Saturday, November 10, 2007

Another Hotel Project Looking For A Handout

The IBJ's Cory Shouten fills us in on an ambitious $480 million hotel and other mixed use project planned just south of the downtown near Lucas Oil Stadium. Shouten writes:

The project, Legends District—SODO, could be one of the largest private developments in the city’s history. It would sprawl over 11 acres that are now home to several parking lots, Subway and Arby’s restaurants and the former Chateau Thomas Winery.

For the last two years, The Legends Entertainment LLC has quietly put several properties under contract. It now controls all the land and recently closed on the first parcel, a 1.2-acre parking lot at the southeast corner of South Street and Madison Avenue, for $3.5 million.

The lead developer is Ryan Zickler, principal of Indianapolis-based Zickler Associates. Other partners are Tim Shrout, president of locally based Cedar Run Ltd., the developer of Heartland Crossing; and Doug Mennen, principal of Lafayette-based Mennen-Gutwein LLC.

The project’s retail portion will be designed to complement Circle Centre mall. The developers are targeting retailers such as Target, Dick’s and Best Buy, along with casual and upscale restaurants. The project would have 2,200 parking spaces, most of which would be underground. The three hotels would have a total of about 500 rooms.

And now the part you've all been waiting to read. "The development team plans to meet with Mayor-elect Greg Ballard, and hopes to win tax abatements in exchange for a potentially giant boost to the city’s tax rolls," Schouten writes. Hell, no other businesses in the mile square are paying property taxes, these developers probably figure why should they. More demands on and costs for the city's infrastucture which we can conveniently shift to homeowners. Same old game.


Anonymous said...

Did you ever get the feeling that the Mayor really doesn't have much say in who really runs this town?

Isn't this what people voted against?

How about a moratorium on abatements and tifs for four years until this town can take care of the people who have to live in it.

We will soon see the REAL Greg Ballard won't we.
Folks, these next for years may be worse than the last eight under Peterson.
I didn't work my ass for Ballard to have these same bastards keep taking $$ out of my pocket while my own neighborhood is falling down around me.

Anonymous said...

This project will never get off the ground.

Ryan Zickler is three-quarters snakeoil salesman, one-quarter developer. He has no experience in brokering many large deals. And he is no developer.

A smaller portion of it might fly...and it's a good location.

Isn't it amazing how the media in this town can be led around by the nose? Why didn't the reporter ask these simple questions?

1. Have you run this by the pertinent neighborhood associations?

2. Ditto with the district councillor?

3. Need any variances? Judy's only here for a few more weeks...and she's the only one who routinely ignores stautes and grants these variances. And King Ro won't be around to bully his fellow caucus members if someone calls it down for a vote.

4. Has the professional staff at DMD had much input?

You won't get past the first two questions with this project.

This will die the same death Market Square did. Plus, Al Kite won't let another big hotel happen downtown until he gets better returns on the Conrad, which won't happen for awhile.

Anonymous said...

If these developers can't turn a profit on this project without taxpayer money then perhaps they shouldn't build it.
Downtown has grown to a point where a free open market conditions now prevail. The need for the city to underwrite more developers is no longer needed.
The Mile Square can stand on it's own now. One only look at the price of real estate there now.

Which reminds me, I would like to see the Market Square site put on the auction block and sold to the highest bidder. Then place that money into a program to rid this town of about 12,000 abandoned houses.

Anonymous said...


The Urbanophile said...

Abatements aren't necessarily horrible. This area is largely vacant today and must contribute very little in taxes. Even with an abatement, it could end up adding dollars to the tax rolls, even in the short term.

The real problem is less abatements, than the huge TIF subsidies these places get. This both removes large districts completely from the tax rolls for an extended period, and hands cash money to a developer.

Speaking of TIF's, I suspect (though don't know for sure) that this area, like most of downtown, is already in TIF zone, meaning no taxes would go into general funds anyhow.

Gary R. Welsh said...

"This area is largely vacant today and must contribute very little in taxes."

That land is hot right now. Check out the selling prices for land in that area and look how much the guys are asking the CIB to pay them for the land south of the RCA Dome. The assessed values should be quite high, but I'm guessing it's deliberately under-assessed.

The Urbanophile said...

Clearly, most of the land south of South St. should be subject to immediate re-assessment based on the prices being paid for land for the stadium.

Of course, some of the land value is no doubt the implied value of expected tax abatements and TIF subsidies.

For all the progress downtown Indy has made, I have long argued that we won't know for sure that downtown Indy has really come into its own until major development is able to stand on its own two feet, without tax subsidies.

What compounds the problem is that that so many of the subsidies have gone towards extremely low quality development.

Anonymous said...

I'm one of your readers and have contributed some material to you in the past which you have posted.
My question to you is this, is there anything particularly wrong with letting the market take care of itself with regard to a project like this?
Downtown redevelopment began in the 1970's, now here we are 37 years and over $12 billion dollars later still wondering if "downtown can stand on its own"?
I'm sorry, but at some point these artificial public supports are going to have to be kicked away and replaced with a free market.
As Gary stated, look at the price of real estate down there.

