Tuesday, 01 March 2011
Written by Jon Murray and Jeff Swiatek
Indy Star - March 1, 2011
The North of South development planned for Downtown Indianapolis received a boost Monday with the City-County Council's approval of $98 million in city-issued bonds for financing.
Buckingham Cos. of Indianapolis, working with Eli Lilly and Co., has proposed a 10-building complex. Plans include a hotel, apartments, a YMCA branch, and office and retail space along Downtown's southern edge.
The risk the city would take on as mortgage holder for the $155 million project has made the unusual arrangement controversial. Some opponents also question the city's spending priorities.
But several council members said the risks were reasonable, and such a project fit the intent of Downtown tax-increment financing districts.
The council approved the proposal 16-12. It was the last major hurdle for the project, and city officials expect the bond-selling process to begin in two weeks.
Property tax proceeds from those economic development districts will be used to secure an estimated $86 million loan to Buckingham. The rest of the bonds will cover early interest payments and financing costs.
"This debt will be repaid by the tax proceeds paid by the development itself, not by the rest of the city," said Jackie Nytes, one of three Democrats to vote in favor.
A statement issued by Mayor Greg Ballard, a Republican, said: "While other cities are cutting services, Indianapolis continues to invest and grow, and North of South represents an innovative way to bring the life sciences industry, new jobs and private investment to the heart of Downtown."
The city also has agreed to pay for $9 million in street and other infrastructure improvements, tapping the development funds.
City leaders have said the reluctance of private lenders to finance commercial real estate developments justifies the public loan.
Recent national news reports suggest the market is beginning to recover, but Dennis Dye, executive vice president of Browning Investments in Zionsville, said financing of such projects remains difficult in the Indianapolis area.
Dye said bank lenders are demanding the developer come up with a large amount of equity, which is expensive to get.
"That extra equity requires a higher percentage (return) and makes it hard to make (the project) work," Dye said.