Tag Archives: Downtown North

Opposed to Downtown North

The Hartford City Council has held numerous public hearings and committee meetings in an effort to better understand the Downtown North proposal. They have dramatically increased the amount of information available to the public.

I’ve followed the discussion, and see many positives to the proposal. Yet, I still find myself opposed to the project. I see building out the site as a luxury, and as a distraction.

Hartford has a more important priority right now; restructuring municipal finances and operations to put the City on a sustainable path. My primary concern is that if Downtown North is approved that it will be much more difficult to make the hard choices that a restructuring will require.

There are positives to the proposal, and the first phase of Downtown North seems likely to achieve meaningful goals. There is a good chance that the main benefits would be realized. Baseball would expand and diversify the City’s entertainment options. A grocery store would address the food desert in the northern neighborhoods and provide a new option for the increasing number of Downtown residents. Main Street would be transformed north of the highway. Clay Arsenal would be reconnected with Downtown. There would be more construction jobs. Hopefully phase one would also create momentum that would ensure the entire project is completed.

The Downtown North business case for the City is approximately revenue neutral. The business case has been portrayed as a positive, though I see it as a negative. The Administration is projecting that the City can achieve the benefits listed above without increasing the property tax. The ancillary development can create new revenue that will more-or-less offset the expected costs of the land preparation, stadium construction, and public infrastructure improvements.

Unfortunately, Hartford is in a position where it has to do better than financially treading water. Increasing expenses at the same pace as revenues doesn’t improve the City’s financial position.

Other criticisms of the proposal also resonate.

Stadiums, in general, are regional assets. They provide entertainment to all of the surrounding towns while generally losing money. Asking the City of Hartford, a financially stressed municipality with very low median income residents and a highly taxed business community, to take on the facility alone doesn’t seem appropriate.

The financial model of professional baseball, specifically, has regions paying for the privilege of hosting a team. Again, it does not seem appropriate for the City of Hartford to subsidize this entertainment option on behalf of the entire region.

There has been virtually no discussion about how the XL Center is impacted by the proposed baseball stadium. Hartford needs to ensure that the XL Center, which is the more important of the two sports venues and is already funded at the state/regional level, continues to be successful and remains a top priority.

When looking at the big picture, Downtown North seems like an acceptable project, but not a great one. Choosing to move forward will not expose the City to an unreasonable amount of risk, and would bring some positives.

However, committing time and money to Downtown North will distract from a higher priority effort that the current political leaders have already agreed is necessary.

Approving Downtown North will send conflicting messages to stakeholders that will need to make concessions in the form of higher taxes, fewer services, or fewer benefits as the City works to find a sustainable path.

The best course of action is to put Downtown North on the back burner until the City has an opportunity to reorganize.

It could take years to get Hartford’s proverbial house in order, and at that point the environment may be different. The numerous early-stage Downtown construction projects will be much further along, if not complete. The influx of new residents may even change the priorities for the Downtown North site.

Hartford needs to set sustainable municipal goals. Hartford needs to agree on primary strategies for working towards those goals. Hartford needs to organize and focus its operations around the goals and strategies.

Once those steps are complete, the City will be in a much better position to consider proposals like the one currently on the table for Downtown North.

DoNo Hartford Proposal: First Take – Costs to the City

On Friday, September 5, 2014 the City of Hartford posted a number of documents related to the Downtown North site and Request for Proposal (RFP). Included in the set was the RFP response from DoNo Hartford, LLC, which was the group that the administration recommended as the developer of the site.

The full document is 244 pages, and can be found here. The first 66 pages outline the proposal, while the remainder focuses on the background of the Developer and others who would be involved in the project.

Although all aspects of the proposal are interesting, the issue that is generating the most discussion is the potential cost of the development to the City of Hartford. The RFP response, though not a final agreement, provides enough detail to begin understanding potential costs. An initial read shows that the City takes on costs in a variety of ways.

Land Cost: The City would sell the land to the Developer for $1 per parcel.

Environmental Remediation: The City is responsible for any environmental remediation and/or monitoring necessary for the site.

Transportation Modifications: The City has agreed to contribute $8 million for modifications and improvements to the public right of ways – streets and sidewalks.

