Atlanta losing millions on 75-year Underground Atlanta lease

Updated:

ATLANTA - Taxpayers are losing millions of dollars on what is supposed to be a tourist attraction for all of metro Atlanta. 

Some Atlanta City Council members told Channel 2 Action News the city is paying more than $8 million on the mortgage for Underground Atlanta, but only getting $100,000 a year in rent.  

The lease on the property lasts for the next 75 years.

Each year, thousands of people gather at Underground Atlanta for the New Year's Eve Peach Drop, but that's only one night a year.  City leaders and neighboring businesses said for the rest of the year, Underground is virtually empty.

"(It's a) catastrophe," said Brett Teilhaber, who owns nearby Friedman's Shoes.  "If you look right across from Underground, you have a vacant building that looks like it should be blown up.  I think it's time for the city to take some time and invest in the properties around Underground."

Underground Atlanta has a rich history dating back to the end of the Civil War.  The freight train depot, which stands at the entrance of Underground Atlanta was constructed in 1869, and is one of the oldest buildings in the city.  

Underground Atlanta, as a shopping and entertainment district, opened 100 years later.

Savannah Riverwalk and Underground Atlanta are the only two entertainment districts officially recognized by the state. 

Still, reports of crime at Underground and the surrounding areas have hurt its image.

The city of Atlanta owns the property.  Some city leaders say the deal it has with Underground is hurting the taxpayer’s bottom line.

"Right now, it's a financial drain on the city," said Atlanta City Councilwoman Felicia Moore.  "We're paying somewhere around $8 million in debt services on it."

The operations of Underground are headed by Dan O'Leary.  His company pays $100,000 a year in rent to the city.  According to the contract, the company only pays more if it makes a certain amount of money.
  
City leaders told Channel 2's John Bachman the city gets just the $100,000 for Underground.  Still, O’Leary said the deal is fair for his company and the city.
 
"We want nothing more than to stroke the city a gigantic check.  Because if we win, they win and vice versa.  And that's the way it ought to be," O'Leary said.

http://bcove.me/obgcombu


Channel 2's John Bachman looked at the city's lease for Underground Atlanta, and found it is signed through 2086.  Former Atlanta Mayor Bill Campbell signed the original lease agreement in 1999 for 48 years.  Then in 2001, Campbell approved a 38-year extension to the lease, just before he left office.  New Mayor Shirley Franklin took a second look at the extension and approved it in 2002.
         
O'Leary said a long term lease is needed to make lenders feel comfortable to make large loans to a leased property.               
         
Still, Moore said it's not in the city's best interest.

"I certainly hope that we can find some ways to move the needle on that, because frankly, it's a drain on our annual budget. That's $8 million that we can be spending for police officers, firefighters or other things that our city government needs," said Moore.
         
Moore told Bachman the city needs to improve the safety and perception of Underground Atlanta to get more crowds like those seen at the Peach Drop.
         
"We need to see, how do we replicate that throughout the year.  (We need) other events that will bring people from all over the metropolitan area to Underground," Moore said.

O'Leary pledged if that's done, he will get investors to buy into Underground, making him and the city more money.
         
"Once the quality of life issues are dealt with, I don't believe implementing a big idea is going to be that difficult," O'Leary said.  "(That's) because the attributes of Underground Atlanta are incredible."