Author Topic: DIA approves $6.033 million loan package for Jones Bros. rehab  (Read 3202 times)

thelakelander

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The Downtown Investment Authority approved $6.033 million in historic preservation loans for Corner Lot Development Group’s proposed renovation of the Jones Bros. Furniture Co. building.

The board voted 6-0 on May 17 to provide financial assistance for the $16.7 million, 29-unit apartment reuse portion of the Jones Bros. project. The deal requires City Council approval.


https://www.jaxdailyrecord.com/news/2023/may/18/dia-approves-6033-million-loan-package-for-jones-bros-rehab/
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marcuscnelson

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #1 on: May 21, 2023, 02:06:29 PM »
Bit of a shame the expansion seems to be getting put off. This is better than getting nothing at all but still unfortunate. Hopefully the expansion follows soon.
So, to the young people fighting in this movement for change, here is my charge: march in the streets, protest, run for school committee or city council or the state legislature. And win. - Ed Markey

jaxlongtimer

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #2 on: May 21, 2023, 05:26:56 PM »
Does anyone have a running total of all the incentives DIA has given out over the last 5 to 10 years to developers?  Are we close to or above $1 billion?  And, what is our ROI on that? 

Doesn't seem Downtown has exactly taken off as planned.  Would be proof positive that investing dollars in other avenues might be better for everyone.  Hope a Deegan administration takes a fresh look at this approach.
« Last Edit: May 21, 2023, 06:37:38 PM by jaxlongtimer »

marcuscnelson

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #3 on: May 21, 2023, 06:25:06 PM »
Does anyone have a running total of all the incentives DIA has given out over the last 5to 10 years to developers?  Are we close to or above $1 billion?  And, what is our ROI on that? 

Doesn't seem Downtown has exactly taken off as planned.  Would be proof positive that investing dollars in other avenues might be better for everyone.  Hope a Deegan administration takes a fresh look at this approach.

I feel like at least part of the question here is gonna be figuring out how much money we actually gave out in the first place, and whether the projects they were given to actually happened.
So, to the young people fighting in this movement for change, here is my charge: march in the streets, protest, run for school committee or city council or the state legislature. And win. - Ed Markey

Charles Hunter

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #4 on: May 21, 2023, 07:17:55 PM »
Also, need to agree on how to define the monetary impact of an incentive. Obviously, cash up front 'counts' as a cost to the city. But, what about an abatement or discount of future property taxes on the increased property value? Do you count cash-on-completion of a project just starting, in today's budget, or whenever the project is proposed to be completed, at a future-value in today's budget? How does a delay in completion affect that accounting?

Jax_Developer

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #5 on: May 22, 2023, 08:00:08 AM »
Does anyone have a running total of all the incentives DIA has given out over the last 5 to 10 years to developers?  Are we close to or above $1 billion?  And, what is our ROI on that? 

Doesn't seem Downtown has exactly taken off as planned.  Would be proof positive that investing dollars in other avenues might be better for everyone.  Hope a Deegan administration takes a fresh look at this approach.

If the various large rendering projects get underway (Lions Skyscraper, old courthouse, brew house, Trio) then we will top $1B in incentives when you factor in the various Vestcor projects DT as well. I could do the math to see, if you take vestcor out, what it comes out to but it is certainly close.

Also, need to agree on how to define the monetary impact of an incentive. Obviously, cash up front 'counts' as a cost to the city. But, what about an abatement or discount of future property taxes on the increased property value? Do you count cash-on-completion of a project just starting, in today's budget, or whenever the project is proposed to be completed, at a future-value in today's budget? How does a delay in completion affect that accounting?

It is a simple concept to model, but extremely hard to do accurately. Generally, money 35 years from now is worth half of what it is today. (Rule of 70). But a single year of high inflation changes all of that. So, basically impossible to know but generally in 30 years it will be worth half of what it is today.

Does anyone have a running total of all the incentives DIA has given out over the last 5to 10 years to developers?  Are we close to or above $1 billion?  And, what is our ROI on that? 

Doesn't seem Downtown has exactly taken off as planned.  Would be proof positive that investing dollars in other avenues might be better for everyone.  Hope a Deegan administration takes a fresh look at this approach.

I feel like at least part of the question here is gonna be figuring out how much money we actually gave out in the first place, and whether the projects they were given to actually happened.

I think regardless this argument by Charles is what I have been mentioning as well. Even if these projects don't happen, the opportunity cost of not doing so has arguably become more expensive. There are several mostly true statements that support that.

- Construction Costs don't go down
- Housing Values don't go down
- The US has continuous inflation

(Please, I don't need someone telling me "Oh but remember in 2008.." because everyone knows about 08. I'm talking about the 80+ years of data outside of 2008.)