We have serious problems in our city and the population continues to move out of the "old city limits" of Indianapolis. What good is an Emerald City downtown when it's surrounded by a war zone of over 12,000 abandoned houses and and soaring crime with no future in sight.
Personally, I think it's time to let the market take care of itself and start placing tax money back to cleaning up this town where it needs it most.

Anonymous said...

Anon 2:04 and what are you doing to help alleviate the situation. Now remember complaining doesn't count.

The Urbanophile said...

I'm a big advocate of dialing back on subsidies. For this project, I don't know enough about the details to comment. I would be highly skeptical of any taxpayer support to the hotel or residential components, however.

I don't think all subsidies are created equal, or that any tax benefit to a private development is bad. Look at what Plainfield has done. They will give a ten-year tax abatement on almost anything. Did that destroy their tax base and hurt the residential taxpayer? No - in fact, it was a key tool Plainfield used to become one of the top industrial/distribution submarkets in the USA, has contributed to keeping Plainfield's taxes low while giving it the best roadway infrastructure of anyplace in Hendricks County.

So while I don't advocate handing these guys a blank check, and certainly no TIF money, I'd be willing to consider an abatement if it made sense financially for the city. Is the city better off with an Arby's and Subway paying full taxes versus a $480 million development paying 50% taxes for a limited period of time? I don't know, but would like to see the math.

One thing I'd like to see with regards to this is some type of written policy from the city on the types of development that might qualify for an abatement and the level of quality the city would expect before giving it. For example, I'd be more willing to go for abatements on high density development such as high rises that clearly maximize the value of precious downtown land versus low desnity, suburban copy-cat development.

For this development, I'd want to see a) high density (though not necessarily high rise) b) high quality design that is not self-contained, but is urban in form, engages with the surrounding area and has a pedestrian element to it c) brings something unique to downtown d) is financially a win for the city (i.e., net tax positive in year 1 or 2) and e) excludes the hotel component before I'd want to hand out any significant abatement.

Anonymous said...

the tax abaitment AIN'T GONNA HAPPEN!

Anonymous said...

3:23 this is 2:04,
What am I doing? Working very very hard on the abandoned house issue in this city for which there is currently no real plan, no money and virtually no staff to handle a problem of this magnitude.
I fly out to Baltimore Tuesday to meet with some officials there that have created a plan that may work here. They established neighborhood based groups. You may wish to Google: Baltimore Neighborhood Bill of Rights.
I've seen the plans that don't work, Detroit, Cleveland etc. etc. first hand.
Hotels and condos downtown at taxpayers expense will not solve the blight of our inner ring suburbs.
I like what I see in Baltimore but I'll need to see it first hand.
BTW, I'm doing this on my dime, not the city's or others.

Anonymous said...

Thanks for the response Urbanophile. You do try to keep things in perspective and speak your mind. That's why I like you blog. I don't always agree with you but that's what blogs do, create discussion.
BTW, I sent you the piece on Detroit:Death of a City Block from the Detroit News.
Gary needs to post a link to that article here. It's scary but a must read.
Keep up the good work Urb!

Anonymous said...

Enough of the Detroit/urban blight connections, OK? It was overkill in October, and it's overkill now.

Urbanophile, I've never read your blog...please post a link.

TIFs don't work the way you described, tho. The enforcement/expiration arm of them has gotten real, real lax in the last few years. But, basically:

Property taxes that would've gone to the city/county, schools, etc., go into a TIF Fund for a specific district with specific boundaries. The proceeds either pay down improvements in the TIF district, or pay off any bond issued to pay for those improvements, or a combo of both.

The TIF is supposed to end, and the taxes revert back to the proper taxing entities, when the specific improvements (sewer, roads, etc.) are complete.

Therein lies the rub. Without stern monitoring, the TIF continues, long after the improvements are finished.

No direct checks are written to developers.

It can be, in effect, money in their pocket, however...if you have to put in a $2 million sanitary/storm sewer for Project X, and you can get the TIF money to pay for it, it's a relief on the developer's overall bottom line.

Re: The Zickler proposal: There are substantial improvements already on the subject site. An Arby's that was expensive to build, and other stuff, too.

In today's lending environment, the developer would have to have it about 75% pre-leased to get a construction loan. That alone will kill this deal.

The Urbanophile said...

anon 5:34, my blog is linked off my blogger profile, or you can google "The Urbanophile". Gary has kindly linked to me off Advance Indiana as well.

TIF is supposed to go only for public infrastructure, but there always seems to be a lot public infrastructure in these projects. For example, there appears to be $45 million worth for the JW Marriott complex. As you note, this is very poorly policed, especially as much of the money appears "off budget".

Tax abatement last for 10 years max I believe. TIF districts last twice that (or more in some jurisdictions). TIF captures 100% of any new commercial taxes paid into the zone, money that is not flowing to local government.

