Formula change will give Shops at Midtown developers early bond cash
By Risa Polansky
A JC Penney store planned for the southwest corner of The Shops at Midtown Miami is all that's keeping developers from redevelopment agency funds earmarked for payments on the $73.6 million bond used to finance the project's parking garage, a Midtown official says.
Though the massive Wynwood mixed-use project as it stands is short on square footage until the department store is built, it has far exceeded the taxable value it was expected to reach, said Bruce Cutright, director of operations for the Midtown Group — which should merit access to the redevelopment dollars now, he said.
To qualify for the money, the Midtown Community Development District — formed by the project's developers to construct, operate and maintain the public portions of the development — is requesting the method of assessment be changed from a square footage requirement to a taxable value requirement.
Mr. Cutright is also chair of the district.
In planning the publicly subsidized development, the district, City of Miami and Miami-Dade County agreed to establish the Midtown Community Redevelopment Agency within the development's bounds to generate funds to be used only for payment on the bond.
Redevelopment agencies are funded through property valuation increases. The local government receives tax revenue from the district up to a specified level. As valuations increase, any tax money generated beyond the set level goes to the redevelopment agency — and in this case, it is to go from the agency to Midtown once the development reaches certain benchmarks.
The agreement between the governmental bodies stipulates that the Community Development District can be paid the redevelopment funds only after certificates of occupancy are issued for at least 90% of the components for each phase of the development.
This translates, Mr. Cutright said, to about 540,000 required square feet of retail and 378,000 square feet of required residential for the first phase.
Developers have delivered to date 425,000 square feet of residential space, he said, and more than 430,000 square feet of retail, with the about 167,000-square-foot
Penney's, set for completion in March 2009, as the missing link.
The holdup, Mr. Cutright said, is a result of the city's aversion to building a Wal-Mart there in 2005, which would have kept the project on track.
So "based on square footage, the economic incentive payments have been withheld," he said. But the "underlying goal of all of this was the creation of taxable value."
In planning the project, analysts expected residential units to sell for $225 a square foot. They sold for an average $320 a square foot, Mr. Cutright said.
The retail space expected to lease at $25 a square foot went for about $10 more.
"They've exceeded the taxable value," said Miami Chief Financial Officer Larry Spring.
Reworking the policy for allowing access to the redevelopment funds — which would require approval from the city, county and redevelopment agency — is simply a way "to promulgate a better methodology for assessing their benchmarks so that they can receive the contribution they're supposed to get toward the debt service on the garage," Mr. Spring said.
But the contribution won't be much.
Jim Villacorta, executive director of the city's redevelopment agencies, said the Midtown Community Redevelopment Agency in 2006 garnered $133,000 and in 2007 about $242,000. Projected for 2008: about $735,000.
Required debt service on the bond for this year is about $4.54 million. For next year, about $4.78 million.
Should the redevelopment agency ever generate money beyond the cost to pay the bond debt, Mr. Villacorta said, the excess would go directly to the city and county.