KEVIN LEININGER: Electric Works loses city tax credits; could lose or gain millions more
Even if Electric Works’ developers persuade Fort Wayne officials to give them more time to secure millions of dollars in private financing — and that is by no means assured — the city has already withdrawn a significant financial commitment, with possibly bigger loses to follow.
I’ve learned that $3 million of the $12 million in federal New Market Tax Credits the city promised to the $250 million project in 2018 has now been awarded to another project, apparently in response to the various delays that have plagued RTM Ventures’ efforts to redevelop the former General Electric campus.
City spokesman John Perlich tells me that the board of the Fort Wayne New Markets Revitalization Fund, which oversees awarding the credits, has transferred the $3 million “to another project which it believes is highly likely to close and the credits be properly deployed by the federal deadlines. Failing to do this would have put in jeopardy any future awards to the community.”
Perlich did not identify that “other” project.
Perlich explained that in order for the city to qualify for additional New Markets Tax Credits in the future, it must spend about 85% of previously awarded credits. “Given the delay with the Electric Works project, and in order to qualify for the next round of awarded credits, the third and latest offered reservation to (RTM) was $9 million.” RTM allowed the $9 million in credits to expire because it did not pay the required deposit, he added.
The credits “have been instrumental in funding other recent projects such as The Boys and Girls Clubs’ new facility, Turnstone, the Rescue Mission, the Harrison and Byron Health Center. Continued access to participate in the tax credit program is critically important to future community projects,” he said.
The $12 million in tax credits, when sold to private investors, generate about $2 million in cash, with $3 million in credits providing developers about $600,000. Not a lot of money compared to the massive scope of the project, but on a tight budget every dollar counts. By the time new credits are awarded this summer, though, the point could be moot if the city does not give RTM the additional time it says it needs.
As I first reported on line Tuesday, RTM says the financial disruption and uncertainty created by the COVID-19 pandemic has effectively stalled efforts to secure private funds needed to close the deal. In February the local public bodies that have pledged $65 million to the project agreed to push the deadline for leasing and funding benchmarks and construction documents back to April 30, and to June 30 for closing. If RTM doesn’t meet the deadlines, it risks losing the $65 million.
But in a letter this month to city officials, RTM attorney Pete Mallers said it will take at least 60 additional days to “re-engage” with potential funders. But the pandemic’s timeline is unpredictable, Mallers cautioned, noting that “This is something the developer has no control over.”
The city questions that “act of God” assertion, however. In a letter this week to Mallers and RTM partner Josh Parker, Redevelopment Commission attorney Jon Bonberger argued the agreement between the two parties excludes “delays caused by financial reasons. The failure to have arranged various facets of your financing would fall under this exclusion… There are many performances that are required of developer that have remained outstanding and unresolved for at least the last 12 months. It would be more accurate to say that the delay in performance of those matters is caused by reason of matters within the developer’s control prior to the impact of COVID-19.” Parker declined to comment.
Even so, the city remains willing to work with RTM and, perhaps, authorize even more funding in the future.
“Though unwilling to agree to a general and unlimited extension, (we) remain willing to consider maintaining the reservation (of the $65 million) for an additional, but limited period of time,” Bonberger wrote.
Perlich, meanwhile, indicated the city is willing to consider reallocating that $9 million to RTM “if the closing time frame is reasonable,” and would consider an additional $6 million if the city secures additional credits this year.
The development process had indeed lagged, as Bonberger noted, even before COVID-19. But Electric Works seemed on the verge of reality after Do it Best was announced as the anchor tenant earlier this year. Many city departments are making various short-term allowances for customers and residents affected by the virus; RFTM deserves no less consideration.
And if you think the uncertainty surrounding a project that could provide a massive economic jolt to Fort Wayne provides just another reason to reopen the country as soon as possible, you’re right.
This column is the commentary of the writer and does not necessarily reflect the views or opinions of The News-Sentinel. Email Kevin Leininger at firstname.lastname@example.org or call him at 461-8355.