So every year that a project is not started, the cumulative cost the taxpayers rises because assumption 2 is simply not true in the microenvironment we have DT.. but the other two are. Oh and the opportunity cost continues to "increase" the true cost of development on their respective parcels. So truthfully, housing/rent values are what limit DT and are why we can't get out of the incentive loop. (Inputs are increasing their spread). Also why several local leaders have started to question incentives on the Southbank for multifamily.

Captain Zissou

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #6 on: May 22, 2023, 03:22:42 PM »
It is a simple concept to model, but extremely hard to do accurately. Generally, money 35 years from now is worth half of what it is today. (Rule of 70). But a single year of high inflation changes all of that. So, basically impossible to know but generally in 30 years it will be worth half of what it is today.

Not really.  The rule of 70, or the rule of 72, give the amount of time required for something to double in value given a constant growth rate.  So while your example works, it not because things always double every 35 years.  With a growth rate of 2% that's correct, but things can double in 8 years with a 9% growth rate, 12 years with a 6% growth, etc...None of that applies to your second statement, which relates to NPV.  What you meant to say was that money paid out 35 years from now would have a present value of one half of that same value paid today assuming a constant annual growth rate of of 2%.  However none of this matters if we're talking about city incentives because they use a 20 year return period and use the constant dollar amounts for REV grants not the NPV. 

Other than when the land is gifted to the developer, almost all incentives are paid upon completion or have a clawback clause if the project does not reach substantial completion, so to date the city has not "paid out" that much to developers.  Most of it will never be "paid out", since it's just a reduction of the net increase in property tax.

jaxlongtimer

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #7 on: May 22, 2023, 05:31:40 PM »
Most of it will never be "paid out", since it's just a reduction of the net increase in property tax.

I beg to differ on this conclusion.  Forgoing property taxes is forgoing cash received which, in turn, has the same impact on one's bank balance as cash paid out.  The cash is no longer available to the recipient to spend elsewhere. 

If the City collected these "forgiven" property taxes, it would have millions more to cover services and infrastructure updates, expansion, maintenance and operations.  It still cost the City to provide services to the benefitting properties... that is a real cost (translated:  real money!) not covered by their taxes.

Thus, property tax abatements need to be included in totaling up the incentives.  Assuming such forgone taxes track inflation via increased property values and/or millage rates, I don't think discounting them to present value may be necessary.
« Last Edit: May 22, 2023, 05:47:11 PM by jaxlongtimer »

Jax_Developer

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #8 on: May 22, 2023, 05:40:41 PM »
It is a simple concept to model, but extremely hard to do accurately. Generally, money 35 years from now is worth half of what it is today. (Rule of 70). But a single year of high inflation changes all of that. So, basically impossible to know but generally in 30 years it will be worth half of what it is today.

Not really.  The rule of 70, or the rule of 72, give the amount of time required for something to double in value given a constant growth rate.  So while your example works, it not because things always double every 35 years.  With a growth rate of 2% that's correct, but things can double in 8 years with a 9% growth rate, 12 years with a 6% growth, etc...None of that applies to your second statement, which relates to NPV.  What you meant to say was that money paid out 35 years from now would have a present value of one half of that same value paid today assuming a constant annual growth rate of of 2%.  However none of this matters if we're talking about city incentives because they use a 20 year return period and use the constant dollar amounts for REV grants not the NPV. 

Other than when the land is gifted to the developer, almost all incentives are paid upon completion or have a clawback clause if the project does not reach substantial completion, so to date the city has not "paid out" that much to developers.  Most of it will never be "paid out", since it's just a reduction of the net increase in property tax.

Are you responding to prove a point or what? The Rule of 70 or 72 is literally a debated topic and both are known as estimates. Let's also not forget that the FED does have this thing called the "Federal Mandate" and hence why 2% is generally accepted as the standard. Also why I said "a simple concept to model, but extremely hard to do accurately." That is a fact.. plug any numbers in and I can give you a pretty close number. It is impossible to ever predict inflation.. no duh.

What are you not understanding about NPV vs. future value? Simply put, $1 in 2050 is not worth $1.. so you need to create a price ratio to calculate for that difference. So, you're actually not saying much of anything here. It's a known fact that completion grants are more expensive per dollar.. nobody is arguing that.. lol. In fact, what if I told you that the Rule of 70 or 72 can be used for any time value? Crazy talk I know.

That last paragraph is a boomer statement.. stripping away the tax base of future generations to satisfy the now.. yeah IDK if I can get behind that. Those dollars are certainly "paid" no matter how you want to frame it.

