With the national debt fast approaching $16 trillion, this may be the ultimate man-bites-dog story:
Local developers have actually turned down a $1 million government loan because – get this – they figure they can do just fine without it.
“We just didn't feel right taking that money if we didn't need it, when it could be used for something else,” said Todd Ramsey of RCI Development, which converting the former Anthony Wayne Bank building at 203 E. Berry St. into luxury condominiums, offices and businesses.
Although financing of the $15 million project may have been delayed or even scuttled without the city's interest-free loan of federal Neighborhood Stabilization dollars, the simple truth is that sales have been so brisk that the government money – however important it may have been originally – is no longer needed.
According to RCI's John Nichols, 21 of the 15-story building's 40 residential condos have been purchased or reserved, along with four businesses and more (possibly including a restaurant or grocery) planned for the ground floor.
So far as city Director of Community Development John Urbahns can tell, this is the first time anybody has actually returned money to the city because the intended recipient was doing better than anticipated. That $1 million had been included in a $7 million federal Neighborhood Stabilization Program grant the city received 2008, most of which was used to improve housing in central-city neighborhoods.
City officials, naturally, are ecstatic – deservedly so. “This proves our case that the market for downtown housing is there,” Mayor Tom Henry said. “This validates the study we did that showed a demand for downtown housing,” Urbahns added, referring to a $40,500 survey six years ago purporting to show that about 3,750 households per year would prefer to live downtown if possible.
But with all due respect to Henry and Urbahns, the apparent success of the Anthony Wayne Project does not prove the desire for downtown housing so much as it proves the demand for the right kind of downtown housing, at the right price, at the right time.
Several proposals for downtown residential space have been floated since that 2006 study, after all, and RCI's project is uniquely successful. Construction of the housing component of the city's Harrison Square project, for example, began years behind schedule and only after new financial backers were found and the proposed condos were converted into apartments.
Urbahns is of course right when he points out the differences between the Anthony Wayne project and “The Harrison” now under construction. One is a new building, while the other has existed for 50 years, affecting the cost of renovations and the expenses that must be covered as a result.
But the same market forces that delayed and transformed The Harrison have made RCI's project an apparent success. So the question obviously becomes:
If government must “prime the pump” to promote economic development, shouldn't it try to do so in a way designed to take advantage of free-market forces instead of trying to compensate for them?
Neither I nor RCI mean to minimize the value of the city's loan, which closed the project's original financing gap to the point where banks were willing to get on board. “It made us bold to get out and market,” Ramsey said, an effort aided by the construction of two model units made possible by the loans.
The federal government has squandered hundreds of millions of dollars on failed efforts to create “green” energy and jobs because the necessary markets and technology do not currently exist. The Anthony Wayne project is a case study in how to do “public-private partnerships” correctly not simply because it has worked, but because government merely provided enough money to get an already credible private project over the “hump.”
Duplicating that success in the future will be easier said than done. It is, after all, easy to dream big with other people's money. But with the city now making that $1 million available for other projects, a case of deja vu would be good news indeed -- financially and politically.