Wednesday, May 13, 2009

Some Things That I Cannot Let Pass

The following letter is an entry on the Ace blog for Tue. May 12. I have tried to comment on these type of posts before and had them moderated into oblivion. I will respond to it here for all to see.

The post was written by a fellow named Andrew Wyllie. I have no idea who he is or what his qualifications are, but it is clear that he knows nearly nothing about this city’s legal or development workings. My son has a better grasp on the way the real world works than Andrew.

The red text is the original posting and my response is in blue

Everyday the CenterPointe lot sits vacant the city loses close to ten thousand dollars in tax revenue.

This could not be further from the truth. The city derives only a fraction of the revenue necessary from property taxes. Those revenues go to the State and the schools for the most part.

According to the LFUCG property valuations website, the CentrePointe lot is currently worth about $20 million.

This may be true, I have not checked lately but this is up considerably from the $4.5 million valuation of the block with the buildings intact. The Property Valuation duties are a requirement of the State and are influenced in no way by the LFUCG

Assuming a tax rate of 0.36% the Webbs will pay about $70,000 in taxes per year on the empty lot.

If the initial sentence of the paragraph is true then this is for a total of 70 days(at $10,000 a day)

According to the Webbs' consultants C.H. Johnson Consulting Inc., once built, the property will bring in about $4.24 million a year. That's a substantial amount of money compared to its current tax value and this is why the line of questioning from Vice Mayor Gray is so important.

Yes it is a substantial amount, which is why the Council initiated the TIF district but it has very little to do with why Mr. Gray has a burr under his saddle. Anything built there will bring in more money(except for a public park/open space).

The lot has sat empty for almost a year with no noticeable progress. So why is it that some city council members feel it's okay that Webbs have not got their financing in order yet, even though they claimed to have it in order over a year ago.

For those of who can read a calendar, the demolition started at the end of June and concluded around November, therefore the block has sat empty for roughly 6 months or half of a year. Also, the Webb’s have repeatedly said that the financing is in order and secured with internationally binding legal documents. Just because one member of the partnership has expired does not mean that the whole deal has fallen apart.

Why is it okay that they apparently have not hired structural engineers yet when everyone who lives in Lexington knows full well that building on a karst topography (limestone with caves) can be difficult and time consuming.

No one has said that they have not hired a structural engineer. Mr. Gray’s question was “have they sent the plans to a structural engineer yet?” to which the answer was an “I don’t know”. The question makes Mr. Gray sound like he is up on the situation but only leaves doubt in the minds of those who don’t know any better. Certainly the plans are in the hands of qualified engineers and are being checked against the core drillings taken during the demolitions.

Why is it okay that the Webbs have not applied for their building permits yet which will take another six months to process.

The building permits are estimated to run approximately $120,000 and are good for a limited time. Would you pay for a parking spot now, when you know that your car will not be delivered to the dealer for six months? Or would you wait until your car is in hand?

The City Council is the equivalent to the board of directors for a company and among other things it's their responsibility to make sure the city remains economically solvent. For a city council member to take sides with this developer is a disservice to the city at a price of about 3.5 million dollars a year.

Absolutely, the Council is the “board of directors” and in any good company, they would set the course and the policies of the company. They would not involve themselves in the day to day running of the company. That they would leave to the company president, or in this case, the Mayor. The Mayor does not run the Council. He presides over the official meeting, recommends actions and policies and only votes when there is a tie vote of council members.

Webb's complaint that his project is not being treated fairly compared to other stalled projects in the city is just not valid. Indeed the city council should be dragging all of these property owners in to figure out what their future plans are. Lexington Mall is just as much a blighted area as the pit in the center of the city.

Andrew is again incorrect about the legal process of holding developers accountable. That is the job of the Law Department and the courts. The Council should have no legal right to demand that any one person or group appear before them. No “board of directors” would ever call a supplier or customer to give account of themselves to the board.

The problem with Webb's argument is that his project is in an absolute critical block of the city. It's the most expensive real estate in downtown and cannot remain in its blighted condition.

Now Andrew has trouble with the concept of blight. The blighted conditions have been eliminated with the demolitions and now we have a clean slate with which to work and the intention is to fill it with a work of art. You may not care for the art but it is art just the same.

