Ever since Kelo V. New London, the idea that private economic development constitutes a “public good” has been hotly contentious. While Kelo V. New London centered on eminent domain, the rest of the appendages of economic development are just as much an issue. Today’s Hour dissects the idea of municipal bonding for a private development.
With the economy hovering in or near recession, some find the prospect of the city issuing $104 million in municipal bonds for a private, retail-anchored development in West Avenue a poor choice.
“There’s no way I’m going to encumber the city’s bonding capacity by $104 million, when we need two new fire stations (and other infrastructure),” said Councilman Michael K. Geake. “I was against bonding $104 million the first time I heard it. And then you get into the current economy.”
Last Monday, Mayor Richard A. Moccia, the Norwalk Redevelopment Agency, and the city’s bond counselor made the case for floating $104 million in municipal bonds to help pay for parking garages and infrastructure work related to Waypointe — local developer Stanley M. Seligson’s planned mixture of new retail, housing and offices for the West Avenue neighborhood.
Seligson is looking to build up to 350 new residential units, 75,000 square feet of office space and 393,174 square feet of new retail space in the 19.8-acre area bounded by West Avenue, and Chapel and Academy streets, as outlined in the conceptual plan approved by the Common Council.
According to Moccia, the city must choose between stagnation or growth — in particular, growing the city’s commercial property tax base to shift the tax burden off homeowners.
Moccia indicated that a severe economic downturn would extend beyond Norwalk.
“If we’re in that type of situation in Norwalk, I have a feeling that then the whole country is going to be in it,” Moccia said. “But what choice do we have? We sit now with minimal taxes coming in from the downtown area. And to just let it stagnate further? It just can’t be done.”
A $104-million bond issuance, if approved by the council, would be paid back by parking revenues and a surtax applied to properties within a special services district, according to a draft master development agreement negotiated between Seligson, Robinson & Cole (the city’s bond counselor) and city officials.
According to Robinson & Cole and Thomas S. Hamilton, the city’s finance director, risk to the city has been reduced to a minimum in the agreement. Under one bonding scenario, parking and special services district revenues would generate $235.7 million over a 25-year period. Under another, they would net $184.6 million over a 20-year period. That translates to $4.9 million to $32.8 million more than would be needed to pay off the bonds, according to Hamilton. He has characterized the revenue projections as conservative.
Under the development agreement, the bonds would not be issued until Waypointe was constructed and at least 75-percent of non-residential space within it — retail and offices — was leased and occupied.
Susan Sweitzer, Redevelopment Agency senior project manager, acknowledges the current economic downtown but points to the 75-percent occupancy clause and other aspects of Waypointe, which she believes protect the city. Sweitzer added that occupancy is at least four years off.
“The recession is not gong to last four years — no recession has lasted four years,” Sweitzer said.
According to Sweitzer, the lease arrangements which Seligson plans to secure with tenants ensure occupancy. Seligson, as the property owner, must pay the property taxes and special services taxes, regardless of whether the space is occupied or vacant, Sweitzer said.
According to Sweitzer, parking revenues pose the “soft side” of the revenue stream.
Last Monday night, Tony Doumlele, a Norwalk resident and taxpayer, handed members of the Common Council’s Planning Committee a spreadsheet comparing the proposed bonding amount for Waypointe to that approved for Blue Back Square, a similar mixed-use development in West Hartford. Norwalk officials have used the development as a model for Waypointe.
According to Doumlele, per-capita debt associated with Waypointe would run $1,600 over the life of the bonds, as compared to $592 per-capita for West Hartford residents. Further, Doumlele believes Norwalk would get fewer “public” improvements from the municipal bonding than West Hartford has received. Municipal bonding for Blue Back Square is paying for a library expansion, the town hall and other improvements, he said.
Doumlele, to be sure, praises Hamilton’s and Robinson & Cole’s work negotiating the draft master development agreement for Waypointe. He simply believes that more research is needed on the revenues.
“No one can forecast the future with full accuracy, so I think these comparisons with actual (revenues) — what’s going on in the Norwalk garages and West Hartford — would be very informative. And that hasn’t happened yet,” Doumlele said. However “this backstopping that they talked about. I think that’s a good idea.”
According to Sweitzer, the city is working to insert language into the agreement that would extend the time period of the special services district, if parking revenues don’t suffice in repaying the bonds.
Douglas T. Adams, Seligson’s vice president of development, described the 75-percent occupancy clause as “one of the most important aspects” in the financing structure.
“The city doesn’t have to float the bonds until the developer has delivered. A large portion of the income to pay the bonds is from a tax which is paid regardless of the economy. There’s no relief for that,” Adams said. “It is additional risk for the developer. But that’s the business we’re in and a risk we’re willing to take.”
Moccia, while labeling Doumlele’s numbers as “a little bit disingenuous,” used them several weeks ago when speaking about Waypointe. In the worst-case scenario, where the project tanks and there’s no incoming revenue, taxpayers would foot the bill for about $80 per year, he said.
Speaking to The Hour recently, Moccia said he arrived at that figure by dividing Doumlele’s $1,600 figure by 20 years — the possible bond issuance. Moccia finds the prospect of a default unlikely and the cost acceptable.
“If you get the worst-case scenario, everything bad happens, it’s still only going to cost $80-a-head over 20 years for a new downtown area. It’s $80-a-year for 20 years,” Moccia said. “Everyone developer in this country right now is facing uncertainties. We all know that. But you cannot base your decisions solely on the point that they’re might be an (economic) downtown.”
So there you have it. Debate away. But if live debate is more your thing, you can attend the planning committee’s public comment meeting on the draft bonding agreement, June 4 at 6 p.m. in Room A300 of City Hall, 125 East Ave.
source: Who will pay $104 million in bonds for Waypointe?, By ROBERT KOCH, May 26, 2008
