Taxpayer cost rising for projects downtown
Incentives of close to $244M may be required
Three high-impact development deals for downtown Jacksonville could end up requiring roughly $244 million in cash grants, loans and property tax rebates from the city.
The cost of getting those downtown projects across the finish line will be in the mix with other potential big-ticket items facing the city such as $775 million for work on the city-owned football stadium, $150 million for a community benefits agreement with the Jaguars, and $1 billion for a new county jail.
The downtown developments, which are in various stages of review, are the Laura Street Trio in the middle of downtown, the Related Group’s residential tower on the Southbank riverfront, and the Gateway Jax development covering multiple blocks in the Northcore district of downtown.
While those deals head to City Council, a special committee formed by City Council President Ron Salem is examining how the city can speed up the pace of downtown development. Salem said when he formed the committee in May he is “frustrated that we’ve not made more progress.”
Mayor Donna Deegan voiced support for the goals of the special committee, saying downtown growth is one of her top priorities and she would “continue to emphasize the importance of creating a vibrant downtown for all our citizens to enjoy.”
The Laura Street Trio, the Related tower and Gateway Jax each would bring noticeable changes to downtown. But in the current real estate market, they would require large incentives.
Downtown Investment Authority CEO Lori Boyer said DIA welcomes city leaders being interested in spurring forward downtown development.
“Frankly, I think from our perspective, there’s been a lot of, ‘Let’s get downtown going, let’s do it,’ ” Boyer said. “And it’s like, ‘Great, we’re with you. Here’s what it takes.’ ”
She said ultimately, the incentives are a decision for Mayor Donna Deegan and City Council to makes as they decide how to use city tax dollars.
“If you want to get it all going at once, and I think that’s possible, then it starts to become self-sustaining more quickly,” Boyer said. “You can do it, but that is why it’s really a City Council and mayor policy decision as to the priority uses of those big resources.”
The Laura Street Trio redevelopment would restore three vacant, historic buildings and construct two new buildings next to them for 169 apartments, a 143-room boutique hotel, restaurants and retail space. The city has been trying for decades to get those boarded-up buildings restored.
DIA proposed up to $87.2 million in taxpayer incentives in May that includes an $8.2 million economic development loan, nearly $42.5 million in cash grants, $22 million in historic preservation loans that the city would completely forgive after five years, and $14.5 million in property tax rebates paid out over 20 years.
SouthEast Development Group, which owns the Trio, countered with a proposal for $87.2 million in taxpayer incentives that contains an $8.3 million economic development loan, almost $42.5 million in cash grants, $22 million in historic preservation loans forgivable after five years, and a $14.3 million construction loan. The construction loan is the main difference from the DIA proposal because it would replace the property tax rebates.
The city has commonly used property tax rebates as a tool for downtown development because they pay the property owner an amount that is based on city property taxes generated by new development. If the development doesn’t happen, there is no financial liability on the city’s part.
The DIA board has not yet weighed in on the latest proposals for Laura Street Trio. The board’s recommendation then would go to City Council.
The DIA board voted in May for almost $59 million in incentives for the Related Group’s proposed 25-story apartment tower on the Southbank riverfront where the old River City Brewing Co. restaurant was demolished.
The city would provide a $39 million cash grant paid out during the construction of the 390 luxury apartments and riverfront restaurant. After completion of the tower, the city also would rebate 75% of the city property taxes generated by the new construction over a 15-year period, capped at a maximum of $19.8 million in rebates.
The $500 million Pearl Street District development by Gateway Jax also would get a combination of cash grants and property tax rebates. Pearl Street District would encompass about 1,000 apartments and 100,000 square feet of retail spread over five blocks.
The completion grants, which would be paid out after each portion of Pearl Street District is finished, would total nearly $39 million. The incentive package approved by the DIA board also would provide up to $59.7 million in property tax rebates for a total incentive package of almost $100 million.
The city has regularly used incentives to attract private investment into downtown. In the 12 years since the city created the Downtown Investment Authority, the city has provided about $177 million in incentives that attracted more than $1 billion in private investment, according to the agency. The number of people living downtown doubled from 3,700 people in 2012 to almost 8,000 now and that will grow to more than 10,000 residents in the next two to three years, DIA says.
Boyer said development currently under construction in downtown got its financing locked in before a rise in interest rates made borrowing more costly. Lenders also are covering a lower share of the overall development costs, making borrowing “really tight,” Boyer said. On top of that, construction costs rose sharply because of inflation, she said.
Salem won City Council support a few years ago for legislation that requires updated tracking of what downtown incentives will cost the city each year from its general fund, which is how the city pays for everyday services. He said that will be part of any decision downtown development incentives.
“Absolutely it’s a concern,” Salem said. “We’ve got make sure we’ve got the dollars available to meet these needs as well as keeping our government running.”
The use of cash grants has grown in recent years. Jaguars owner Shad Khan’s Four Seasons Hotel and Residences with an separate office building are complete, his Iguana Investments will get a $25.8 million completion grant. The city also will rebate 75 percent of city property taxes generated by the value of the new development for a 20-year period, an incentive worth up to $47.7 million.