Credit troubles may jeopardize Marina District
8/22/2008A longtime plan to develop 125 acres on the waterfront in East Toledo could be in jeopardy as the city's developer has been unable to secure a letter of credit to back part of the Marina District project.
As a result, Larry Dillin, creator of Levis Commons in Perrysburg, said he will be seeking approval from Toledo City Council on a new financing plan for the project's $20 million proposed main roadway and park along the Maumee River.
"In the current banking environment, which continues to spiral down, the banks we were talking about issuing a letter of credit to back the [general obligation] bonds [that] the city was going to issue, are now saying, 'We are not issuing any letters of credit' - not just to us, but to anyone," Mr. Dillin said.
Mr. Dillin said the "meltdown in the banking industry" has made it impossible to secure a letter of credit, which is required under the plan approved last month by council.
The new plan he's proposed - which is being recommended by Mayor Carty Finkbeiner - puts greater risk on Mr. Dillin and less financial obligations on the city, he said.
Toledo City Council on July 29 authorized the sale of $8.2 million in notes plus a number of permanent improvements for the $20 million public portion of the riverfront Marina District.
Dave Amstutz, the city's director of development, said the Finkbeiner administration now wants that plan undone and a
new one put in its place.
Mr. Dillin will appear before council this morning to talk about the new plan.
He said he hopes for approval during its regular meeting Tuesday.
If council decides to reject the new plan, Mr. Dillin said the project will stop.
"We stop, wait," he said. "I don't think anything will happen in 2008. We will be forced to rebid the project."
That could drastically increase costs since prices for construction materials such as concrete and steel are rapidly rising, Mr. Dillin said.
"We want to lock in the bids because they are within the budget right now and if we had to delay and wait until next spring the city and us may be exposed to a dramatically different cost structure," he said. "We'd have a termination clause in case what we are in now turns out to be the Great Depression."
The latest plan, which is the fourth publicly released revision, will reduce the use of general obligation bonds by the city, Mr. Amstutz said.
The first phase of the new financing structure would assemble $6.86 million for construction of a proposed Riverside Drive, extending from Main Street, parallel to the river for nearly a mile.
The money would include a $1.5 million grant from the Ohio Department of Development, a $3.5 million loan from the State Infrastructure Bank to be repaid by Mr. Dillin, a $660,000 grant, and $1.2 million paid by Mr. Dillin for 14.66 acres in the southwest quadrant of the Marina District - near Main and the river.
Mr. Dillin said he is still confident the public and private development will work.
"The reason you can tell that is because I am prepared to personally guarantee repayment of the loan," he said.
The current plan approved by council would have sold 58 acres to Mr. Dillin for $3.6 million for residential and commercial development. Under the new plan, he would still have the option to purchase the remaining 43.34 acres for $2.4 million. That money would be reinvested into the public portion.
Mr. Dillin yesterday said the second phase - construction of the park - would be triggered the moment he has written commitment to fund "vertical development" of the planned mixed residential and commercial buildings.
The $11.3 million for the park, which is to have fountains, a clock tower, performance space, and boat docks, will be paid for with $5 million from the Ohio Cultural Facilities Commission, $2.5 million in 20-year general obligation bonds from the city paid by special assessments on Mr. Dillin's property, the $2.4 million from the land purchase by Mr. Dillin, and an additional $1.4 million from Mr. Dillin.
The city has already spent $1.84 million for water and sewer infrastructure at the Marina District.
Another $4 million will be spent for building some of the internal roads for the district, which Mr. Dillin said he needs for his private development. That will be funded by a $1.1 million SIB loan paid off by the city, a $400,000 loan paid for with assessments on Mr. Dillin's property, and $2.5 million from Mr. Dillin.
City Council President Mark Sobczak said the new plan could work.
"I would think this is a positive thing to move forward," Mr. Sobczak said. "From the city's standpoint, it's a better deal than before Council should see this [as] Larry's commitment and move forward from there."
He acknowledged that the city could be left with the property without any vertical development in a worst-case scenario.
"This is mostly for the road and it is our infrastructure," Mr. Sobczak said. "I would like to see some connectors between Main Street and the marina that was just built because whatever happens on that property, we are going to need a road."
The city has constructed a marina, and the Toledo-Lucas County Port Authority completed a $3.1 million marine passenger terminal for Great Lakes passenger ferries and cruise ships at the downriver end of the site.
Councilman Frank Szollosi, who along with Councilman Michael Ashford voted against the July 29 issuance and sale of bonds, said he would not support the new plan.
"I am reluctant to support any more public money for that project until I see quite frankly a single privately financed brick," he said. "With the economy the way it is and tough choices we need to make in capital spending, until I see private investment, I will not support any more public investment."
Mr. Szollosi said private investment in the marina district does not depend completely on a waterfront park being built first, as Mr. Dillin has suggested.
The Marina District land has been cleared of environmental pollution, except for the decommissioned power plant and an "environmental hot spot" located within the 14.66 acres Mr. Dillin would purchase, if council approves the new plan.
The cost to finish the cleanup is rolled into phase one of the new financing plan, he said.
"The city cleaned up the property to a commercial standard, that's not good enough for us. We need a residential standard," Mr. Dillin said.
More than $9.35 million has been spent to clean up the former power plant and the land.
That included removal of contaminated soil, removal of mercury contamination within the building, PCBs, asbestos, and some demolition necessary to get to the contamination.
Of that cleanup cost, $4.57 million was from grants through the Ohio Department of Development.
Contact Ignazio Messina at:
imessina@theblade.com
or 419-724-6171.