Louisville Forward seems unwilling to budge on how much it will give Edwards Cos. for two proposed developments along East Broadway, leaving the Columbus, Ohio-based company to evaluate other options to fill a $3 million gap in financing.
Edwards plans to construct a four-story, 195-unit apartment building at the former Mercy Academy site and a four-story, 260-unit apartment complex with first-floor retail at the corner of Baxter Avenue and Broadway. The developments, the company said, would transform that area.
Earlier this year, the city’s economic development arm Louisville Forward preliminarily agreed to give Edwards a total of $7.5 million in tax breaks for the two projects. Edwards also asked the Jefferson County Board of Education for a $3.8 million tax break in March to supplement the incentive agreement it had worked out with Louisville Forward — a total of $11.3 million.
Per the proposed agreement, the city would take out a bond of no more than $60 million on behalf of Edwards to fund the Phoenix Hill project and a second bond of no more than $30 million to finance the Mercy project. The city would own both properties and lease them back to Edwards until the company paid off the bonds.
However, the company now is looking to city government to chip in almost $3 million more after Jefferson County Public Schools leaders told Bill Bardenwerper, the Louisville attorney representing Edwards, that they do not have the manpower to devote to studying the implications of the incentive agreement.
“How do we plug that gap?” Bardenwerper said, adding that he has always told government officials and residents that the projects were package deals, one would not move forward without the other. Without the additional, $3 million Edwards can’t proceed.
At a Louisville Metro Council zoning committee meeting Tuesday, Edwards asked elected officials to approve a total of $10.4 million in tax incentives for two projects to make up for the school system’s lack of participation.
Metro Council has not approved the incentive, and Louisville Forward’s media spokeswoman Jessica Wethington indicated to Insider Louisville in an email that the city was unwilling to increase the incentive offer, directing IL to a letter from Jeff Moseley, deputy chief of Louisville Forward, to Edwards. (See letter below.)
“The correspondence stated Metro Louisville’s best and final offer,” she said.
As of 8 p.m. Wednesday night, Bardenwerper said he’d not spoken to Louisville Forward about increasing the tax breaks.
“We just have to decide if we just take that at face value and that is the best we can do,” he said when made aware of Louisville Forward’s statement to IL. “The developer is just thinking of what other options are open to it.”
Bardenwerper spoke with Edwards executives Wednesday afternoon about the meeting with Metro Council’s zoning committee and about other possible options to close the financing gap. He declined to say what options the company is considering, stating “none of them may even be viable.”
He added that the company has not completely given up on the possibility of continuing to seek funding from the school system.
“We’ve been working with JCPS leadership on the possibility of the school system participating financially, but they never made a commitment,” he said, adding “we haven’t given up on that. …They have not said a definite no.”
Although the school board did not shoot down the proposal during its March meeting, chairman *David Jones Jr. indicated the board would require a rigorous review process before deciding whether or not to approve the incentive deal.
“When a nonprofit board gets in the business of handing out tax credits, a whole lot of issues arise,” Jones said at the meeting.
In an emailed comment, Jones told IL that he has not had any contact with the developers since the March meeting.
“The Board’s focus is on the education of students, not co-investing through tax-expenditures in real estate development,” he added.
Although the local school board has never given an economic incentive before, Bardenwerper said similar agreements are “standard operating practice in Ohio,” where Edwards is headquartered. Ohio is more aggressive and offers developers stronger incentives to build, he said.
“We don’t have very good economic incentives.”
The request has received some backlash, with several Louisville residents commenting that Edwards is trying to strong arm city government officials into agreeing to the proposed tax incentive by saying the company will simply walk away.
Both the Mercy and Phoenix Hill developments are located in Louisville Metro Council District 4, so IL reached out to the three candidates for that seat — Bryan Burns, a University of Louisville graduate student; Marshall Gazaway, president of the Beecher Terrace Residents’ Council; and Barbara Sexton Smith, the former president and CEO of Fund for the Arts — to get their thoughts on the $10.4 million request.
While Gazaway has no problem with high-end housing, he said he’d prefer city money fund the Louisville Affordable Housing Trust Fund or the mayor’s Louisville CARES program, which provide quality affordable homes to those in need.
“My concern is about people living equally, but it hurts me hard when I know there are veterans still living on the streets,” said Gazaway, a veteran himself. “Everybody deserves a place to live.”
Burns spoke out against the incentive.
“It was unconscionable to even begin to hope that this development could secure $3 million from our public school system, which is already severely underfunded,” Burns said in a message to IL. “Now that Edward Cos. is threatening to walk away mid-project without our taxpayers chipping in an amount of $10.4 million dollars, I’m even further disheartened.
“This location is prime real estate, and I doubt our city would have any trouble finding a developer wanting to do business there on fairer terms.”
Sexton Smith noted that she does not serve on Metro Council, at least not yet, but she said any incentive package requires “serious thoughtful consideration” and resident input.
“There should absolutely be no shortcuts in the approval process,” she said. “The neighbors are telling me that they want to make sure that they have plenty of time to have ample input, and they very much want to see a development that takes their interests into consideration.”
She added that if Edwards wants to walk away from the project, that is the company’s prerogative.
“I believe that Metro Council and the city of Louisville can stand on their own two feet and not be bullied,” Sexton Smith said.
*Disclosure: David Jones Jr. is an investor in Insider Louisville.