I had an excited phone call from my friend Bo who could hardly contain himself. Bo's a builder.
"Did you hear about the deal the county government is offering to build a commercial building east of the highway in north county?" he asked.
I'd heard rumors but it didn't sound logical.
Bo continued.
"All you have to do is buy around 5 acres across from the shopping center and build 30,000 square feet of commercial space, then lease 25,000 square feet for commercial use, preferably for retail but they don't hold you to that, and the county gives you $25 million over 16 years," he said.
"$25 million?" I asked in humored disbelief. "You must be drinking kikapoo joy juice again. For only 5 acres and 30,000 square feet? How much could it cost?"
"Well," Bo replied, "they would like the developer to buy and develop 100 acres and around 600,000 square feet of commercial space, mostly retail, but they won't put that in the contract to avoid scaring off the developer. Anyway most of the property is owned by some car dealer but he wouldn't be a part of the agreement. So just to get it started the county selected a 5-acre parcel and is putting $25 million on the line through their redevelopment agency."
"So how much could it cost?" I repeated.
"Well," Bo replied again, "since the county selected the 5 acres, naturally the owner will hold them up for ransom, so the property assessed at $140,000 will reportedly go for $3 million."
"But that's $600,000 an acre," I observed. "Why would they do that?"
"They're government," Bo replied as if that explained it.
"How about other costs?" I persisted.
"I was given a price tag of $12 million altogether," Bo said. "On the high side that would include some landfill, site prep, bringing in sewer and water, moving a gas and fiber optic line and paying NDOT to build an off-ramp. Plus of course the building cost."
"That totals $400 a square foot of building," I said. "Why do you need an off-ramp for a 30,000-square-foot building?"
"Oh, they expect you to spend their money up front to build an off-ramp, develop Topsy Lane to handle traffic, and bring in utilities to service the entire 600,000-square-foot development," Bo said.
"But," I protested, "I thought you said the contract only had to be for 5 acres and 30,000 square feet?"
"That is what the commissioners approved," Bo said.
"Do you mean they'll take it on faith that if you bid the contract you'll use the money to pay for roads and utilities to service the entire 100-acre hoped-for development?" I asked incredulously. "Where do they get that kind of money anyway?"
Bo smiled.
"They're putting out the word that it will be paid over 16 years only from property tax increase over current value that would flow from the 100-acre development, but in actual fact it would be paid from any funds the redevelopment agency has, and it has plenty flowing in from the shopping center on the other side of the highway to cover the payments."
"But the county needs that money to pay for increased services required by existing developments," I said. "They're always crying poor and their five-year projections show them running short. And that's even without a community/senior center. What if you or anyone else build the required 5-acres and 30,000 square feet and can't attract any retail so you lease it for offices, the economy drops through the floor as even the Federal Reserve is now saying is possible, so you don't acquire nor build out the 100 acres, and neither the redevelopment agency nor the county get any appreciable added revenue from property tax nor sales tax. What then?'
"Then," said Bo, "the guy who gets that contract gets enough income over the next 16 years to pay for some nice digs in Europe or Costa Rica.'
"Who would ever take that kind of risk?" I asked.
"Only politicians and bureaucrats," Bo replied. "But they point out that the present value of the 16-year payout is only around $10 million at 9 percent."
"Nine percent?" I exploded. "Why would they use 9 percent when the payments are basically county funds from an assured revenue stream? It should be no more than 5 percent, if that, which makes it at least $18 million present value. What a deal for the developer. You're going to bid that aren't you? How can I get a piece of it?" I asked.
"Probably can't," he replied. "I'm trying but I'm told it's not open for public bidding, they're giving it to a special developer they've known before."
"Let's see," I mused, "They're paying four to sixtimes the value of the land, the contract doesn't require much of the hoped-for development, which won't happen if the market busts this year, there is an assured revenue stream to pay the developer, it's a closed deal for a selected builder. Is that a sweetheart deal. But is it legal? Can a county or redevelopment agency risk their money away like that?"
"Who knows," Bo responded, "Unless some citizen raises a fuss, I guess it's a done deal."
-- Jack Van Dien is a Sunridge resident, retired business executive and aspiring playwright.
