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Am I showing too much skin?

By Jim Sack

Fort Wayne Reader


We have a very tough decision to make, this matter of how much community money to commit to the restoration of the GE campus.

First, there is no doubt the public wants the GE campus revitalized.

We are courted by developers and their champions who paint a glowing picture of Electric Works as the game changer for Fort Wayne, a thriving, teaming campus of sushi bars, yoga mats, fountains, grand buildings restored, and scores new businesses amid leafy parks.

Others predict doom as the project becomes a money pit of the grandest proportions.

Stuck in the middle are our mayor and deputy mayor and a growing number of community leaders trying to ascertain reality from the extreme of soaring promises or apocalyptic specter.

Members of council, where the critical votes are looming in the near distance, are becoming progressively stressed, and divided with few, if any, trained or well versed in the skills this decision requires.

Councilman Jason Arp is the leader of the critics. He sees a variety of problems:
1. the cost exceeds the potential reward
2. the developers have too little “skin in the game”
3. public money is “subordinate” should foreclosure or bankruptcy occur
4. significant conflicts of interest exist
5. the financing is so convoluted and interdependent that the slightest economic turbulence could bring it all down pillar and post.
6. current financing disproportionally profits the developers while indebting the public.
7. too-big-to-stop-now means overruns will be born by the public ad infinitum…

To that list we might add the developers demand that we loan them tens of millions of dollars at one tenth of one percent for 60 years, where payback on the first 20 years would be interest only.

Councilmen Dr. John Crawford and Geoff Paddock are the champions, urging our support They argue that this is that one truly great leap forward Fort Wayne can’t afford to miss. Geoff, a beloved seasoned veteran of our long cycle of boom, then bust, now boom again, believes the tides of history favor the deal. Councilman Crawford sees this project akin to the ballpark that has so energized downtown revitalization. Remember, he voted for the ballpark despite vociferous opposition, and his prediction was born out.

In short, the champions believe the GE redevelopment will bring thousands more souls to live in the center, yield many, many millions in taxes, spin-off waves of investments, create thousands of jobs, and prime the pump for future decades of prosperity.

They add that if not now, while the proverbial iron is white hot, when?

Kaiser Tom and Bismarck Bandemer, yet undecided, are in the fiduciary middle fraught with doubts. First, this is a very big gamble indeed. Four hundred million is the low-low-low-ball guestimate of the cost. Anyone over 10 knows that over-runs, miscalculations, add-ons, change orders, surprise remediation expenses, economic downturns, developer insolvency or a few dozen other unforeseen unforeseeables will dramatically add to the cost.

Who will pay for that developer proposed new street from Jefferson to the project? Just guess. One guesses costs will rise $700k and beyond.

Another concern - the developers equity stake is a measly 5%, if that. One of our city’s top developers estimates their “skin-in-the-game” is closer to a meaningless 2%. Try getting a home loan with only 5% down, let alone 2%. Few banks would touch you. Instead, the developers are using your money to guarantee their loans. Worse yet, local money is subordinate to investor cash, so we would be wiped out in foreclosure.

That speaks to both Councilman Arp’s and Mayor Tom’s fears, that the balance of public/private depends on too much of our money, and too greatly encumbers our future. It obligates the majority of our “savings” and rainy-day funds for decades with a very, very slow payback.

As for our return on invested tax dollars, one study shows we will only see a net positive in 10 years, if then, and only if all goes well. And remember, inflation is creeping up, along with interest rates, so that 00.01% interest rate looks like a 4% loss…for 60 years.

It gets more contrived as the developers propose to repay our loans with savings they make on property taxes. While they promise increased sales and payroll taxes, those mostly go to the state. Certainly, jobs matter, but property taxes matter more.

Beyond sensing a much too uneven deal, one guesses the mayor frets the Electric Works project will be such a drain on community money that the nascent riverfront project, long the community’s top priority, will be starved of essential funding.

But the mayor and his team are also aware that the state and feds have offered some $100 million in outside money for the deal. That’s significant.

One of Councilman Arp’s philosophical gripes is a disproportionate amount public money is involved in all of these public-private deals from the Ash Building to the Landing to GE.

In short, that has been the norm since Rudisill came to Fort Wayne. The novelty of Electric Works is not the process, but rather the scope, which is enormous.

Certainly, our prosperity depends fundamentally on how we invest in ourselves. We sport neither balmy weather nor majestic vistas. We are in competition with every other city in the world, so whether we sink or swim is our doing with no help from mother nature.

Most of us agree the GE complex is too important to leave long fallow, and that some degree of public/private partnership is essential to its redevelopment.

It is rather the appropriate mix of public to private dollars that is under contention, and the level of shared risk.

Simply put, it seems a very risky, lopsided deal for which the mayor is correct in withholding support until the structure of the deal shifts more in favor of the public weal.

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