When Keystone Realty Group bought a sliver of land near Old Meridian and Main streets in 2011, the Carmel Redevelopment Commission promised to take care of about $250,000 in site work to prepare the property for construction.
Now Keystone is offering to let the cash-strapped agency off the hook if city officials approve a $3.8 million bond issue to cover those and other expenses needed to get its Olivia on Main project off the ground.
The Indianapolis-based developer plans to buy and guarantee the TIF bonds, insulating Carmel (and its top-notch credit rating) from any risk.
And as IBJ reported in August, the proposed deal calls for the CRC to get 25 percent of the new taxes the project produces—an estimated $104,000 a year—to help cover payments on about $486 million in existing debt.
Keystone said it would use bond proceeds to pay for demolition, excavation, grading, on-site stormwater detention and other improvements necessary to transform the largely undeveloped parcel into a five-story building with 200 luxury apartments atop ground-floor retail.
“It is quite expensive,” Keystone founder Ersal Ozdemir told the City Council finance committee last month.
Councilor Luci Snyder, a budget hawk who chairs the finance committee but missed the September meeting due to illness, isn't convinced. TIF bonds aren't intended to pay for project costs such as parking lots and landscaping, she said. Rather, they must be used for to build infrastructure and mitigate natural barriers to development—"swamp relief," as Snyder described it.
The city approved a $11.5 million bond for apartment specialist Edward Rose Development Group in August. Rose is planning The District, an $80 million mixed-use project with structured parking south and west of the Keystone site.
Still, there’s a key difference between the requests: The city’s financial gurus had planned on sharing tax-increment financing revenue from The District with Rose. Long-term projections released in July assumed the CRC would get all of the new taxes from Keystone’s project, which was expected to be valued at about $17.8 million by 2016.
To sweeten the deal, Ozdemir said the company will donate about $350,000 of property to accommodate the city’s planned improvements to Main Street, in addition to covering the $250,000 in CRC obligations. Snyder said the Keystone project will benefit from the roadwork.
As planned, the Olivia is expected to add more than $20 million to the city’s tax base, said Loren Matthes of CPA firm Umbaugh, increasing the project’s annual revenue—and long-term payoff.
Carmel’s Economic Development Commission was expected to review the bond deal at a meeting today, but it has been rescheduled for Oct. 20.