Infrastructure Improvement District (IID): The City would work with the Developer to establish a legal entity that would oversee the overall site, and would collect incremental property tax revenue generated by the development.

Property Tax Fixing: Property taxes on the site would be set at 5% of the gross revenue in perpetuity.

Rental Payments for the Ballpark: The City would lease the ballpark from the Developer with an annual lease payment in the vicinity of $5 million. This money pays back the Developer for the construction costs of the facility.

Ballpark Maintenance: The City would be responsible for all costs associated with the ballpark operations, maintenance, and improvements.

The RFP document estimates some, but not all, of the costs that the City will bear. Some of the costs will be more difficult to estimate than others, though there is now a more detailed framework. The RFP document makes no attempt to estimate revenues to the City.

More detail about each of the costs, and the respective page numbers in the RFP document where each cost is discussed, can be found below.


Land Cost

Page 41, section 1 states that the ballpark parcel will be sold for $1, and page 44 section 1 states that the five other parcels will be sold for $1 each. This is an opportunity cost to the City – could the property be worth more to another developer?

Environmental Remediation

Page 41, section 4 states that the City will be responsible for all remediation and/or monitoring that may be required on the Ballpark site. Environmental costs will be factored into the Rental Payments. Page 44, section 4 states that the City will be responsible for all remediation and/or monitoring that may be required on the other parcels. The specific manner in which the City will cover those costs is not defined.

Transportation Modifications

Pages 14 and 15 discuss the changes to the City’s streets that would be made as part of the project. Paragraph 5 of page 57 states that the City will contribute $8 million towards related off-site and roadway improvements. The $8 million number is repeated in the table on page 58.

Infrastructure Improvement District (IID)

The first paragraph of page 57 notes that there will be an IID created in order to help finance the project. Paragraph 5 of page 57 states that the IID will “raise capital through a bond issue supported by a municipal tax sharing agreement.” The final paragraph of page 57 notes that the IID-related debt would be on the order of $10 million, as does the table on page 58. The costs to the City are the work to create the district, and then the foregone tax revenue that is shared with the IID.

Pages 62 and 63 provide a high level overview of how the IID would work. The IID is described as a “mini-municipality” within the City. The City and the IID would share the additional property taxes generated as a result of new development in the district. The IID would have the ability to issue debt against its share of the property tax revenue stream.

Property Tax Fixing

Page 43, section 14 states that property taxes on the parcel containing the Ballpark and the adjacent parcel that the Developer has under contract will have their taxes set to 5% of gross revenue in perpetuity. Page 45, section 8 contains similar terms for the remainder of the development site.

Rental Payments for the Ballpark

Page 34, section J introduces the idea that the City will pay rent for the stadium based on the “Guaranteed Maximum Price,” which will be set before construction begins. Page 42, section 12 defines the formula to be used for the rental payments. The City will be charged 8% of the construction costs as the initial annual rent amount. The example provided is that if the construction cost is $40 million, then the rent would be $3.2 million. However, a table on page 58 projects development costs for the ballpark to be just over $47 million.

An additional paragraph in section 12 of page 42 discusses the escalation of the rental payment over time. The paragraph is written in a confusing manner, with what appears to be an error describing the calculation. It is unclear if the rent escalation begins in year 6 of the deal, or if it begins in the first potential extension of the lease in year 26. What is clear is that the rental amount will increase by 5% over the previous period.

Ballpark Maintenance

Page 42, section 8 states that the City will rent the ballpark under a “triple-net” lease, making the City responsible for all operating and maintenance costs of the facility, including “property taxes, insurance, utilities, maintenance, repair and replacement, including roof, mechanical and structural items.” The “Lease” section of page 60, the Preliminary Financing Term Sheet for the Ballpark, states that the lease is to be triple-net as a condition for the construction loan.

Evaluating the Downtown North Proposal

Few details about the proposal for Downtown North have been made public. This puts a substantial burden on the Court of Common Council to evaluate the project on behalf of the City’s residents, taxpayers, and other stakeholders.

The resolutions to be received by Council would set the project in motion with very broad parameters. The resolutions seem to provide little opportunity for future input from either the Council or the public. They empower the Mayor to negotiate the specifics of the deal, working directly with the Developer.

