FORT WAYNE – The bulldozers and excavators have begun rolling on the massive Skyline project in downtown Fort Wayne, and city officials have dedicated millions to helping make it happen.
But what happens if the private entities involved, Ash Brokerage and Hanning & Bean, pull out of the project? Will taxpayers end up with a $39 million hole in the ground?
I think the prospect of Ash pulling out is extremely remote, said Tim Haffner, the city’s corporate counsel.
The $98 million project is centered on Ash Brokerage building an eight-story, 95,000-square-foot, $29 million headquarters on the block between Harrison and Webster streets, from Wayne to Berry streets. The company will move its 200 employees to the building and add 115 more.
Also in the project is a $30 million, 17-story residential tower of 100 townhomes, apartments and condos by Hanning & Bean Enterprises. Both projects will sit on top of a city-owned, 1,200-space parking garage, which will be surrounded by street-level retail. The Ash Brokerage office tower will be known as Ash Skyline Plaza, while the residential tower will be called Skyline Terrace.
Local government is contributing about $39 million toward the project, which includes the land, demolition of the buildings currently on the site, excavation and construction of the parking garage.
One key to making officials comfortable with that commitment is where the $39 million comes from:
$10.5 million from the food and beverage tax in Allen County
$4 million that has built up in a fund to make loan payments for Grand Wayne Center expansion
$2.7 million from county economic development income taxes
$5 million from the Legacy Fund, which is money from the lease and sale of the city’s old electric utility
That’s $22.2 million basically in hand, and the rest will come from the tax increment finance district that covers downtown – meaning property taxpayers are not on the hook, even if everything goes wrong.
TIF districts take the new property taxes generated by development within their borders to pay for infrastructure within that district, such as the streets or sewers that made the development possible. For example, the former property owners at the Skyline site paid a total of about $48,000 a year in property taxes. After $59 million worth of buildings are constructed there, the property taxes will increase exponentially. The $48,000 will continue to be distributed as normal – among the city, schools, library, etc. – while the increased amount will go into the TIF district, in this case to make payments on the parking garage.
One thing about the worst-case scenario you have to remember is there’s already a great amount of money flowing into the TIF from the current buildings downtown, Community Development Director Greg Leatherman said. Even in the worst-case scenario, we’d still be good in meeting our debt obligations.
Officials also point out that they’ve built in protections so that even if everything does go wrong, they won’t have committed all of the money.
While the project is on a tight schedule – the parking garage has to be done by February so work on the towers can begin – the schedule also allows for the spending of public money to be broken up into pieces.
For example, the cost of buying the land, demolishing the buildings on the site, moving Cindy’s Diner and relocating a major sewer line that’s in the way, will cost about $8.5 million. Which means that if the deal falls apart before the parking garage is ordered in August, it’s not a $39 million outlay.
That’s the deep-breath moment, Leatherman said. At that point, it’s excavated to 15 feet, we would have to take a look at it and decide whether to proceed with a parking garage or wait for some other project. I don’t know that we would just fill it in.
But even then, things aren’t terrible, officials said: The city will own most of a city block in the heart of downtown that is not only ripe for development, the site is already prepared. In addition, there are $4 million in state tax credits already attached to the land that could help entice a developer, and city officials recently announced $33 million in federal new markets tax credits that could be used to snag a new deal.
There are also the protections built into the development agreement: Ash Brokerage has signed a contract to build its part of the project, officials said, and as part of that commitment must produce a $1 million letter of credit.
Ash Brokerage is building its office tower itself. And it has a lot of assets the city could go after to recover damages if the company pulled out of the deal, however unlikely.
We’re dealing with people firmly rooted in Fort Wayne, Leatherman said.
Deputy Mayor Karl Bandemer points out that Ash Brokerage has seemed immune to financial ups and downs.
Even during the bad economy of 2008, they were growing, he said.
Hanning & Bean, meanwhile, also signed a contract to build its portion of the project. It has 90 days to show proof of financing and must produce a $4 million letter of credit.
If just Hanning & Bean were to pull out, officials have a contingency for that, too.
In addition to the design for the 1,200-space parking garage, there is an alternate design for a smaller garage that does not include a residential tower built on the west end, officials said.
The parking garage is particularly expensive – about $30 million – because it will have to support not only itself, but also two structures built on top of it. Reducing its size to support only the Ash portion will drop the cost about $4 million, officials said, and give them yet another option in case things don’t work out.
At that point, we would refill (that portion of the hole) with good soil and remarket it, Haffner said.
Officials reiterate they have no reason to believe either party will be unable to fulfill its obligations. But they also say the scrutiny is warranted, especially after the delays in building The Harrison, the mixed-use building that completed Harrison Square, the home of Parkview Field.
Even though the city wasn’t out anything while developers tried to get financing in a bad economy, it was a sore spot.
We didn’t get what we were promised, and people were frustrated – we all were, Haffner said. There was sort of visceral reaction to it that was hard to argue with.
He said the community is right to make sure it’s protected in this deal.
They should be (scrutinizing it), Haffner said. It’s public money.