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Lawsuit opposes arts school’s move

SANTA FE, N.M. — A work in progress since its inception, the New Mexico School for the Arts is working toward becoming a template charter high school for arts and culture education in America.

But that vision has been blurred this week by a lawsuit that seeks to prevent the state charter school from opening at the former Sanbusco Market Center in the Railyard district.

Meanwhile, ways for city government to help the school with its expensive move to Sanbusco and renovation of the former commercial complex continue to be a point of discussion.

The owners of Pranzo Italian Grill, a bar and restaurant that has been doing business at that location since 1988, are seeking declaratory judgment and a permanent injunction from a Santa Fe judge saying that the new owners of Sanbusco are obligated to operate it as a shopping center. They claim breach of contract and seek damages for the loss of business that has occurred since the transition from a shopping center to a high school began two years ago.

“The loss of tenants, the closure of shopping center retail tenants, and the loss of consumer traffic has started to negatively impact the profitability of Pranzo, resulting in lost sales in the past months, which continues to accelerate week by week,” states the lawsuit filed last Friday by the Sommer, Udall, Hardwick, and Jones law firm. It also says that converting the center from a shopping center to a school negatively affects the value of the business and its marketability.

An attorney representing the school, Slate Stern – and who is listed as the registered agent for Sanbusco 2015 LLC, the arts school-related entity that purchased the 6-acre site that includes 88,000 square feet of building space at auction in August 2015 for $7.3 million – said Thursday he had not yet seen the lawsuit.

A statement from the school said it believes the lawsuit is frivolous and has no merit and won’t jeopardize the move to Sanbusco.

Pessimistic prediction

When the shopping and dining complex was sold two years ago, Pranzo owner Steven Lemon predicted his business would be hurt.

“They tell me all my tenant partners are going away,” Lemon told the Journal. “They want to put me in jeopardy by surrounding my bar and restaurant with high school students. What they’re doing hurts business. I have 40 jobs that I’m trying to save.”

Lemon had recently signed a 20-year lease with Sanbusco that, according to the lawsuit, is filled with references to “shopping center,” while never mentioning “education” or “schooling.”

The lawsuit contends that Sanbusco 2015 is “obligated to maintain and operate a retail Shopping Center under the existing contract.”

While Pranzo remains at the location, about 18 other retail businesses had to find new homes as a result of the sale. Many of them are now at the DeVargas Center shopping mall across downtown. Santa Fe city government gave those displaced businesses a break by exempting them from having to pay building permit and fire inspection fees at new locations so long as they were within the city limits.

Waiver sought

Similarly, NMSA has been seeking a waiver from the city for approximately $100,000 in building permit and plan review fees related to a $12.5 million renovation project. But Mayor Javier Gonzales this week pulled the resolution that would make that happen amid concerns from members of the City Council who make up the Public Works Committee.

City spokesman Matt Ross said the mayor withdrew the resolution “based on input from the school about the timing and approach for a resolution of support from the city.”

He said the decision had nothing to do with the timing of the lawsuit and that the mayor values NMSA as a community asset.

The school is currently operating out of the former St. Francis Cathedral School on East Alameda but plans to move to the new location by the beginning of the 2018-2019 school year.

“The mayor remains as ever a believer in the benefits the NMSA brings to Santa Fe and its alignment with the value we place on the arts and culture in our economy and quality of life,” Ross said.

Cece Derringer, director of the New Mexico School for the Arts-Art Institute, the fundraising branch of the school – the only state-chartered school in New Mexico, created by an act of the Legislature in 2008 – said the request to pull back the resolution was made because the final cost for construction hadn’t yet been accurately determined. “Rather than go back and forth, we thought it would be best to wait until we have those,” she said.

NMSA is in the midst of a fundraising campaign to pay for construction at the new location. Earlier this spring it said it was about halfway to its $15 million goal.

Derringer wouldn’t say where they are now. “It’s still in progress and we’re in good shape,” she said.

Late last year, NMSA made a last-minute request of Santa Fe Public Schools to expand a $100 million bond issue by $15 million to help pay for the renovation at Sanbusco, but the school board rejected the idea over concerns about the timing, liability taken on by the district and how it could affect the district’s bond rating.

Mayor’s resolution

Last month, Mayor Gonzales introduced a resolution calling on the city manager to explore ways to come up with $5 million to help NMSA complete its move to Sanbusco. But that proposal was struck down partly out of concern, as one councilor said, that it would be perceived as a “bailout.”

So the mayor came back with a substitute resolution this month asking to waive building and plan review fees that the City Council’s Public Works Committee approved, albeit with some hesitance.

On May 8, the committee approved the resolution, 3-0, but expressed concerns over whether the city could afford to waive fees, whether a waiver would set a precedent to waive fees for other schools, and whether it was even legal to do so.

City Councilor Joseph Maestas, who wound up voting in favor of the proposal, also asked if the plan would violate a resolution co-sponsored by the mayor and approved by the City Council a year ago that set a financial policy that calls for new programs to be offset by new revenue. He said that with the end of the fiscal year coming June 30, any offset wouldn’t be realized until the next fiscal year.

“I realize this is a little different. It’s not an expenditure, it’s waiving revenue,” Maestas said in an interview this week. “And what department are we impacting by waiving revenues? It seems to be Land Use, which has been plagued by resource challenges.”

During the meeting earlier this month, he said perhaps the City Council should come up with “some objective policies to guide us in future decisions” regarding waiving fees.

Construction benefits

Matt O’Reilly, asset development director for the city, noted that the city’s share of gross receipts tax revenue generated by construction of the arts school’s campus would “vastly outweigh” the amount of fees waived.

In addition, an economic analysis of locating the school in the Railyard district, which was commissioned by the school, says that with a full enrollment of 400 – the school now has about 215 students – it would generate about $172,000 in municipal tax revenue annually and have an $80.3 million economic impact over 10 years while supporting 128 jobs.

It also predicted that between 2017 and 2019 the city would earn $1.2 million in tax and fee revenue as a result of construction, if no fees were waived.

Setting a precedent?

“My concern is if you waive fees for one school, then we would have to do it for any school that came forward,” Councilor Chris Rivera said.

That led to a discussion about what fees school districts pay when they build a new school and to whom. When Santa Fe Public Schools builds a school, permitting is done through the state’s Construction Industries Division, though the city does receive tax revenue when it’s built within the city limits.

In an interview earlier this week, O’Reilly said NMSA was at a disadvantage. As a state-chartered school, it’s not part of Santa Fe Public Schools and because the campus will not be a public building or part of a political subdivision, the arts school doesn’t qualify for permitting by the state.

That’s significant because obtaining permits through the state is much less expensive. He estimated that permitting through the state would cost roughly $15,000, compared to the $100,000 charged by the city in this case.

There has been some talk that now that the Santa Fe University of Art and Design has announced that it will be closing after the next school year, the city-owned property near the intersection of St. Michael’s Drive and Cerrillos Road might be a good location for NMSA.

The city’s spokesman called that speculation. Derringer said that’s highly unlikely. She said NMSA is probably too far invested in the Sanbusco site to go that route.

“New Mexico School for the Arts remains very excited about its new campus at Sanbusco,” she said. “Its development will contribute to revitalizing the Railyard area and, moreover, will provide a creative learning center where high school students throughout New Mexico can pursue their passion in the arts.”

ArtSpring, the school’s year-end event showcasing the work and performances of students concludes tonight at The Lensic Performing Arts Center.