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11/30/2015
NCCo OKs $3 million for stock exchange -News Journal

County Councilman Bob Weiner, one of the council members not voting last week, on Monday said he supports the investment because he is convinced the software platform is adequate collateral to support the project, which he believes will bring jobs to the area.

NCCo OKs $3 million for stock exchange

 Xerxes Wilson, The News Journal 11:06 p.m. EST November 30, 2015

New Castle County Executive Tom Gordon has formalized the transfer of $3 million in county money to be invested in a proposed, private stock exchange in Wilmington.(Photo: SUCHAT PEDERSON/THE NEWS JOURNAL)Buy Photo

New Castle County Executive Tom Gordon on Monday went forward with a contentious plan to invest $3 million in public money into a startup company that’s planning a stock exchange in downtown Wilmington. The transfer came a week after the County Council publicly opposed the move.

Gordon’s office, in a statement released Monday evening, said the money will be loaned to the new Delaware Board of Trade through the county-controlled Garstin Trust, set up in 2001 by the estate of former DuPont executive Geoffrey S. Garstin to fund county parks. The trust fund had been administered by Wilmington Trust but now will be primarily invested in the Board of Trade. Interest still will be used to pay for parks.

Gordon did not respond to an interview request Monday, but in the statement said he “was encouraged by council members’ willingness to reconsider and, with a fuller briefing, reach a consensus in support.”

The News Journal first reported two weeks ago on Gordon’s plan to issue a $3 million promissory note to pay for startup costs for the exchange. The Board of Trade, which in June was incorporated in Delaware, plans to create alternative trading systems for U.S. and foreign securities and small- and medium-sized businesses. All of the transactions would be handled electronically.

Officials announced the plan in July and said the exchange will be based in downtown Wilmington. Executives include Nick Niehoff, a former top Nasdaq official and chief executive officer of the Cincinnati Stock Exchange, and the former CEO of the Philadelphia Stock Exchange, John F. Wallace.

The New Castle County Council Executive Committee discusses the $3 million that Tom Gordon wants to give to the private company that is planning to open a stock exchange in Wilmington. (Photo: SUCHAT PEDERSON/THE NEWS JOURNAL)

County Council in July approved a $15 million revenue bond to build the project. At the time, officials said no county money was at risk.

The Garstin Trust proposal prompted the county Executive Committee on Nov. 24 to pass a resolution opposing using county finances for the exchange. Ten members of the 13-member council voted in favor of the measure opposing the transfer of the trust, with three in attendance not voting. None voted to support the transfer.

Council's vote was largely symbolic, as executive office officials have argued investment authority sits exclusively with Gordon.

Councilman Penrose Hollins, who voted to oppose the investment, said Gordon's statement about the council's new support was "insulting" and an "abuse of power."

"He cannot call a few County Council members, twist their arms ... and then say he represents the position of the County Council," Hollins said. "In order for County Council to have a position, they have to meet and vote."

Hollins, who sponsored the legislation for the initial $15 million bond for the exchange because he was told no county money was at risk, said he hadn't spoken to Gordon since the vote and his position opposing the investment had not changed.

"We have a fiduciary responsibility to treat other peoples' money more cautiously than we do our own," Hollins said, adding later: "This is not how you make a sound investment."

Officials for the exchange have not responded to interview requests regarding the funding arrangement. Estimates originally put the number of jobs created at up to 125, earning an average $86,000.

Wilmington city officials also have said  they are exploring seeking $2 million for the exchange from the Wilmington Urban Development Action Grant Corp., a quasi-municipal agency that distributes federal Housing and Urban Development funds to distressed areas.

Gordon said proceeds from the stock exchange investment will continue to be invested in county parks. The legislation establishing the trust fund in 2001 outlined that the fund “to be used for the care, maintenance, and upkeep of parks under New Castle County jurisdiction.”

Gordon said the county will receive 6 percent interest totaling $180,000 annually through the five years the county will have money invested in the exchange. The Board of Trade's software being used as collateral for the investment is worth more than the $3 million investment, he said.

County Councilman Bob Weiner, one of the council members not voting last week, on Monday said he supports the investment because he is convinced the software platform is adequate collateral to support the project, which he believes will bring jobs to the area.

Gordon said county involvement in the project has already helped organizers raise capital through a national bank and will spur private investment in the venture. County officials have said the Board of Trade was also considering Texas to locate the exchange.

Councilman John Cartier voted in opposition of the deal last Tuesday, but on Monday said he had switched his position on the investment after a conversation with Gordon.

"In the end of the day, they were going to leave the area and go to another jurisdiction, and I felt that given the kind of challenges we were facing that this was not an opportunity we could just let go away," Cartier said.

He had previously expressed concern that moving the $3 million from being invested in a diversified set of stocks through Wilmington Trust to an upstart stock exchange venture will put the county's money in a risky position.

On Monday, he said he would have liked more information about the collateral offered by the Board of Trade, but "we are not given that opportunity and so it is a matter of balancing risk versus stimulating economic development."

He also said he has been convinced it is Gordon's prerogative how to invest county money.

Hollins and others on the council have raised questions about the valuation of the software platform the Board of Trade has offered as collateral for the loan. Hollins also said he has questions about Gordon's authority to change the investment of the funds without council's approval.

"There are serious legal questions about this transfer that was brought to the attention of the county solicitor last Tuesday. Those issues have not been resolved," Hollins said.

Contact Xerxes Wilson at (302) 324-2787 or xwilson@delawareonline.com. Follow @Ber_Xerxes on Twitter.

 

 

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