I don't think TIF's are always bad. They can be good when used for their original purpose, which was revitalizing blighted neighborhoods or in other targeted situations. But they've turned into little more than developer subsidies in pratice. Ironically, most use of TIF today appears to be subsidizing greenfield sprawl, as is the case with new developments such as Anson in Boone County and the Noblesville Corporate Campus.

Anonymous said...

thanks, Urban...nice blog. I hadn't seen the link at the bottom of Gary's blog.

Tax abatements are one thing. Abatemnents are best-used for straight-forward job promises, with a trigger if certain quotas aren't met. Peterson's folks actually got quite good at that. And they revoked multiple abatements when commitments weren't met.

TIFs are for infrastructure only. Their expiration is the earlier of: payoff of the infrastructure, or ten years.

The Bond Bank is supposed to oversee their timeframes. An ugly little secret: one for 96th St. bridge, through much of The Precedent (yeah, that Precedent), paid off its obligations and continued longer. Washingotn Township Schools complained that the TIF money should go back to the taxing units, and they got a one-time check in 2005. They were told it was one-time only, and not to whine any more. And ya know what? Those dunces did just that: cashed the check, and didn't ask the tough questions: why is this one-time, why isn't the TIF finished, etc.

I can't believe that incident was isolated.

The administration of these TIFs has been inconsistent, to the tune of millions of tax dollars. The taxes are paid, but they go into these accounts for infrastructure.

It would be very interesting to see what checks were written on those accounts after the infrastructure was paid for. Can you say "Ice Miller" ?

This is not, repeat, NOT, a small amount of money.

Anonymous said...

Developers always cry about government interference in the free market, but are always ready to seek out a government handout for hair-brained schemes with phony elevations created from the newest software program their junior draftsman just learned to use.

Tax abatement and other so-called economic development "incentives" were born out of desperation. The more they are used, the more desperate the city appears. How about letting developers live and die on their own dime.

Also, if we would change our tax system (maybe just for downtown) and used land value taxation, the use of tax abatement would quickly end as their would be no reason for abatement since the structures would not be taxed or would only be lightly taxed.

The Urbanophile said...

sos, I am a huge proponent of land value taxation (LVT). The benefit of LVT vs. traditional property taxation are immense.

Anonymous said...

5:34, More than 12,000 abandoned houses in Indianapolis compared to 11,000 in Detroit is not something to sweep under and pretend to call discussion of it "overkill".
You are obviously not very astute in matters relating to urban blight and population loss that is one of the root causes.

Since Unigov was created the central core of Indianapolis (the core being the pre-Unigov city limits) has seen a population decline of over 160,000 people. On a percentage basis this is nearly the same loss of population as Detroit in the same period of time.
When a city loses that many people then the issues of abandoned houses and businesses, increased crime and decline of services due to lack of tax dollars becomes a very serious matter.
People like yourself may want to educate themselves on the history of Detroit and compare it with the history of Indianapolis.
The similarites will scare the hell out of you and when that happens you will then be more conscious of the "real Indianapolis" as opposed to the "perceived Indianapolis".

Go to Urbanophile's blog and read the series Death of a City Block. It's the history of my Indianapolis neighborhood and all those that surround me.

Anonymous said...

9:18, I'll match my "astuteness" to yours any time.

The city began bording up abandoned houses and identifying with this strange spray-painted date system, in 2003. It only amplified the very complex problem of abandoned homes...who in the hell thought of putting dates on something, especially if you can't do anything about it? Not very politically smart.

Urban blight is a tough charge to make stick in this city, though. Job growth and stability, even in a wretched economy, has been steady to slightly down. Scores of American urban centers would kill to have our successes.

By any reasonably-accepted professional standard of measure, this city has made tremendous progress on multiple fronts. Its successes are immitated by many cities, and it is often cited as a model of urban government. Going back to the Lugar days.

The problems are there, to be sure. The challenges will always be there.

Let's not over-analyze this election's results. A once-popular mayor drops the ball, loses his focus, and makes some dumb decisions. Taxes kill him. He refuses to separate himself from a mortally-flawed council leadership. He has paid the price.

I happen to think the city is in good shape, and that Ballard can use that strength to make us even better. He's smart, and he's the first mayor ever elected who owes nobody anything. How refreshing.

After elections are done, this has always been a city which emphasizes cooepration. Only in the last couple of years, under horrid Democratic council leadership, has the rancor been this loud.

That's over now, thankfully.

Anonymous said...

"Urban blight is a tough charge to make stick in this city, though. "

Are you kidding me?

Anonymous said...

9:54--no--as someone who works professionally in real estate valuation, and has for 30 years, I'm not kidding you.

I don't resort to hystrionic campaign rhetoric to define an urban area.

Could it be better? Hell yes. And I think this new mayor may go in that direction. I hope so.

Are these cities who would give their left nut to be in our position?

Many, many of them.

I know that doesn't fit the simplistic view of the city that some folks painted during the last few months, but it's true.

Anonymous said...