Perez: The Numbers Add Up

When he saw that the deal makes New Haven money in just two years, a fiscal watchdog made a key decision to back a plan that will remake a chunk of downtown and reverse a half-century of urban renewal.

That watchdog is Hill Alderman Jorge Perez (pictured above). As the longest-serving member of the Board of Aldermen, as a banker, and as an independent voice known for challenging administration plans, he can play an influential role in delaying major proposals or enabling them to advance, especially when tax money is at stake.

Perez played that role this week in embracing Downtown Crossing, a $140 million plan to fill in the Route 34 Connector (aka the mini-“Highway To Nowhere”) and transform it into an urban boulevard with bike lanes, safe pedestrian crossings, narrower streets, and a 10-story, 400,000 to 500,000 square-foot biotech-oriented office building called 100 College Street.

“This is a good deal,” Perez declared after a City Hall press conference cum celebration Wednesday. ​“It’s going to create jobs and increase our tax base.”

Perez’s was initially skeptical about OKing the project. His questions and desire for more information helped delay approval of a $16 million federal grant the city won to fill in the highway so the rest of the project could be built (with private money).

Then City Hall convinced Perez that the city’s stake — up to $6.5 million in bonded matching dough — would easily pay for itself, create hundreds of new jobs, and pour millions of new tax dollars into government coffers. Perez was sold. And Monday night the Board of Aldermen voted 24 to 1 to approve receipt of the grant. That means officials can get started drawing up agreements and filling in the highway.

The DeStefano administration gathered key players (pictured) to Wednesday’s press conference both to celebrate the approval and to discuss next steps. They said they hope to ink the fine-print grant deals with federal and state officials by mid-2011, start filling in the highway in late 2011, then have developer Carter Winstanley start building 100 College Street in 2012. That work all involves the first block of the project, bounded by College Street, Front Road, George Street, and Legion Avenue. The plan eventually calls for the mini-highway to be filled in all the way to State Street.

After the press conference, Perez explained how he came to become convinced about the numbers, and developer Winstanley and Yale Medical School Dean Robert Alpern discussed what the city can and can’t 100 percent count on at this point.

“No Guarantees In Life”

Among Perez’s original stated concerns: Burdening the taxpayers at the time of a looming fiscal crisis. The city faces an estimated $57 million budget gap next year. Citizens have demanded — and official have agreed — that taxes not be raised to fill it. But to accept the $16 million federal grant to make Downtown Crossing possible, the city would have to borrow up to $6.5 million.

This past week Controller Mark Pietrosimone gave aldermen a breakdown of how much that would cost in interest per year and how much tax revenues the project would bring in. Click here to read the memo.

Perez noted that the city wouldn’t be selling the bonds to fund the project until late in 2011. It wouldn’t start paying for another six months.

Here are the numbers provided by Pietrosimone. First the worst-case scenario, based on a five-year bond. (The city doesn’t usually bond for five years; usually 10 or 15.)

In the first year, 2012, it would have to pay $1.5 million in debt service. Carter Winstanley — whose development company is buying the land to build the new office building known as 100 Church Street — would pay a projected $412,500 in new real estate taxes that first year. So the city would lose $1.129 million that first year on balance..

But beginning in the second year, the annual debt service would drop slightly, while the city would collect at least $1.65 million in real estate taxes and over $100,000 in personal property taxes. That number jumps another $3.75 million per year in years 2015 and 2016 when the building allegedly comes online, meaning the city would already be $4 million ahead after debt service. Plus, that doesn’t count a spike in personal property taxes generated by equipment used by businesses at the project.

The second scenario offered by Pietrosimone was for a 10-year bond. The third scenario covered a 20-year bond sale at 4 percent interest. It showed the city paying $902,200 in debt service in 2012, and netting a $489,700 after taking in property taxes. It shows the city netting $1.3 million by the second year, $5 million by the fourth year, and $4.97 million by the final year.

Perez said those numbers convinced him the project made sound fiscal sense.

One holdout alderman, Darnell Goldson of West Rock, argued Monday night that the city should have demanded firmer financial guarantees from the developer — back-up in case the project gets stalled or abandoned, the way development projects sometimes do.

Perez countered Wednesday that several unique factors make this deal less of a gamble: Winstanley has already been filling office buildings in town, to the tune of one million square feet. He has especially had success filling his biotech complex at 300 George St. because of its proximity to Yale Medical School. The new Downtown Crossing project is but a block away.

Perez said he also is confident that Winstanley already has tenants lined up or nearly lined up to make the project work. Earlier, during the press conference, Winstanley spoke about how, unlike in other some cities and states where his company works, New Haven has a strong demand for commercial office space. Yale Dean Alpern spoke of how the med school has been adding 25 to 50 professors a year — who in turn spawn one or more support jobs each (secretaries, tech) — and plans to continue expanding.

In addition, New Haven’s not, at least at this point, offering tax relief to Winstanley. It’s not offering money to help him build his building — only to prepare the infrastructure (a filled-in mini-highway) to enable him to build.

“There are no guarantees in life,” Perez said. ​“Tomorrow’s not written in stone. I may not be alive tomorrow. That doesn’t mean we don’t look at ways to build our tax base.” The alternative to pursuing promising proposals for growth, he said, would be to raise taxes or make even deeper budget cuts than those on the horizon.

“Complete Deal Not Negotiated Yet”

Indeed, while Winstanley and Alpern spoke optimistically about their plans Wednesday, they didn’t offer many guarantees.

Winstanley said after the press conference that he has been in conversations with potential tenants already. He declined to name them or to say whether the medical school is one of them. He said 300 George St. is 95 percent full; same with his building at 25 Science Park.

He was asked if he’s anticipating getting any tax breaks form the city on the new building.

“The complete deal has not been negotiated yet in terms of whether there’s a tax phase-in,” he said.

Dean Alpern said he couldn’t commit at this point to having the medical school take space in the new 100 College Street complex. ​“It’s a great location for us,” he said. ​“There will be a lot of intense discussions in the next month or two” about locating there. ​“We’re always looking to expand.”

That’s assuming the medical school continues to have the dough. Alpert noted that a new Republican-led U.S. Congress is being seated in 2011. ​“We’re going to be looking for signs in January” about the fate of National Institutes of Health and general health care funding. ​“If they maintain funding” the medical school has every intention of continuing to expand, he said. ​“If they [Congress] do something draconian with budgets,” the outlook is less clear.

Alpern said the med school has 2,000 faculty members backed up by 3,500 other employees, such as secretaries, nurses and technicians. He said Yale-new Haven Hospital also often creates spin-off support jobs for professors who do work there, too.

He said during the press conference that Downtown Crossing will help Yale lure more faculty here. Right now, recruits like downtown New Haven as a place to live and go places at night. They don’t see the medical school area that way. Part of the idea of Downtown Crossing is to knit back together downtown with that end of the Hill, the area now separated by the moat that is the Route 34 Connector Mini-Highway To Nowhere.