CHARLOTTE, N.C. -- Duke Energy Corp., whose CEO is leading the fundraising for the Democratic National Convention, is guaranteeing a $10 million line of credit for the event.
The credit line from Fifth Third Bank is apparently the first time such an arrangement has been used by any Democratic convention organizers.
A Duke spokesman said stockholders, not rate-payers, would be on the line if the convention's host committee defaults. But the head of the committee said it may never have to draw on the money.
"It is just security in the event of a cash shortfall," Will Miller, acting executive director of the Charlotte organizing committee, said Friday. "The host committee is obligated to pay it back, and the host committee will pay it back."
Some suggest the arrangement is tantamount to a large corporate contribution at a time when the party is touting new rules that bar corporate cash and individual contributions over $100,000. Democrats have pledged "a people's convention" and say the line of credit doesn't violate the new rules.
The credit line was required by the Democratic National Committee. The bank's proposal for extending it was part of a detailed set of contracts involving the party, the host committee, the city, the Charlotte Bobcats and the Charlotte Regional Visitors Authority. The agreements were made final on Friday.
The contract calls for the host committee to raise $36.6 million. That would cover millions in upfits to Time Warner Cable Arena, other production costs and transportation for an expected 30,000 delegates and media members.
Miller, who compared the organizing effort to "a start-up business," said fundraising is still in the planning stages.
A financing anomaly
The changes are a departure from the way other party conventions have been financed. Some companies gave $1 million or more in 2008 to help Democrats and Republicans stage conventions in Denver and St. Paul.
Corporations, however, will still be able to give in-kind contributions such as equipment, office space and technology.
Republicans have called the new restrictions "sleight of hand." They say Duke's loan guarantee is more of the same.
"We said it then and we'll say it again, this rule isn't worth the paper it's written on," said party spokeswoman Kirsten Kukowski. "It proves the 'policy' was nothing more than a PR move from the very beginning."
Democratic spokesman Brad Woodhouse dismisses that notion. "No one is giving us anything," he said. "This is a line of credit."
Duke CEO Jim Rogers is leading fundraising efforts for the convention. As for the loan guarantee, spokesman Tom Williams said, "The DNC asked, and we were able to provide it."
"We stepped in to do it as a way to land this convention and support this community. When our region is successful, Duke is more successful."
The agreement, he added, "would have no impact on rate-payers or our electric customers at all."
Duke 'currying favor'
Duke faces increasingly heavy costs from federal environmental rules, and will shutter some of its old coal-fired power plants rather than upgrade them. The utility also plans to build an $11 billion nuclear plant in South Carolina that has to be approved by state and federal regulators.
UNC Charlotte public policy expert David Swindell has said Rogers' involvement can only help Duke in seeking energy subsidies from the Obama administration. Others say the company could at least expect goodwill from the party that controls the White House.
"Duke may not be angling for a particular payback, but certainly they are currying favor with the Democratic Party," said Sheila Krumholz, executive director of Washington's Center for Responsive Politics. "If it buys goodwill without having to spend a dime, Duke will feel it's been a good deal for them. Their shareholders may not like the risks."
Organizers of the 2012 Republican National Convention haven't sought a credit line.
"We received all individual money to this point. We do not anticipate having a line of credit," said Ken Jones, president and CEO of the 2012 Tampa Bay Host Committee.
Fifth Third, a bank that entered the Charlotte market in 2008, agreed to the letter of credit on Jan. 19, according to a letter included in the final contract. That was the same day the bank announced a public stock offering to repay its federal bailout, or TARP money.
The convention contract prohibits the host committee from accepting in-kind corporate contributions from TARP recipients "unless those funds have been repaid in full."
Woodhouse, the Democratic spokesman, said a credit line from Fifth Third "would be consistent with the spirit of all our rules."
Staff writers Bruce Henderson and Fred Clasen-Kelly contributed.