Yale Balks At 9th Square Bailout
The city will send a $1.39 million tax bill next week to the developers of the Ninth Square project, rather than send the developers a new deal they had sought: to keep a lower tax bill for years to come and to secure new loans and $9.9 million in forgiven debt payments.
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Since: May 11
#1 Jun 10, 2013
Council Questions Developer's Request To Wipe Out Debt
(WLKY 4/22/2009, 9:12 PM, updated 10:06 PM)
Investors Want $7 Million Forgiven In Real Estate Deal
By Mike Petchenik
LOUISVILLE, Ky.-- Some Louisville Metro Council members are questioning a mayor's administration proposal to forgive millions of dollars in loans to an out-of-town developer whose project is losing money.
In 1983, the city loaned St. Louis-based McCormack-Baron nearly $8 million to build Phoenix Place apartments on the corner of Muhammed Ali Boulevard and Clay Street. Back then, city officials said the project cost about $25 million to build, but today, they said it is only worth $9 million, so the investors are trying to get out.
"The tax credits on it have expired and they said they've not made money," said Bruce Traughber, director of the Metro Louisville Economic Development Department. "The project is upside down in that they can't sell it for the amount of money that they have in it to satisfy our mortgages and the debt that's outstanding on the property."
Traughber said the McCormack-Baron is planning to sell the Phoenix Place land to the University of Louisville Foundation and the apartments to local developer Brown Noltemeyer so that the complex can be turned into affordable medical student housing. But, he said, in order to make the deal work, McCormack-Baron has asked the city to forgive all but $1 million of its debts to the city.
"Twenty-five years from now, we're still gonna be owed $8 million on the mortgage," said Traughber. "So, if we don't move the property today, who knows what the future holds and who knows what happens to that housing in the interim."
Traughber said the deal would also ensure that the downtown medical center could expand if needed.
"The hospital complex is a major driver of our downtown economy," he said. "So anything we can do to help that complex to ensure that complex is here in the future is important to us."
But some Metro Council Republicans said Wednesday they feel the administration is moving to quickly without necessary information, such as the financial impact it could have on Metro Government.
"To just wipe out this debt with no strings attached seems to many of us to be a big mistake," said Hal Heiner.
Heiner said the initial loan was made in an effort to ensure housing for low-income families on the eastern fringes of downtown. He said forgiving the loan could take away the city's control over the project's future.
"It's not only poor business practices," he said. "It's poor government."
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