How Athens plans to help finance the multimillion dollar Baileys Trail System

Photo by Emily Crebs.

The Baileys Trail System — 88 miles of mountain bike-optimized trail — is estimated to cost between $11 million and $12 million.

If members of Athens City Council choose to pass legislation to help finance the trail system, the city will be required to pay nearly $1.2 million over 20 years toward its construction. Athens County will pay the same amount.

In early November, City Council tabled a vote on legislation that would commit an annual $90,000 to construction of the Baileys. Councilmembers Jeffrey Risner, Patrick McGee and Sarah Grace cited inconsistencies with information provided by Quantified Ventures — a capital investing firm that is managing the Baileys finances — as a reason to stall the vote.

Late last month, the council untabled the ordinance and amended its potential financial commitment to the project by tightening the control the body has in funding for the trail system.

Athens city’s potential financing of the trail:

Athens city and Athens County are deciding whether to enter into an agreement with a council of regional governments known as the Outdoor Recreation Council of Appalachia (ORCA) to pay for a bond funding the Baileys. Some councilmember’s reservations came from the implications of entering into the agreement.

According to the proposed ordinance, Athens city or Athens County can withdraw from ORCA at any time and cease bond payments. Both entities’ financial obligations would be to only pay off what is owed to ORCA in a calendar year. 

However, Kathy Hecht, Athens city auditor, does not believe the city would withdraw from the agreement if the council ultimately decides to approve the funding ordinance.

“If we commit ourselves to this and let them sign off on this bond that we can’t really back out,” she said. “(If) you buy a house and then you’re financial situation changes, you still owe all that money.”

Hecht questioned how Athens city’s financial obligation may change. Athens County could also withdraw from ORCA. 

“My biggest concern was would the city in some way be financially responsible if the project failed? Would we be required to pay off everyone’s debts? The answer is no, we’re not,” said Jeffery Risner, head of the City Council’s appropriations committee. 

Hecht clarified that the bond would not be issued to ORCA directly, but rather the Athens Port Authority, a third party that facilitates economic development in Athens County. 

“If the Port Authority decides not to take out the bond for the Baileys then they’ll have to find someone else to do it,” Hecht said. 

If Athens city or Athens County does not enter into the financial agreement, “Well then (the financial model) doesn’t work. This is entirely dependent upon the city and the county supporting this project,” Brown said.

In recent amendments to the ORCA agreement, Athens city’s financial support was made contingent on Athens County also entering. 

“We’re not gonna put in our share if no one else is gonna help,” Hecht said. 

One recent amendment established in the event that if ORCA asks Athens city to increase its contributions to paying off the bond, the mayor must ask City Council for a vote on whether to agree to increasing the contributions. The mayor is a member of ORCA; the council is not.

“It keeps us able to control our money or our contribution,” Hecht said.

Another amendment also changed the year for the trail’s evaluation to be completed. After five years, the Ohio University Voinovich School of Leadership and Public Affairs will use metrics to determine how much economic benefit Athens city received from the Baileys. Previously, this was scheduled to be done after seven years. The council will review and decide whether to approve the school’s assessment.

The “pay for success” model:

In 2017, Quantified Ventures selected the Baileys Trail System to be the first outdoor recreational trail financed with a “Pay for Success” model. In this model, private investors partially finance the project to lessen the financial risk for Athens city and Athens County.

“We’re trying to scale up evidence-based things that are good, and we’re trying to tie the cost of the project to its ability to do what it’s supposed to do,” said Seth Brown, director of forestry and land use at Quantified Ventures.

The U.S. Forest Service, in conjunction with the National Forest Foundation, hired Quantified Ventures to finance an environmental project through the model because of budget constraints within the U.S. Forest Service.

Quantified Ventures conducted a nationwide survey of environmental projects across the country to find a pilot program for the business model. Eleven forest services applied, including the Sierra National Forest in California, the Gifford Pinchot National Forest in Washington state and the Coronado National Forest in Arizona and New Mexico. But the investment company settled on the Baileys due to its potential to provide possible economic opportunities for nearby cities through a projected increase in ecotourism.

According to a 2018 financial report from Quantified Ventures, the bike trail could diversify the economy, address health concerns like obesity and improve environmental issues such as illegal dumping.

The Baileys already received enough funding for construction to begin through private grants and philanthropy. Athens city and Athens County would pay nearly $2.4 million to complete construction.

Hecht thinks some concern for Athens’ financial contribution to the trail is due to it not being located in the city limits. Its trailheads will be found in Chauncey, Buchtel and Nelsonville.

Athens city has many hotels and restaurants compared to other cities in the county, according to Hecht. Potential Trail users are expected to lodge and eat in Athens city, thus increasing revenue from the transient guest tax — a 6% tax on all rented rooms such as hotels and motels. Half of the tax is paid toward Athens County, while Athens city collects the other 3%. 

Hecht said Athens city annually brings in over $200,000 from taxes. In accordance with Ohio Revised Code, Athens uses half of the revenue to fund the Athens County Visitors Bureau.

“That’s really how they (Athens County Visitors Bureau) survive, but having what they do brings people into the city,” Hecht said.

The remaining amount from the transient guest tax goes into the city’s general fund, which partially goes toward city employees’ salaries, according to Hecht. If Athens city enters into a contract to fund the Baileys, the money will come from transient guest tax revenue and be directed to investors.

In the finance model, investors will pay the Wayne National Forest the amount needed to construct the trail. Athens city and Athens County will pay back investors overtime with revenue created from of the trail system.

Currently, Brown is searching for investors. 

“[Investors are] someone who cares greatly about the project or cares greatly about the region,” Brown said. “Someone who wants to get their money back they’re putting their money towards good outcomes, but it’s not philanthropy or charity.”

The Voinovich School has not yet determined how the potential economic benefits of the Baileys will be evaluated.

“You don’t need an evaluation if there’s nothing to finance,” Brown said. 

If the trail overperforms, Athens city will increase its pay up to $125,000. If the trail underperforms, the city of Athens will receive some compensation back from investors. After the evaluation, Athens will continue to pay that amount for the next 15 years.

If Athens city and Athens County increase their financial contributions to the Baileys due to its success, excess money will be used for trail operations. 

“We’re creating a sustainable trail system with the governance and operations and maintenance built in on top of what they would normally do if they just issued debt, they could only pay for construction,” Brown said. 

If the trail can fund operations through nonprofits and internal revenues, the extra payment from the city and county will go to investors as reward for their risk in funding the trail. 

All eyes on City Council:

Earlier this week, Mayor Steve Patterson presented information by Kirby Date, a community planning expert at Cleveland State University, at City Council’s full-body meeting. Date believes Quantified Ventures may have underestimated the numbers of potential mountain bikers the trail will draw annually.

Quantified Ventures previously projected that the Baileys is expected to draw between 125,000 and 235,000 mountain bikers to the area per year, according to an earlier report from The New Political.

At other recent City Council meetings, supporters of the Baileys passionately spoke of their support for the project. Hecht believes council feels rushed in making a decision on their commitment. 

“We’re the first ones jumping in the ice water here,” Hecht said. “Everybody’s waiting to see what we’ll do.” 

Hecht and Risner both believe that council was not made aware of the Baileys, specifically Athens city’s role in financing it, until this year. 

“They think we’re just dragging our feet; everybody’s been talking about it forever. It’s just not quite like that,” Hecht said. “I’d like us to keep moving forward. I don’t think it needs to be rushed. … I think all this process of letting people talk and getting questions answered is helpful in both ways.”