Thanks, Tim for noting the revealing Neal St. Anthony Strib piece. The
deal's critics got some column inches at the end, but mostly, it was a
revealing look at how Brookfield's Harold Brandt and the MCDA's Steve Cramer
think. The piece is at:
http://startribune.com/viewers/qview/cgi/qview.cgi?story=83595425
The story left a lot of questions, which I hope some public official,
especially at the MCDA will take time to address to the list:
First, I reiterate Tim's point: why does the MCDA need the cash now? Is a
cash-flow crunch pushing them to discount the Gaviidae loan?
2. If so, how did that happen? Does this situation reflect fiscal
mismanagement by the city?
3. Brandt takes credit for Gaviidae/Saks spurring a $280 million
development. ("The incentives worked," Brandt said. "The two department
stores were a catalyst for those developments.") The city loaned $30 million
at 6 percent interest (much below market-rate) in 1987-91 - a nice subsidy
even without the new discount. But were the retailers key to the office
component in any way? Or was it like Target, where the office tower was
going to be built regardless and the retail was a means to its own end?
4. St. Anthony tacitly compares the $30 million Gaviidae loans to "$130
million in government-financed roads and other site-preparation" for the
Mall of America. But MofA worked, and Minneapolis's project didn't. Critics
here at the time complained about getting into a high-end retail bidding
war. Looks like they were right. Also note: because of its subsidy,
Bloomington won't see any net tax-revenue benefits from MofA, something the
Strib has written about.
5. The game appears to be keeping City Center high-end retail, which pays a
higher tax rate, rather than office space, which earns (and pays taxes on)
half the retail rate. Cramer seems to want to subsidize City Center to keep
the tax rate up.
But why bother? Is City Center "going office" that bad? If it cost $18
million in subsidy to prop up the higher rate, how soon does that generate
additional revenue compared to a lower - but unsubsidized - office rate?
6. And of course, the big question: why should the city be directing this
sort of (retail) use when the market dictates otherwise (high demand for
office, low for retail).
7. Cramer makes a bow to Tony Scallon, the genius behind linking NRP to
developer deals: ""They've [Brookfield] generated millions in property
taxes, which has helped fund the Neighborhood Revitalization Program and
other priorities. They came along at time when there was a real question
about the future of retail in Minneapolis. They aren't generating the sales
figures or per-square rents that retailers like. But they're viable and
people are shopping in downtown Minneapolis and we have a chance to make
improvements as the downtown work force and residents increases over the
next decade."
Cramer seems to be saying, "hey, they did something for us 15 years ago
(even though the $30 mil at 6 percent interest was a big subsidy to
Brookfield then), so we owe them even more now." Let's hope we don't put
such costly good will in our development contracts.
Then Cramer argues city subsidy has WORKED -- if not for Brookfield then for
the city because workers and residents are increasing. If so, why do any
more pump-priming. Won't the market respond to a successful environment?
8. Media Kool-Aid-drinking alert! St. Anthony writes: "The Dain/Gaviidae
developments are important, throwing off $5.7 million in property taxes last
year, part of a downtown district that yields more than 40 percent of the
property taxes in the entire city."
Downtown yield 40 percent of the taxes, but Gaviidae is a tiny part of that.
That's like giving me credit for Kingfield's resurgence. It would have
happened without me (and I'm not trying to renegotiate my mortgage!). It's a
credit to unsubsidized office developments, prudent and genuinely public
infrastructure.
Yes, Dain/Gaviidae pays a nice chunk of property taxes...but still will,
with or without the proposed loan deal unless Brookfield is threatening to
shutter Dain/Gaviidae. The biggest howler is THIS is a project that has
settled into the dreaded "retail-turned-office" scenario we were frightened
about a few paragraphs ago. Now it's being touted! Most of the $5.7 million
comes from the (unsubsidized Dain) office component. We'd get the benefits
regardless of Gaviidae, unless the office wouldn't have gone in without the
retail.
8. Brandt wraps himself up in the hair shirt, talking about keeping City
Center retail: "I feel Brookfield has been the retail first-aid guys for too
long," Brandt said. "We need to see a commitment from Minneapolis."
Um, Harold - the city contributed its own big bandaid in the late '80s with
below-commercial-rate financing...and added a few million in exterior
improvements in recent years. We taxpayers have been there for you. The
question is whether either of us should still be there.
9. Last question (to all insiders, please post to list): how likely is it
that a new subsidy deal will pass 7-to-6?
David Brauer
Kingfield - Ward 10
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