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November 24, 2010

Study shows most redevelopment projects on time, budget — arena developers among late projects

by Deena Winter

A study of redevelopment projects in Lincoln shows most of those that have been undertaken since Mayor Chris Beutler took office are getting done on time. Of the 22 redevelopment projects examined in the report, three are behind schedule. And the developer behind two of those three, WRK, is the same company the city chose to develop private shops and stores near its planned $340 million arena project.
The report indicates several high-profile projects have stalled or are having trouble getting financing nailed down, including the downtown hotel planned for the block south of the Gold’s Building and NeighborWorks’ ambitious condos and headquarters project in Antelope Valley. And interestingly, the company chosen to develop private shops near the city’s future arena is behind two of the projects that are behind schedule — a Haymarket hotel and south Haymarket mixed use project called Block 85.
The same company, WRK, also was late on an older redevelopment project in University Place. Let’s hope they’re not late getting shops near the arena, since they’re being counted on to provide the vast majority of new jobs and economic development touted by city officials when they sold the arena to the public.
In the past three years, 22 projects have been awarded public assistance in the form of tax increment financing or TIF – an urban financing tool that amounts to a convoluted property tax break. Instead of going into local city and school coffers, the additional property tax revenue generated by the project goes back into the project in one form or another – either through public improvements, lease buy-downs or demolition, for example.
Beutler asked his Urban Development Department to review those projects. The department’s resulting report says 10 of them are complete, nine are underway and on time and three are late. However, many of the redevelopment agreements either don’t have deadlines or have deadlines that only kick in once construction begins. So if construction never begins, the deadline can never be missed.
Of the 22 projects, 21 are generating enough property tax (TIF) to cover the debt payments.
“None of the projects are what we would consider to be in default,” Urban Development Director David Landis wrote in a summary to the mayor.
The one project that fell short was the construction of a 32,000-square-foot commercial building at Northwest 32nd Street for Thunderstone, a cast stone manufacturing company that planned to invest $3 million in the facility and add 10 new jobs within the first year. About $200,000 in TIF helped get the project off the ground.
However, according to the TIF report, last year Thunderstone work began to slow down with the recession, and the business has since relocated to its original home and put the new site up for sale. TIF collection will be about $14,000 short this year, which Thunderstone will be responsible for paying.
In addition, since 2008 the city has switched over to a system where the developers purchase the TIF bonds, not the city, so if the project doesn’t generate as much TIF as expected, it’s up to the developer to cover the difference.
Here’s the status of the other redevelopment projects, according to the report:
• Construction of the $18 million Hy-Vee at 48th and O streets, which received about $2 million in TIF and other city funds, was done on time and TIF collections this year should be more than enough to make the debt payment.
• Construction of an $850,000, 26,000-square-foot building for the Inland Truck Company in the 56th and Arbor Road area – nearly $114,000 in TIF was budgeted for sewer, water, storm sewers, paving and site preparation. The project is complete, on time and all requirements were met.
• Verizon’s $35 million call center in northwest Lincoln was built, but the assessed value of the 112,800-square-foot building was lower than expected. Verizon has been reimbursing the city the difference, which this year will amount to about $62,000.
• A $42,000 TIF allocation was used for the $442,000 development of David Wood Construction at 2600 W. M Court in the West O redevelopment area. Project is complete and responsibilities met.
• The $2 million business incubator called Turbine Flats, 2124 Y St., received nearly $72,000 in TIF and was completed on time and with responsibilities met.
• The nearly $3 million Sawmill project on Eighth Street between R and S streets included a $263,000 TIF and was completed and is leased, but the public utility and street improvements to be funded with TIF will be bid with the public improvements on the adjacent Arts and Humanities project when it is done. The 2010 assessed value is below projections by $231,000. The report did not indicate whether the developer, WRK, is making up the difference.
• Although some buildings have been demolished for the Haymarket Arts & Humanities project – a mixed use retail, office, hotel and residential project on the southwest corner of the block bounded by Eighth, Ninth, R and S streets – work has not yet begun on the second phase of this project. The original completion date for this WRK project was September 2010. The $25 million project includes $2.8 million in TIF, but the redevelopment agreement allows for a reduction in the scope of TIF-funded improvements if the project doesn’t meet the projected value. WRK now says construction will begin in the spring of 2011.