After reading the resolutions, there are many questions to consider. The Council still has an opportunity to add additional conditions to the project before handing off the details of the implementation to the Mayor.

1. The resolutions do not specify what is to be built on the site, other than a ballpark. Will the City have any input into what is designed and built in the mixed-use portion of the development? Will the City have any recourse if the Developer makes dramatic changes to the plans they have presented thus far? Is there any recourse if the Developer fails to act within a reasonable amount of time?

2. What is the physical boundary of the project that divides responsibility between the Developer and the City? For example, will the Developer be responsible for the sidewalks and streetscapes? Will any roads or utilities need to be moved, and if so, who would be responsible for that work, and those costs?

3. Suppose the City enters into complementary leases with the Developer and the Baseball Team for the stadium, as is proposed. What is the City’s exposure, and recourse, if the ballpark facility is not complete by the time the lease with the Baseball Team is scheduled to begin?

4. The City acts as a middleman between the Developer and a tenant, the Baseball Team. Another interested tenant, the Brewery, is working directly with the Developer. There are reports of two supermarket operators have also been in touch with the Developer directly. Is there a way to establish a similar relationship between the Baseball Team and the Developer so that the City is not positioned between the two, and taking on risks via both lease contracts?

5. The Developer has proposed including a significant amount of “municipal office space” in the project, though it is not mentioned in the resolutions. Is the City of Hartford still one of the primary expected tenants for the space? If so, what is the City’s process for evaluating that opportunity? If not, does the Developer have a plan for how to utilize that space in the project?

6. The resolution appears to give the Mayor broad authority to make future decision about the development without consulting the City Council. Would this include renting or buying property, other than the stadium, from the Developer (like municipal office space)?

Perhaps this is the time to begin making details of the proposal more widely available. The public is not the enemy. Throughout the ballpark debate the community has been treated like the enemy, and in some cases acted like the enemy. However, without any real information available, there are very few ways for citizens to contribute to the discussion in a constructive manner.

Mayor Introduces Resolutions to Authorize Downtown North Development

On Thursday, September 4, 2014, the Court of Common Council of the City of Hartford will hold a special session to receive and refer three related resolutions regarding the proposed redevelopment of Downtown North. Here are the proposed resolutions.

1. The first resolution allows 19 properties to be transferred to the developer “free and clear of any encumbrances and environmental conditions, if any.” The developer is to pay $1 for each of the 19 lots. Once the developer owns the properties, they are expected to “design, develop, and build” a ballpark and a mixed use community.

2. The second resolution allows the ballpark to be leased from the developer. There are two “material” lease terms disclosed; that the initial term of the lease is 25 years, and that the City will pay the “property taxes, insurance, utilities, maintenance, repair & replacement, including roof, mechanical and structural items.” There is no mention of a monthly rent in addition to the listed expenses among the material terms of the lease.

3. The third resolution allows the ballpark to be subleased to a specific Baseball Team. The initial length of the lease is 25 years. The team will pay annual rent of $500,000 for the first 15 years and $600,000 for the final 10 years. The lease is structured to allow extensions in five year terms, up to three times (15 years total). The annual rent amount is not specified beyond the initial 25 year term.

All three resolutions note that the Mayor, with Corporation Counsel’s approval, has the authority to negotiate the specifics with each party. They also note that nothing is official until the Mayor signs off with the Developer and the Baseball Team.

Finally, all three resolutions empower the Mayor to make future decisions related to the development, with Corporation Counsel’s approval without coming back to the Court of Common Council.

Every Analysis Needs a Base Case

Every financial analysis needs a base case to serve as the point of comparison.

Sometimes the base case isn’t the status quo. In the Downtown North situation there seems to be broad consensus that the area in question should be developed. Therefore, it’s important to compare Hartford’s costs for the current stadium-centric proposals to Hartford’s costs in a generic project. The cost to the City of doing nothing on the site shouldn’t factor into the conversation.

Hopefully when the project’s financial details are presented to City Council, and released to the public, the City will break out the costs it would expect to incur in every Downtown North proposal. This will allow the focus to be on the costs that are unique to the specific proposal(s) under consideration.