Forest City subsidies raise questions
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| By chris_d on Tuesday, January 07, 2003 - 11:50 am:|
Here's a Brenda Payton column in the Oakland Tribune (Tuesday, Jan. 7). I couldn't find the link so I re-typed it here:
Back in the day Oakland was known as the City of Loans, a developer just had to show up with a plan and the city would offer loans and subsidies. Please come and build something in Oakland, please, please, please.
That was back when no one had any faith that anyone would want to build anything in our city.
But this is a new day in Oakland, city officials have assured us. Market-rate development projects will not receive public subsidies. No taxpayer money will be spent to lure developers to our town. That is unless it is.
Which brings us to the Forest City housing development proposed for the long-neglected uptown area bordered by 18th and 20th streets and Telegraph and San Pablo avenues. The development will include 770 rental apartments, 285 condominiums and 350 student housing units. Of the units, 80 percent will be market rate, 20 percent will be affordable.
This project, which has not gone out to bid but is the subject of an exclusive agreement between the city and Forest City Enterprises, has had a different public price tag every time it is discussed.
In the spring, the subsidy for the project was $51 million, which was annually $41 million if you counted $10 million the developer says it will return to the city after it makes a goal of a 12 percent return on its investment.
Of course, at twice the normal return on a housing development, that's a pretty high threshold. Plus the developer and the city have not signed an agreement for the $10 million to be repaid.
For any of you who believe the city will receive that $10 million, I have three bridges for sale at bargain rates. If you buy a fourth, you'll get a bulk rate.
Six months later, the $41 million subsidy had grown to $62.5 million, described in the Redevelopment Agency report as the ``total gross agency contribution.'' I'll say it's gross.
But actually that $62.5 million was really only $25.1 million, according to city officials. If you subtract the cost of relocating businesses, public improvements related to the project, the fanciful $10 million, $7.5 million of the $14 million in tax increment funds the city had planned to give the developer and another $7 million in tax increment funds generated by a condominium high rise which an as-yet-unnamed developer will build.
Other developers, both market-rate and affordable housing, dispute the city's calculations, saying the costs of public improvements and business relocations would be considered subsidies if they were the developers. When is a subsidy not a subsidy? When the city says it's not.
You also might have noticed a couple of implied ifs in the the explanation of why $62.5 is really only $25.1 million. For one, if Forest City expects some of the anticipated tax increment funds, why wouldn't the As-Yet-Unnamed Developerr of the condominium high rise?
The day the council voted to move forward with the project, yet another number was given for the public price tag. The $62.5 million gross agency contribution somehow was reduced to $59.5 million -- hey, what's $3 mil here or there -- and the $17.5 million in combined tax increment funds and $10 million fanciful repayment was increased to $22.5 million.
Presto, chango, the subsidy is only $16.5 million. A steal for the construction of more than 1,400 units of housing on 12.5 acres the city has been trying to develop for more than 20 years. That's according to city officials.
According to affordable housing developers, it's a steal all right, and the public is the one getting its pocket picked. They say even a $16 million subsidy leaves the redevelopment agency broke and unable and unable to fund other housing project with ore affordable units.
There's a lot about this sure deal that isn't so sure. Raiders Redux, anyone? What if Forest City doesn't realize a 12 percent return on its investment? After the city has put out the $62.5 or $59.5, what if the tax increment funds aren't as much as anticipated? What if the As-Yet-Unnamed-Developer wants its own subsidies?
What happens if the economic downturn continues and Forest City has second thoughts about the project? What if the apartments dont' rent for the anticipated amounts? What happens if the project costs more than expected, as all projects always do?
Where is a $62.5 million subsidy a $16.5 million subsidy? In the City of Loans, that's where.
| By diamond_lil on Tuesday, January 07, 2003 - 12:04 pm:|
Thanks for sharing that Chris.
Meanwhile, for the sake of keeping informed, here's the 'new look' of the Oakland City Council
and what to expect...or not...
| By eyleenn on Tuesday, January 07, 2003 - 12:59 pm:|
More on Oakland politics. Jerry Brown's legacy is at stake, according to Chip Johnson of the Chron.