The Truth about TIF and the NDC

One of the most unfortunate aspects of the events leading up to our June city council meeting was the guest editorial by Silvia Quezada  that ran in the Press Citizen Tuesday morning. Tom Jackson, Director of the NDC, sent an email to all of City Council Tuesday afternoon. 

Silvia did start the meeting Tuesday night with an apology to Tom and the NDC. However since approximately 40 members of the public were at the meeting and I'm sure more than that read her editorial, I think it is fair to run his response here.

Subject:   RE: Follow-up University Heights From:   "Tom Jackson" <TJackson@nationaldevelopmentcouncil.org> Date:   Tue, June 9, 2015 12:05 pm To:   "silvia quezada" <smq130@hotmail.com> (less) "council@university-heights.org" <council@university-heights.org> Priority:   Normal Options:   View Full Header | View Printable Version  | Download this as a file

Councilmember Quezada – I was sorry to see in the paper this morning that you feel that “NDC was instructed to analyze the (One University Place) project assuming $4 million in TIF plus interest.)  That was not my direction from any of the members of the University Heights City Council and is not the way that NDC conducts gap analyses.  What I did do was review budgets, sales projections and operating revenues and expenses for multiple iterations of the project.  If, in my initial analysis of the project’s financials, I had found no evidence of a financing gap, I would have informed the City of as much and future considerations could have focused on zoning without any need to debate the use of tax increment financing (TIF).  Instead, I identified a financing gap in that initial submission that exceeded $9 million.  This number was well in excess of what I was told was the City’s total bonding capacity and it was a number that couldn’t be amortized with a TIF rebate in anything approaching the maximum available terms of private financing.    Councilmember Lane stated in the last council meeting, and I believe during a meeting that you and I had with him in the spring of 2014, that the City couldn’t risk more than $4 million in gap financing to help incentivize development on the St. Andrew’s site.  Given this feedback, the Developer had no choice but to rework and resubmit successive plans and associated financials to try to eliminate the majority of their financing gap.  Even the plan that included the one-story retail/commercial building that was reviewed by Council in early summer 2014 – and that received relatively favorable review from your residents – could not bring the financing gap below $5 million.  A rework of that plan led to the current Developer proposal and my analysis that it evidences a financing gap with a present value of $4 million dollars. I believe that you have, through the services the City contracted with the National Development Council to provide, received an independent review of the financing scenarios that have been associated with each iteration of the project’s design, unit count, unit mix, project budget, and projected sales and operating revenues and expenses.  This review couldn’t be independent of the proposals made by the Developer, because the current development team is the only one that has control of the St. Andrew’s site.  Given that control, the Maxwell team is the only one investing in the designs, construction estimates, proforma development, etc. that are necessary prerequisites to NDC’s analysis.  I’ll be in attendance at tonight’s City Council meeting to answer any questions you may have regarding my analysis of the current proposal’s gap financing needs.  All the best - Tom Tom Jackson, Director National Development Council 927 Dudley Road Edgewood, KY 41017 (513) 300-0886 Mobile tjackson@nationaldevelopmentcouncil.org www.nationaldevelopmentcouncil.org