Pedcor Cos. is offering Carmel leaders an unusual array of guarantees backed by its own bank account in hopes of landing public funding for a portion of its $100 million City Center expansion.
The Carmel-based developer wants the city to issue as much as $17 million in property-tax-supported bonds to build a parking garage, streets and other public infrastructure for the project.
If all goes as planned, the expansion’s eight buildings would produce enough tax revenue to repay the bonds. But if development stalls or assessments don’t meet projections, Pedcor is prepared to step into the breach.
A work-in-progress agreement between the Carmel Redevelopment Commission and Pedcor lays out several layers of protection for taxpayers, including individual guarantees for each building and for the development as a whole.
“Nobody in the nation is doing this,” said CRC chief Corrie Meyer, who helped negotiate the deal. “It’s unprecedented to have a series of backups like this.”
Pedcor CEO Bruce Cordingley said the belts-and-suspenders approach reflects the company’s confidence in the second phase of City Center, a commercial-and-residential hub in the heart of Carmel.
“We’re adding to something that we’ve shown does work,” he said, citing the number of leases signed during the Great Recession and the lessons Pedcor learned about multi-use development during the first round of construction. “Often, subsequent phases are more successful and profitable than the first.”
If the City Council signs off, tax-increment financing bonds would be secured by a special benefits tax that could be levied on all property owners—something Cordingley and others said would happen only if the project and all the proposed safeguards fail.
“We’re giving them protection by standing behind what we’re saying we’re going to do,” Cordingley said.
Pedcor’s plans call for a 500-plus-space garage that would support eight new buildings in the 88-acre downtown development. At least 75 percent of the parking would be available for visitors, Meyer said.
Other infrastructure includes streets and a so-called Spanish staircase intended to serve as a public gathering space.
City Councilor Kevin “Woody” Rider said he doesn’t see a downside to the proposal.
“The city will be totally protected from any exposure due to a shortfall of TIF revenue,” he said. “From what I’ve seen, it’s a strong deal.”
Pedcor also is proposing to share revenue from the TIF district, using 90 percent for the project and turning over the remainder—about $2.5 million over the 25 years—to the cash-strapped CRC.
From the city’s perspective, that’s an improvement from past deals, where developers kept all the new taxes from development, but not quite as generous as the 75/25 split Edward Rose Development Group offered to win approval for $11.5 million in TIF bonds earlier this year—an arrangement officials hope becomes the norm.
“I believe TIF is ready to go the other way,” said Luci Snyder, who chairs the council’s finance committee. “Every dollar you give to developers is one dollar you don’t have to spend on other things.”
Still, if there’s a project worthy of an exception, Rider said, it’s Carmel City Center.
“We’re developing a cornerstone to the redevelopment of Old Town,” he said. “It’s a unique situation—we’re looking at a massive amount of [assessed valuation] for the future. I’m a fool if I don’t support this.”
Indeed, although the council has kept a tight grip on the municipal checkbook since refinancing $185 million in redevelopment commission debt in 2012, members also have made it clear to Pedcor that finishing City Center should be a priority.
The first phase of development included 106 apartments and 62,000 square feet of retail/commercial space in a cluster of buildings at the corner of City Center Drive and Rangeline Road. Pedcor and Carmel developer Anderson Birkla have three other mixed-use buildings currently under construction.
The iconic Palladium concert hall and the Center for the Performing Arts, projects that represent a $200 million public investment, also are part of City Center.
As proposed, the second phase of construction will fill in vacant land between the Monon Greenway and Rangeline Road, better connecting the existing commercial-and-residential hub with the Center for the Performing Arts campus. Two buildings also are planned west of Third Avenue Southwest.
“If we don’t finish [City Center], we don’t have a viable entity,” Rider said. “We need that synergy to have long-term success.”
And parking is the key to drawing more people to City Center and its business tenants, he said. Although he hasn’t heard complaints from patrons at his City Center restaurant Divvy, Rider expects demand to grow along with nearby development.
“The garage is the lynchpin to future development in this space,” agreed Councilor Sue Finkam. “It’s needed to provide the density and assessed valuation that was envisioned way back when. … I’m excited to see it finally coming to fruition.”
Cordingley said the City Center project could proceed without structured parking, but the TIF-funded garage is necessary for development “to happen as we all want it to happen.” The alternative, a surface parking lot, would eat up developable land and limit new construction.
Pedcor is proposing to build the garage, then transfer ownership to the city. The cost of operations and ongoing maintenance, however, would be paid by users of the new buildings.
Council President Eric Seidensticker agreed that City Center will need more parking, but he’s still not sold on TIF funding or public (and consequently tax-exempt) ownership of the garage, even without operational expenses.
“Every other private business around Carmel is paying taxes on their parking, which can be substantial,” he said. “We have to evaluate what’s in the best interest of taxpayers. What will [the project] look like with and without TIF?”
The council still has some time to decide. CRC’s Meyer hopes the project agreement and bond resolution will be ready for approval next month.
In the meantime, she plans to introduce an overview of the project and the proposed stopgap measures at the council’s next meeting Oct. 6. Members also are expected to consider a procedural move that would clear the path for a formal TIF request.
Snyder said she’ll keep an open mind when reviewing Pedcor’s proposal but not an open checkbook. Although improving, the economy is still far from robust, she said, suggesting Carmel should exercise caution.
“I’m willing to look at it and I’m even willing to give it some TIF,” she said. “But I’m not willing to give away the store.”•