College Hill - Correspondence to Shawnee County Commissioners
December 30, 2005
Mr. Ted Ensley
200 SE 7th B11
Topeka KS 66603-3971
Dear Mr. Ensley:
I have several concerns regarding the Redevelopment District for the Washburn Lane College Hill area that was recently approved by the City of Topeka City Council for TIF eligibility. The taxpayers are expected to provide a $5.0 million loan to these developers; a loan secured with approximately $2.0 million in land and $3.0 million in hopes and dreams. Few banks would accept this type of risk and I don't think the taxpayers of Topeka and Shawnee County should be expected to accept this risk either.
Based upon the Feasibility Study prepared for the developers by Richard Caplan & Associates, the demand for this project will be driven by Washburn University students. Washburn University's Fall, 2005 enrollment growth was flat, falling short of budgeted growth. In fact, the occupancy rate for the Living Learning Center residence hall was only 88%, considerably less than the anticipated 92% occupancy goal.
I respectfully request that the Board of Commissioners seriously take into account the following issues when considering their action on determining the eligibility of this Redevelopment District for TIF funds.
1. Negotiating Purchase Prices
The Topeka City Council established the Redevelopment District based, in part, on Caplan's blight study. A review of the properties within the approved district indicates that very few properties in this area are owner-occupied. In fact, ten parcels are owned by one single investment company. Four parcels are owned by the Washburn Lane Parkway Renovation, LLC, formed in April, 2005, with one of the partners in this LLC individually owning two additional parcels. It is apparent that some speculative purchasing over the past few years has contributed to the blight that now is found in the area.
What safeguards are in place to ensure that property being purchased by TIF funds are negotiated at a fair price? It is difficult to imagine how some of these purchases could be considered an arm's length transaction.
2. Developer's Credentials
The minutes of the December 13, 2005 Topeka City Council meeting indicate that Councilmember Alcala asked that the city attorney ensure that the City "receives a guarantee from the developer regarding their financial responsibility for the project."
Who is the developer? Newspaper reports have indicated that the developer is Henry McClure and his partners in Southwind Capital LLC. The Notice of Public Hearing for the December 6, 2005 meeting that established the redevelopment district indicated that the private developer is Washburn-Lane Parkway Renovation, LLC, a private company formed in April, 2005, most likely for the sole purpose of this project.
What assurances are given to the public that this LLC is not just a pack of thieves incapable of meeting the financial responsibilities of this project? Are performance bonds required for this type of private development when public funds are a significant part of the financing package? Is competitive bidding required for the construction costs?
3. Economic Development
The Shawnee County taxpayers are already paying an additional $0.01 in sales tax to support economic development in this area. In addition to providing that source of revenue, we are expected to assume the risk on the $5.0 million in bond proceeds to support this project, again in the name of economic development.
The Feasibility Study for College Hill Redevelopment Project specifically states the intention to maximize the rental rates by "attracting regional or national tenants to replace local retailers." I find this type of economic development to be offensive. Taxpayer's funds should not be used to push local retailers out onto the street in order to maximize the profits for these developers.
4. Long-Term Outlook
Who is likely to ultimately own and manage these properties? Developers typically are interested in tearing down, building up, and moving on. They don't usually stick around for the routine day to day operations. So, who will ultimately own and manage these properties in the manner that is required to meet the projected revenues stated in the Feasibility Study?
Less than 15% of the proposed residential units are likely to be owner occupied, with the rental units targeted to college students. With projected rental rates significantly higher than the current local market serving these students, it will be imperative that the properties continue to be well maintained in order to justify these high rental rates.
What assurances can be given to the taxpayers that this area will not return to a "blighted" state, seriously jeopardizing the aggressive projected revenue stream required throughout the 20-year debt retirement period?
5. Responsibility for Bond Repayment
It does not appear that there is any real collateral for the loan payments. The twenty year property and sales tax increment projections that support the bond repayment schedule presented in the Feasibility Study seem aggressive. The incremental property and sales tax is a bit misleading, since many of the listed current businesses have been closed and/or driven out of business by the proposed development.
What prevents the owner(s) of the new properties from allowing the properties to become vacant and falling into disrepair, as has happened recently under some of the developer's current ownership?
The local sales tax projections are based upon a 2% growth rate each year. It is interesting to note that the proposed liquor store will generate twice the current amount in sales tax, even though most of the Washburn University students are under the legal drinking age.
Have these projected tax increments been verified independently by any governmental entity?
I do not think this project should be eligible for TIF funds. I believe that the benefits to the developers far outweigh any benefit to the public, especially weighing the risks involved. I would respectfully request that you reject this project as a TIF eligible redevelopment district.
Sincerely,
Mary Lou Herring
cc: Mr. Vic Miller
Ms. Marice Kane
Mr. Bill Haynes, District 5 City Council Representative