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As we predicted when the doors opened in 2008, the city
subsidized Mint restaurant has closed
its doors after a net loss of $400,000.
Here is the short version of this sad story. Some city
council members wanted to impress out-of-town guests visiting their taxpayer
center and their $10 million make-over of Fayetteville Street. Thus, the need for a white
tablecloth restaurant featuring "low country" cuisine on
Fayetteville Street. They took an empty
space in the city-owned building and gave the Raleigh Restaurant Group a cool
million dollars to convert it into a glamorous restaurant. The first month after it opened in January
2008 the Mint lost $96,000. That's a
whopping $3,100 per day.
When The Mint continued racking up heavy losses, city
council members could not admit defeat or suffer the political repercussions so
they approved a renegotiated rental contract in April 2011 giving The Mint a
$1,200 per month reduction in its rent.
The city defended this move by stating that the rental reduction was for
3 years on a 10 year contract and rent increases in years 4 through 10 would
make up for the reduction. That excuse was laughable at the time because no one
believed that The Mint would make it past three years. Now, after one year of cut-rate rent, The
Mint goes bust.
Interestingly, The Mint's owners seem to be walking away in
order to open their own restaurant called Oro in the nearby PNC Plaza building
leaving Raleigh's taxpayers holding the bag. Maybe they got tired of the city
council members dictating the "low country" cuisine menu and the
Now will the city council admit defeat and save taxpayer
dollars by getting out of the restaurant business? Not on your life. The plan is to reopen the restaurant with new
owners and a new concept. Perhaps an upscale food truck would turn a profit for
the taxpayers? I forgot, the city
council has outlawed trucks on Fayetteville Street.
City Manager Russell Allen claims on ABC 11 TV that the
taxpayers have not lost anything on this deal.
That is true only in the fantasy world of public sector accounting, not in the
real world of basic economics. First,
you have to compare the city's claim that The Mint paid $600,000 in rent to
what that space could have been rented for without the taxpayers paying $1
million for restaurant equipment and renovations. Let's say the city had rented the space to a
business for retail or office space and the renters paid for their own
equipment and furnishings. The rent paid
by this business would likely be at or above the $600,000 and the taxpayers
would still have the $1 million in their pockets. In addition, the city might have even raised
the rent since 2008 rather than reducing it by $1,200 per month as it did for The
Mint. In addition, how much is that $1
million of restaurant equipment and furnishings worth now? If sold at auction, the city would be lucky
to get back half to a third of the original purchase price.
To illustrate this point, let's assume the city had $1
million to invest and had a choice between a bank on N. Capital Blvd that paid 5%
interest and another bank on Fayetteville Street that paid 1% interest. In order to promote downtown business
activity, the city council selected the Fayetteville Street bank. After a year, the downtown bank went out of
business. At this point the city manager
claimed that the city did not loose any money because the failed bank paid the
city 1% interest or $10,000. Unlike the city manager, any reasonable person
would conclude that the city lost $40,000 on this decision.
Mr. Allen really needs to sign up for a refresher course in
basic economics, and possibly reality, if he is to continue to provide the city
council advice on economic matters. I
know several qualified NC State economics professors who would love to have him
in their microeconomics class where freshmen learn about "opportunity
The city council members are getting plenty of help from the
press in their effort to sweep this disaster under the rug. The News
& Observer and WRAL have
failed to mention this story. It seems that their role as boosters of former
Mayor Meeker's downtown boondoggles has gotten in the way of their journalistic
responsibilities. Thus, the current
mayor and city council are likely to
continue to fleece taxpayers by staying in the restaurant business. New owners with a new concept will be found
and the city will give them another sweetheart deal at taxpayer expense. And the city manager will continue to snow
the public and a complicit press with his bogus public sector accounting.
I have a suggestion.
Perhaps the city council members could become reality TV stars by
inviting Kitchen Nightmares host
Gordon Ramsay to teach them how to run a restaurant.
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