Market Square Arena and Development/Redevelopment and Bart Peterson and Real Estate & Retail

Mayor says MSA 'not a priority'

September 3, 2007

When Bart Peterson announced in February that he would seek a third term as mayor, he said he wanted the opportunity to remedy one of the biggest disappointments of his tenure: the stalled redevelopment of the Market Square Arena site.

At the time, he was pushing a tight time line to spark action. Developers got two months to submit plans. Two teams filed bids in April, and city officials promised a decision by July at the latest.

Now, with the Nov. 6 mayoral election looming, Peterson seems content to wait for a third term to choose who will develop the four-acre site. He's willing to put off the opportunity to wipe past failures clean in large part because the political climate has changed.

Promises of quick action on MSA were made before property tax bills began arriving in Hoosier mailboxes, before the mayor sought an increase in income taxes, before all the protests and tea parties and extra scrutiny on city subsidies of all stripes.

Both teams that submitted bids for MSA have said they need city money to pull off their proposals. Of course, digging up several million dollars to help a developer build luxury condos wouldn't exactly scream "fiscal responsibility" to agitated constituents.

"To be honest, my personal attention is focused 100 percent on property taxes and crime," Mayor Peterson said in an interview with IBJ. "It's not a priority of mine to sit down with our team and push [MSA redevelopment]."

Peterson said the committee he appointed to review the proposals continues to meet, carefully examining options and vetting the financial wherewithal of the players. It's just not a mayoral priority, and won't be, for a while.

That frustrates people in the development community, particularly those who scrambled to put together proposals in two months and have twiddled their thumbs as the city's selection process drags along.

They say the project is a legitimate opportunity to create jobs and add to the tax base (the city-owned parking lot where MSA once stood is, naturally, not on the tax rolls).

"Obviously, the mayor's distracted and it's unfortunate," said one prominent local developer who spoke on condition of anonymity. "I'm not sure why they've needed as much time as they've had. You've got two teams ready to do it. Why not pick one, and run?"

The best option, politically, is to wait, said Bill Blomquist, a political science professor at IUPUI. Delays will work in the administration's favor, particularly at a time when officials are calling for spending cuts and increases in tax revenue, and critics are questioning subsidies for a new convention hotel and Lucas Oil Stadium.

"At least ordinary residents of central Indiana can imagine themselves going to a Colts game," Blomquist said. "They can't necessarily imagine themselves buying a $350,000 condo."

Blomquist is willing to bet more residents are upset about taxes and budget priorities than about delays with MSA redevelopment.

"Not doing this is working better politically than doing it and having it cost money," he said. "None of us would be surprised if, in the middle of November, there is a move forward."

Regardless of when a deal gets done on MSA, a city subsidy would have to be defensible, something that will boost the city's finances in the future, said Peterson, who acknowledged the political ramifications of moving forward now.

"[The deal] would certainly come under much more scrutiny at this time than it did a year or two ago, and I think that's perfectly appropriate," he said.

The real test is ensuring that the chosen project is viable, Peterson said. Another concern will be how turmoil in the credit markets could affect the project. The last MSA proposal, selected in 2004, petered out after the developers failed to pre-sell enough condo units to arrange financing.

This time, no pre-sale requirements were allowed of the bidders: Market Centre Partners (Kosene & Kosene Residential Inc., Pedcor Cos. and Smoot Construction) is proposing a $130 million residential and retail complex with a 21-story tower and a 15-story tower, and Market-Ability Partners (Lauth, Mansur Real Estate Services, Hearthview Residential Inc. and Venture Real Estate Services) is proposing a $150 million project with a14-story condo/office tower and a Target store.

Both teams may be in limbo for a while, said Jon Owens, a principal in the local office of St. Louis-based Colliers Turley Martin Tucker.

"It would be absolute political suicide to come out with any incentives to a developer to get that thing out of the ground," Owens said. "My guess is [the mayor] is waiting for things to quiet down on the tax front before making an announcement on MSA."

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