’t changed.”

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