Monday, January 11, 2016

State St. Project: Winners and Losers

Soon we will know which of the two consortia left in the running have won the $60 - $100 million (at the last city council meeting the city increased it's bonding capacity to 73 million in bond series #A, moving to 78 million in a possible bond series #B) West Lafayette State St. Reconstruction Project.

They are:   
  • Plenary Roads State Street
    (Plenary Group USA Ltd., Rieth-Riley Construction Co. Inc., Janssen & Spaans Engineering Inc., and Shrewsberry & Associates LLC)
  • Walsh Gateway Partners LLC
    (Walsh Investors LLC, Walsh Construction Company II LLC, Parsons Brinckerhoff Inc., Rundell Ernstberger Associates Inc., and Milestone Contractors LP) 
Who are the other winners and losers?

The biggest winners are the investors who are renting out the money to finance the winning consortium. The have little or no risk here. Not only are they guaranteed payments for 22 years from the revenue accumulated in the Levee-Village TIF, but should the TIF fail to produce the anticipated revenue (between 4.4 and 4.7 million dollars each year), the city is obliged to collect a "special benefits tax" beyond the usual property tax caps, to insure the safety and profitability of the investors. The WL Redevelopment Commission on January 6th. upped the initial lease payment $2.5 million to $19.6 million to make the package more attractive to investors. Nice. 

Purdue is also a winner. It's leadership scores an ideological debate point by replacing the traditional public works model with the profit driven "public/private" partnership now in vogue. It gets a big campus rehab in time for the 150 anniversary of Purdue in 2019. The university's western gateway is developed much more quickly. Projects that were once to be financed by other means (the Todd's Creek relocation) are folded into the State St. budget.

If Wang Hall is typical, there will be some taxable development to feed the western US 231 Purdue TIF and offset Purdue's costs. But whether these new "public/private" projects appear because they escape taxation by wearing a Purdue educational label, or are taxed to repay PRF's investment and grow the city, Purdue does well.

West Lafayette wins. The city could accomplish in three years what might have taken it thirty. Think "Railroad Relocation". West Lafayette wins big IF the city can it make the most of this redevelopment opportunity. We have an uneven record of urban redevelopment. West Lafayette wins big IF the selected consortium moves well up the Joint Board's "scoring ladder". If the ring roads are not completed, we "win" a daily crawl up the W. State St. hill. If we don't get any of the "pretty" that appears in the MKSK  renderings, what will inspire new investment? West Lafayette wins big IF at the end of “Build-Operate-Transfer” road lease, the "pre-owned" road we then inherit is in pretty good shape. IF not, then maybe the city just wins a little.

The losers? Possibly the city's neighborhoods. This was James Haas's argument in the last election cycle. The city has grown dependent on it's TIF's to fund what was once thought to be basic services funded by property taxes; fire stations, fire trucks, dump trucks. Will we be still be able to do that? What else could you dream of doing with 4 million dollars each year for 20 years? Will the benefit derived from "Re-State State Street" trickle up the streets of West Lafayette?
All the signed confidentiality agreements won't matter in a few days. We will soon know who won.

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