• The $2.5 million Washington Square project – 16 affordable housing units in the Near South Neighborhood – received $200,000 in TIF and was built as planned. However, the units are currently occupied by renters, not homeowners, and the redevelopment agreement gives the developer four years to sell the units or the developer must repay $12,500 of the TIF for each unit not sold. However, the developer has more than three years’ time left to sell them.
• Demolition of the Rosewood Hotel in northwest Lincoln, near Interstate 80, and construction of 22,000 square feet of commercial space by B&J Partnership is behind schedule but close to completion. The $2.5 million project includes $300,000 in TIF.
• Perot Systems built a $28.5 million, 150,000-square-foot building in the University of Nebraska Technology Park in northwest Lincoln, with $3.5 million in TIF. The project was done on time. Recent reports indicate the company has shipped 250 jobs to India.
• Block 85 is a $10 million mixed use retail, office and residential redevelopment on the block bounded by Eighth, Ninth, M and L streets. This is another WRK project. The TIF improvements are underway and most of the utility work is complete or in the works, but the streetscape work had not yet been bid when the report was written. The original completion date was September 2010, but the redevelopment agreement allows for a reduction in TIF-funded improvements if the project doesn’t meet the projected value. The developers will be responsible for any shortfall in the projected $932,000 TIF.
• Lincoln Flats/Bank of the West is a $6 million mixed use, commercial and residential project at 13th and O streets. Seven condos are done and three are under construction. The redevelopment agreement allows the developer, Concorde Management, until September 2011 to complete another 14 units and two more commercial spaces. Any shortfalls in the projected $764,000 TIF will be covered by the developer.
• Antelope Creek Village is an $8.2 million housing and commercial project in the Antelope Valley area, where NeighborWorks Lincoln plans to build 12 townhomes and a mixed use office building with eight condos, with $636,000 in TIF budgeted. The project has been delayed and scaled down (eliminating retail and condos above the NeighborWorks office, which may or may not be built here now) but is still in compliance with the redevelopment agreement timeline, which just requires that phases be done within 18 months after construction commences.
• Matt Talbot Kitchen’s $2.4 million move out of the Antelope Valley area to 2121 N. 27th St. was assisted by $430,000 in TIF. However, a TIF loan for another $200,000 is to be repaid with funds raised by the group. The project is complete and on time.
• Creekside Village is an $8.5 million low-income housing development north of the North Bottoms Neighborhood, where 60 apartments and 10 townhomes will be built. About $775,000 in TIF was budgeted, and although utility work is done, construction had not yet begun when the TIF report was written. The redevelopment agreement requires construction to be complete 24 months after commencing.
• Assurity’s new $57 million headquarters in Antelope Valley was helped by $7.2 million in TIF. The project is on schedule to be completed by the April 2012 deadline.
• Shoemaker’s Travel Plaza – which was budgeted to receive $950,000 in TIF – is nearly complete and has met the requirement that employees be paid 105 percent of the county’s average starting wage.
• Block 68 is a mixed use commercial, hotel and residential development just south of the Gold’s Building in downtown Lincoln. At the time the report was written, the project was still in the design phase and financing was not yet secured. The $34 million project was approved to receive $4.4 million in TIF, although the bond ordinance has not yet been approved by the developer and City Council. The project is to be complete in December 2011.
• Little Saigon – a redevelopment along 27th Street approved for up to $90,000 in TIF – is still in the design phase; the projected completion datae is June 2011.
• Haymarket Hotel and Tool House is a $16 million mixed use residential, hotel and retail/office project on the west side of the block bounded by Eighth, Ninth, Q and R streets. It was approved to receive $2 million in TIF, but is still in the design phase with a projected completion date of June 2012.
• 56th and Interstate 80 North Bluff Employment Center by Hartland Homes and Roger and Eldonna Schwisow — $2.2 million in TIF was budgeted for construction of water and sewer lines to north of I-80 and the Northbank Junction housing project. The first phase of sewer is done and a portion of the first phase of water main is done, but city funding was not available to complete the work. The project hasn’t been built due to a decline in development interest and because the generation of TIF didn’t occur as expected when the area was annexed.
The review of TIF projects prompted the Urban Development Department to make some changes in protocol. Now, all projects must include a completion date, an estimated value, a prioritized list of how the TIF will be spent, an estimate of the annual debt payment and a procedure for collecting payments if the TIF is not enough to meet debt payments.

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