Council member Lane's comment that "even though it's just a raw site I think our downtown looks better" should be enough to remove him from the council.

The Charter of Lexington’s Merged Government has clear reason for removal from office and I doubt that comments like this will qualify. Also, Mr. Lane was elected by a largely rural and suburban constituency and I don’t think that we have heard from them as yet.

It's a big hole and it's an embarrassment to the city that's currently sting the city a lot of money. Whether the development on the parking garage is completed is not a major issue. The parking garage is not blight, it's not an embarrassment to the city and it's not as big a project as the grand, multi use, hotel/condo project promised by the Webbs.

This rambling is quite confusing as the parking garage is a part of the total package and would not be built without the rest. Andrew is dead wrong about the vacant block costing the city money as no tax payers funds have been spent on this project except for the normal and customary reviews of the plans

Yes, it is a privately owned project and being privately financed. This DOES NOT mean that the owners can do whatever they please. There are city zoning restrictions as well as public health, safety and welfare issues associated with owning any property.

There you have it, Andrew has admitted that the private financing is in place when he says that it is “being privately financed”. He is, however, wrong if he believes that any zoning, public safety, health or welfare violations have occurred. So far everything has been done according to the regulations on the books.

The community has “police power” which gives the community the right to regulate the activities of private land owners.

Having broken no regulations the community’s “police power” has no reason to be brought to bear.

In fact, the city can take this currently blighted property and transfer it to another developer (a developer with all of the financing in place) The eminent domain laws in Kentucky do not allow for this kind of behavior which may be enough of a threat to encourage the Webbs to s(p)end the estimated $300K (their estimate – I should also mention that you could also buy a very thin sheet of gold that would cover the entire property for about $300K) to fix the sidewalks and put in some grass until they are ready to move forward on their project.

If the Webbs don't move forward, I'm sure there are some other developers that would be more than happy to get a chance to pull the rug out from under the Webbs with a project that is a bit more in line with what the people in Lexington would like to see in the downtown area.

Andrew must have flunked Economics 101. There are no other developers who can “pull the rug “ from under the Webb’s, build a smaller project and get their ROI(return on investment). Any subsequent project to this proposal would have to be of a grander scale for it to be worth anybody’s time.

Finally, I put the blame for the failure of this project squarely on the Mayor and the Council. Allowing Lexington's most expensive real estate to remain blighted for a over a year and then apologizing to the owner/developer when some members of the council start demanding a progress report should be grounds for dismissal. Council members Beard, Myers and Lane should remember that it's the people that elected them to the council who are bearing the cost of this delay both in pride for their city and tax dollars. Mayor Newberry should also take notice that no company, creative class or other, will want to relocate to a city with this kind of incompetence at the city government level.

Andrew, at this point I think that you should give it up. Mr. Gray is a construction professional and not a lawyer, therefore he made himself look foolish to all except those who also know nothing of the laws and rules of development in America. Mr. Webb is a lawyer and a developer, well versed in the needs of construction in the downtown Lexington area. I doubt that anyone else has built more on the karst limestone of this downtown.

While you did not mention it, there have been statements regarding the need for a hotel. I will say that the time to plan for a new facility, be it a hotel, transit system, farmers market, hospital, etc…is before you NEED them not after. The planning for this block anticipates needs of Lexington in 15 or more years not 1 or 2.

I also find it appalling that the Ace magazine would allow this to be printed without anyone understanding the real fact of the matter.

1 comment:

Andrew Wyllie said...

Just cam e across this response - it's too bad you did not post it to the AceWeekly blog where we could discuss it in a more widely read forum.

It's funny to look back at this article after a few months as a lot has changed.

$10,000 a day comes from the Webb's website - it's the amount of revenue the completed project is estimated to earn for the city once it is complete. When the project is complete, they will get a discount rate of 0.36%. Their current rate is roughly 1% and they are paying that on the new valuation which is either eight or ten million.

The point is that the city is losing a lot of money having a big empty lot sitting in the middle of the city as opposed to having the income from the completed project. The city council should be upset about the situation, no?

As we established elsewhere on the interwebs, the city can use eminent domain to buy properties and resell them - they are doing just that in one part of town as we speak. Not surprisingly, Webb is trying to make the property look less blighted - why else would he spend $300K for grass that he does not need to.