The city and IDA/CDA (Industrial Development Agency and Community Development Agency) are finalizing a financial assistance and bond package to help fund public infrastructure, parks and other public amenities planned for the Garvies Point Waterfront Project, which is on the verge of breaking ground after more than 20 years of planning and over $120 million of environmental cleanup.
The city’s financial participation, support and investment in this public-private partnership have long been contemplated by the Land Disposition Agreement (LDA) with our redeveloper partner, RXR Glen Isle Partners, LLC. The LDA is the sales contract governing the transfer of the IDA/CDA-owned properties to RXR. It was first executed in 2003.
Municipalities regularly provide the public infrastructure and amenities necessary to support a project in order to attract private investment and stimulate economic growth. This is especially true when the properties sought to be redeveloped have been burdened for decades by environmental contamination and blight. The municipality funds or installs critical improvements such as the roads, stormwater, utilities, parks, etc., to make the property and sites “shovel ready” and primed for reuse.
The city’s independent economic consultants confirmed that financial investment by the city is necessary to make the waterfront redevelopment viable. RXR has already invested approximately $40 million on behalf of the project without owning a single acre. Many of these expenditures were not required by the LDA. We are appreciative of RXR’s commitment, including sticking with the city through challenging economic times.
The proposed financial assistance and bond package is a “win-win” for the city and IDA/CDA. It will be sized and structured to allow us to make our fair share financial contribution and build critical amenities/infrastructure for the project, while at the same time covering all of the project’s municipal services (police, fire, schools, etc.) and resulting in approximately $400 million in net tax revenue to the city, school district and Nassau County over the 40-year bond period, all without placing any additional burdens on our taxpayers. This will be accomplished by using the incremental tax revenues generated from the project, which would not exist “but for” the project. The city and other tax jurisdictions are coming out far ahead as tax revenues are projected to far exceed the cost of essential services over the life of the bonds.
Also it’s critically important to underscore that the bonds will be “non-recourse” to the city. We are not responsible in the unlikely event there is not enough tax revenue to cover the debt service. That is the risk of the bondholders.
Both the original 2003 LDA, and the major amendment in 2012, provided for several types of financial assistance to RXR.
The city, for example, is obligated to pay for the reconstruction of Garvies Point Road (currently estimated at $21 million). The city and IDA/CDA are also obligated to either fund or work cooperatively with RXR to obtain funding for public infrastructure and public amenities, including for any final environmental cleanup of residual contamination. Recognizing the contributions typically made by municipal entities, IDA agreed to consider in good faith “financial assistance regarding project infrastructure costs.” The LDA further identified the potential use of Tax Increment Financing to fund the acquisition and/or development of the Gateway Properties (RXR is currently anticipating a private acquisition of these 4 acres, adding to the approximately $42 million it has already invested).
As the LDA is a living and breathing document, we are continually negotiating additional amendments, which will further protect the city and make the project a reality. Just like RXR has spent extensive funds on items for which they may not have been responsible under the 2003 LDA (and will be obligated to take on additional costs), the city must do its part for making this project a success for the benefit of all our residents. It is normal in this type of long-term public-private partnership for deal terms to evolve, especially as the project approaches the finish line and economic conditions change. We are now defending two lawsuits. Costs have gone up and the project itself has become much more defined since the initial 2003 concept plan.
RXR Will Pay to Maintain Public Amenities/Infrastructure
It is important to emphasize that RXR or the HOA (Homeowners Association) will be responsible for maintaining the public infrastructure and amenities at their sole cost in perpetuity. The city will also continue to receive the same amount of taxes, regardless of whether IDA or RXR own the public spaces. The project’s public spaces, which have always been contemplated since 2003, would have little or no tax value, even if privately owned. The value of the open space is reflected in the value of the surrounding residential and commercial properties.
Finally, the sale price of the property has not changed from the $15 million that was agreed upon in 2012. The IDA/CDA and city are excited by the project’s significant progress. We are closer than ever to restoring our waterfront to productive use for everyone to enjoy.
In an upcoming column I look forward to outlining the financial rewards of the Garvies Point project vs. the overwhelming financial challenges the city would face if the project was not realized.