O Street Market Delay Could Cost City More Cash
Shaw's Giant grocery store closes today, and despite doubts and delay, Roadside Development told Advisory Neighborhod Commission 2C last night that the CityMarket at O development is finally getting started in earnest. But because of the extra time, the Chief Financial Officer says it'll cost the city more than anticipated.
Yesterday, CFO Nat Gandhi sent the Mayor a letter apprising him of the situation. The details, if you're into these kinds of things: In order to finance the project, the city floated $43.5 million in tax increment financing bonds. Paying that off requires the construction of a hotel, but at this point, getting the money and completing the designs for the hotel will take at least another 15 months.
"Due to this lag in the commencement of the hotel construction and the uncertainty surrounding the completion of a full hotel deal, the District would need to set aside $1 million in the financial plan annually to cover the potential shortfall in tax revenue available for debt service, beginning in FY 2015," Gandhi writes. "The funds would be required in the event that the hotel is not completed and the projected hotel tax increment is not available to support debt service on the proposed November TIF bond issuance."
Roadside's Armond Spikell says that the city's just being cautious. They do, in fact, have a signed deal for a hotel with not one but two major backers. "It's a cover-themselves letter," he says. "You know, 'we warned you, there's risk.' Is it a significant risk? No."
Spikell has only thinly veiled impatience for how complicated the process has been with the city. "Twenty-five percent of the bond proceeds go to pay teams and teams of lawyers that are on top of lawyers," he said, while praising the Deputy Mayor for Planning and Economic Development for "moving things a lot faster than they moved before."
There's still another big hurdle for one piece of the project, though. To construct the 80 units of senior affordable housing, Roadside had been counting on a $7.5 million loan from the city's Housing Production Trust Fund—which, you may recall, is pretty much empty until deed recordation taxes pick up again. So they're looking at other sources, like low income housing tax credits, to finance the project and begin construction on schedule. There's a strong incentive to do so: Besides the cost of restarting construction later, the city will exact financial penalties for breaking deadlines (which might have been useful for some other projects I could name).