Captain Zissou

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #9 on: May 22, 2023, 10:07:20 PM »
Most of it will never be "paid out", since it's just a reduction of the net increase in property tax.

I beg to differ on this conclusion.  Forgoing property taxes is forgoing cash received which, in turn, has the same impact on one's bank balance as cash paid out.  The cash is no longer available to the recipient to spend elsewhere. 

How many property taxes have been collected from The Landing, The Southbank generating station, First Baptist, RCBC, the courthouse/Ford on bay, the shipyards, the fairgrounds, FSCJ, the vacant lots in La Villa, the list goes on and on and on.  Downtown should be an ultimate cash cow for property taxes in a city this size. Instead, it's contributing nothing.  So by your argument, the city has been forgoing cash on these properties for decades by letting them sit vacant.

jaxlongtimer

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #10 on: May 22, 2023, 10:39:26 PM »
^ Vacant land (and to a bit lesser, vacant buildings) doesn't demand utilities, generate traffic on roads, demand police (and maybe fire) protection or create other demands on City services and infrastructure so not generating taxes isn't the same as a fully utilized property not paying taxes for what it demands. 

Based on your suggestion, all virgin land in the county needs to be developed ASAP to extract more property taxes from it.  And, if I build a house on a vacant lot, would you support a rebate for my property taxes because I just added value to my property that would otherwise sit vacant?  Where is the line drawn?

The problem with developing the properties you identify has far more to do with City leadership than anything else.  In my view, the City mainly offers incentives to make up for lousy leadership, planning and execution.

Jax_Developer

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #11 on: May 23, 2023, 01:06:48 PM »
The problem with developing the properties you identify has far more to do with City leadership than anything else.  In my view, the City mainly offers incentives to make up for lousy leadership, planning and execution.

This is the truth. Haven't seen a city led project here delivered on-time. None of the big money in town has cared for the DT.. they'd rather invest in the beaches or town center. Honestly can't blame them to an extent. DT is an afterthought for a lot of people.. lets be 100% honest.. Sad to say it is so, and I am adamantly hoping that can change soon.

But JAX is a top 50 metro, with a river running through it, in the sunbelt.. Hard to overlook leadership with all that in mind.

--

I hope the Jones Bros project phase 2 comes sooner than later.. this will an extremely tough project for the market, and if it happens well, it should open up more projects of similar density.

thelakelander

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #12 on: May 24, 2023, 12:00:58 AM »
I'm happy that it appears Phase I will be underway soon. That building has been vacant longer than I can remember. It is a huge accomplish to get the long vacant inventory in this area back online.
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marcuscnelson

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Re: DIA approves $6.033 million loan package for Jones Bros. rehab
« Reply #13 on: May 26, 2023, 05:50:09 PM »
Most of it will never be "paid out", since it's just a reduction of the net increase in property tax.

I beg to differ on this conclusion.  Forgoing property taxes is forgoing cash received which, in turn, has the same impact on one's bank balance as cash paid out.  The cash is no longer available to the recipient to spend elsewhere. 

How many property taxes have been collected from The Landing, The Southbank generating station, First Baptist, RCBC, the courthouse/Ford on bay, the shipyards, the fairgrounds, FSCJ, the vacant lots in La Villa, the list goes on and on and on.  Downtown should be an ultimate cash cow for property taxes in a city this size. Instead, it's contributing nothing.  So by your argument, the city has been forgoing cash on these properties for decades by letting them sit vacant.

Interesting example now of all this:

https://www.jaxdailyrecord.com/news/2023/may/25/city-paid-4-million-to-ge-oil-gas-and-successor-in-compliance-with-incentives-agreement/

Quote
The city Public Affairs Office said May 23 the city has paid $4 million of the $10.1 million in taxpayer incentives that GE Oil & Gas negotiated before it opened in 2015.

[…]

To date, the city said it has paid:

• $2,699,360.52 of the Recapture Enhanced Value Grant. The legislation authorized up to $6.6 million in REV grant payments, based on 75% of the increase in property taxes on the developed land, paid annually for up to 15 years.

• $953,941.40 for an Economic Development Manufacturing Employer Grant. Legislation authorized up to $3 million for the EDME grant based on $400 per new job created and retained, paid up to $200,000 annually for up to 15 years. The grant was approved by a Council waiver since such grants are not authorized in the city’s Public Investment Policy.

• $376,456.08 in the city’s portion of a city-state Qualified Target Industry tax refund. The legislation authorized up to $500,000 for the city’s 20% QTI match to the state’s maximum $2 million based on creating up to 500 jobs. The legislation said the refund is payable over “multiple years.”
So, to the young people fighting in this movement for change, here is my charge: march in the streets, protest, run for school committee or city council or the state legislature. And win. - Ed Markey