The North of South development is the next big thing to be promoted by City officials. Presumably their timetable had been predicated upon the completion of the parking meter deal by now.
North of South is anywhere from 10 to 14 acre development proposed for land owned by Lilly and just north of their main campus. A rezoning petition is in process, and is scheduled to be considered by the Metropolitan Development Commission on November 17.
Just yesterday, the economic development committee of the MDC heard for the first time, details about the proposed deal between the City of Indianapolis (who would finance the lion's share of the project), Buckingham Companies (who would develop and own the project), and Eli Lilly (who developed the plan and who will continue to own the land upon which the development would occur). The Commissioners requested that their vote on this proposed deal also be postponed to November 17. At the moment it is scheduled for November 3. Should the MDC approve the proposed deal, it would move to the Council for its verdict. The City hopes to be floating the bonds before the end of the year.
I made an open records request for the proposed deal, and received a document titled "Memorandum of Understanding As of September 27, 2010 With Respect to North of South - Mixed Use Development". I have
posted that document. (you will need to sign in with a google account to access it -- if you just want me to email it to you, please send me a note to
hadenoughindy@gmail.com) This document alludes to two attachments, neither of which did I get. I have requested those, and when I get them, I will post those as well.
Between the presentation at yesterday's MDC committee meeting and the MOU, here are the details of the proposed deal.
Two years ago, Lilly began planning for the undeveloped ground it owns north of its main campus. It currently serves as parking lots, primarily. One year ago, the City entered the picture, and has been working with Lilly and Lilly's chosen developer, Buckingham Companies. Lilly sees development of the area as a means of creating a link from downtown to the southeast quadrant and as a way to create a sense of place that is 'interesting and energizing', which would help them attract and retain talent. The Lilly representative at yesterday's meeting said they had chosen Buckingham because of their commitment to Indianapolis, and their 'strength both financially and in developing this kind of thing'.
The exact square footage, like the acreage of the project, shifted slightly, depending upon who was talking. Therefore, I will stick with the MOU and the presentation yesterday of Deron Kintner, Executive Director of the Bond Bank, and evidently the City's spokesman on the deal. He relied upon a
PowerPoint presentation, which I have also uploaded.
The project includes:
320 apartments
150-152 room hotel
15,000-18,000 square feet conference center
30,000-40,000 square foot retail & restaurants
10,000 office/lab space
a new YMCA
sustainability garden/city park with significant public art
the MOU mentions 'parking garages' as well.
The total cost would be about $163 million. ($155 million for project costs and $8 million for capitalized interest)
The City would float a bond large enough to generate $86 million in cash for the project, plus $8 million to cover the first three year's payment on the bond - those three years being interest-only payments. More on how the bonds would be paid off later.
The City proposes spending $9 million from the consolidated downtown TIF on infrastructure improvements - roads, sewers, sidewalks, and the like.
The City would also pay $14 million back to Lilly for a loan Lilly made on the Harding Street TIF in 1991. This money would become Lilly's cash contribution to the project. It also will be allowing the development to occur on its land, valued at $14 million - but would retain ownership of the land.
The YMCA is expected to cost $18 m, most of which was said to be coming from a 'significant donation' from the Lilly Foundation.
Buckingham has to come up with its own cash investment of $7.5 million, plus about $6.25 million to be set aside as insurance of one year's bond debt payment. The latter could, instead, be guaranteed by a letter of credit or similar instrument, instead of with cash.
The City considers the total contributed by the Developer and Lilly to amount to $41.75 million - but it could be argued that the $14 million for the land isn't really a cash investment, the $6.25 million to be set aside for one year's debt payment isn't cash if its just a line of credit, and the City is providing the $14 million cash to Lilly - which would drop the actual developer/Lilly investment to $7.5 million. In addition, there is the $18 million for the YMCA, evidently to be supported by a Lilly Endowment grant to the Y.
More investment money is expected from the State. Indiana Economic Development, Inc., is supposed to give $6 million to the development. The 10,000 square foot office portion of the development, is anticipated to contain within it, a wetlab, which is evidently being used as the hook to get the State to designate the entire project a 'Certified Technology Park'. CTP designation allows income, sales, and use taxes that usually go to the State, to go to the City instead. This could add up to at least $5 million for the City, who through the MOU, has agreed to send it to the developer for either project development funds or repayment of the bonds.
The bonds are to be repaid by the developer within 10 years, unless the agreement is extended at that time. Except, significantly, ALL property tax money generated by the project will be used to pay down the amount of money that the developer has to come up with. The first three years payments are interest only, and will come from the $8 million portion of the bond mentioned earlier. In year 4, the developer's payments begin. The City, in its presentation yesterday to the Commissioners, and in its statements to the press, have downplayed the contribution of the property taxes to the repayment of the bond. These funds should definitely be included in the cost to the City, just as Kintner included the abated taxes as costs to the City in other developments he used for comparison. Kintner estimated the property taxes to amount to $1.7 million per year, which over 7 years, amounts to just under $12 million.
Under the proposed agreement, the City would get the first mortgage. The Lilly representative said yesterday, that Lilly would get the second mortgage on the project.
While Kintner is trying to present the proposed development as a $155 million deal that costs the City only $9 million, I would beg to differ. This proposal would cost the $9 million for infrastructure improvements, the $12 million in property taxes that would be applied to the bond payments, the $5 million for the Certified Technology Park designation, and the $14 million cash to repay Lilly for the loan back in 1991. That comes to $45 million. And, that is only if the project is a success. If it is not, then the City and its taxpayers will be on the hook for the bond payments and own a partially completed project that will undoubtedly need another infusion of cash. The risk is all on the City here.
In addition, the City will use Buckingham Construction as its construction manager for the City's infrastructure projects, with City paying Buckingham an undefined amount of fees for those services.
Of interest is one item in the MOU and another mentioned yesterday, regarding Wellpoint, which leases a building abutting this area. Kintner mentioned that their lease is up in 2015, and the City is already talking with them. The MOU mentions that the City is 'obligated' to build Wellpoint a parking garage.
It never stops, does it?