Keystone Realty Group’s plan to spend $141 million on two high-profile downtown redevelopment projects passed a hurdle Monday night as an Indianapolis City-County council committee unanimously approved $16.7 million in financing to help fund the project.
IBJ last week reported on Keystone’s plans for a $61 million dollar Intercontinental Hotel project at the historic Illinois Building at 17 W. Market St. and $80 million redevelopment of the former AT&T 220 Building at 220 N. Meridian Street into a mixed-use commercial, apartment and retail building.
The council’s Metropolitan and Economic Development Committee passed the proposal, allowing $16.7 million in “bond anticipation notes,” which work similarly to bonds but are anticipatory short-term securities issued under the assumption that the city issues actual bonds within five years. The city anticipates issuing about $17.5 million in developer-backed bonds to finance the project.
The projects, which are both located in the consolidated downtown tax-increment financing district, would use 80 percent of the tax revenue generated by the projects to pay off the bonds, which last for a period of 25 years.
If the project fails to generate enough tax revenue, the developer is on the hook.
“If there’s not enough increment to pay, it’s our responsibility for us to fill that gap,” said Chris Carriere, director of finance for Keystone Realty.
The projects would continue to bring in tax revenue to the city during the life of the bond. The Illinois Building currently generates about $420,000 per year in tax revenue, primarily because of the 2016 additions of Giordano’s and Hyde Park Prime Steak House to the ground floor.
The former AT&T building generates about $120,000 per year for the city in tax revenue.
When the improvements are finished, the city anticipates receiving an additional $341,000 in annual taxes from the buildings, even during the time that the developer is paying off the bonds.
Republican council member Colleen Fanning said she believed the project was a “perfect example” of the benefit of developer-backed bonds.
“This city has added many, many layers of risk mitigation,” Fanning said. “There’s really no risk to the taxpayer at all on this. I have every confidence in this.”
Council Vice President Zach Adamson raised questions about the project's use of the city’s “percent for public art” program, wherein 1 percent of the bond proceeds of the project is used to fund public art.
Plans call for the public art paid for by that program to be installed at the actual project site, which Adamson said is against the spirit of the program, which aimed to place public art in low- and moderate-income areas.
Deputy Mayor Angela Smith-Jones said she was open to discussing that concern with the developers.
Democrat LaKeisha Jackson said she supported the project because she said the Intercontinental Hotel would “help give us some leverage” to land bigger conferences and sporting events.
“This would garner us more visibility and more ambiance of looking good as a city,” Jackson said. “We can work out the nuance of the complexities of the finances [and] if the city is not holding the bag, I think it would be a great deal.”
The bond-funding proposals still need to clear the Metropolitan Development Commission and the full City-County Council.