Bailout of Napa wine shrine flawed; Copia was broke and had violated tax rules

Now, a Bee investigation has found, that decision is coming back to haunt the Sacramento-based Infrastructure and Economic Development Bank, or I-Bank for short.

The insurer of the Copia bonds is awash in subprime mortgage debt and facing an Aug. 11 deadline to come up with cash to back its guarantees – a deadline already extended six times since December, most recently last Wednesday.

Though I-Bank claims that as a third party it is not liable for the bonds that bear its name, a Bee investigation found that if the bond insurer fails and Copia ultimately defaults, I-Bank – and California taxpayers – could at a minimum be stuck with some big legal bills as the finances are sorted out.

Named for the Roman goddess of abundance, Copia: The American Center for Wine, Food and the Arts, is an 80,000-square-foot shrine to wine and food on the banks of the Napa River. It was the brainchild of the late Napa wine mogul Robert Mondavi, who donated $20 million and the land on which it was built.

I-Bank authorized the first bond offering for Copia in 1999 for $70 million, allowing construction of buildings and grounds that feature shimmering fountains, indoor and outdoor kitchens, a demonstration vineyard and organic vegetable gardens, cooking and tasting classrooms and a 240-seat auditorium.

Copia also houses two restaurants: a bistro and a formal eatery, Julia's Kitchen, named after the late Julia Child, celebrity chef Mondavi friend and former honorary trustee. A large gift shop sells fine wines, cookbooks, gourmet cooking tools and DVDs.

Despite rich surroundings and fine fare, however, many visitors to Napa have skipped Copia in favor of one of the valley's 400 wineries, many of which have their own tastings, programs and gift shops.

Since it opened in 2001, the center has lost between $4.2 million and $12 million a year and now has a $14 million deficit, according to the 2007 annual report prepared by accountants Pisenti & Brinker, dated April 23, 2008. At the end of 2006, Copia was running out of money and had taken out a $1 million line of credit, according to financial documents.

The Bee's investigation, based on more than 3,000 pages of bond documents and other financial reports obtained from I-Bank under the state Public Records Act, found several reasons for Copia's financial meltdown:

• Copia consultants had forecast paid attendance of between 467,900 and 522,400 a year by 2006, but instead paid attendance topped out at 146,472.

• Special fundraiser dinners held between 2002 and 2006, like the one to mark Julia Child's 90th birthday and Copia's Bacchus Gala, lost a total of $679,000.

• The initial $12.50 admission price was too high, 33 percent higher than its consultants had recommended. In addition, local residents were upset about being charged admission just to eat in one of the restaurants.

(Copia has since eliminated its admission fee and is trying to build bridges by offering locals special evenings and activities.)

I-Bank knew the hazards

With full knowledge of Copia's troubles, I-Bank approved Copia's financial rescue in April 2007 and authorized the bond refinancing deal three months later through New York-based securities firm JPMorgan. As issuer of the bonds, I-Bank was responsible for evaluating Copia's ability to make its payments.

Created in 1994 to promote economic development and job creation among private businesses, municipalities and nonprofits, I-Bank is part of the state's Business, Transportation and Housing Agency, and its board is headed by that agency's top official, Secretary Dale Bonner.

Over the years, I-Bank has helped California nonprofits borrow $4.5 billion in tax-exempt bond funds. Among the beneficiaries was the San Francisco Ballet, which borrowed $44 million to renovate and equip offices and rehearsal space and develop new productions. Another was the Walt Disney Family Museum, which in February was approved for $75 million to help build a museum at the Presidio "devoted to preserving the vision and legacy of Walt Disney."