Legislation includes up to $82 million in city support for the mixed-used development planned on the Downtown Southbank.
With an economic development deal approved by City Council, developers of the 30-acre mixed-use project called The District will now move to purchase the Downtown Southbank property from JEA in July.
Council members voted 9-5 on Tuesday to approve the deal, which includes $82 million in city-backed financial incentives and the creation of a Community Development District encompassing the property.
Principals Michael Munz and Peter Rummell with Elements of Development Jacksonville LLC will now begin what is likely a 12- to 18-month process that includes buying the land from JEA, establishing the Community Development District and beginning the first phase of construction.
“People are going to say, ‘wow this is Jacksonville,’ and that’s what we’re proud of and that’s why we’ve put the work into it we have,” said Munz after the vote.
The group has until July 18 to close on an $18.5 million sale-and-purchase agreement to acquire JEA’s former Southside Generating Station site. Closing on the 2014 agreement was extended four times since 2015.
Munz said now that Elements has all the city approvals in hand, that sale can go through.
JEA Board Chair Alan Howard on Wednesday said he sees no reason the sale won’t close.
“JEA is obviously very pleased to see The District development pass this critical milestone towards completion,” said Howard.
“We look forward to not just closing on this sale, but more importantly seeing The District developed and the impact it will make on Downtown Jacksonville,” he said.
The generating station operated from 1947 to 2001, when it was decommissioned over a 10-year span.
Howard said retiring the site opened it up for development.
He said the JEA board will discuss “an innovative use of the proceeds from this sale to Elements,” at its meeting Tuesday.
Creating a CDD
Munz said he expects to have approval from the state to create the Community Development District within 120 days.
“We’ll be making the calls, letting people know and moving forward with the project,” he said.
According to state law, a CDD can “plan, finance, construct, operate and maintain community-wide infrastructure and services specifically for the benefit of its residents.”
Because Elements doesn’t own the property, Munz said JEA will provide a letter verifying the purchase agreement to include in the application to the Florida Land and Water Adjudicatory Commission, the state agency with authority to create CDDs.
The CDD will allow Elements to sell up to $30 million in revenue bonds to help pay for infrastructure. Construction costs are estimated at $24.7 million.
The group has until Dec. 31, 2040, to repay the bonds through proceeds of a Recapture Enhanced Value grant worth up to 75 percent of the taxes generated from the property improvements.
The REV grant is worth the lesser of $56 million or the total principal, interest, fees and costs of any credit enhancement of the bonds.
The 2040 deadline coincides with the sunset of the Southside Community Redevelopment Area, regardless of when Elements receives the Certificates of Use for the project.
Some council members pushed back on the financial incentives package Tuesday, including Council President Anna Lopez Brosche.
She was one of five council members who voted against the deal, saying her decision was based on Elements not disclosing its private financial projections on the entire project.
“How do we know that the developer isn’t using the city’s investment and making significant profit on taxpayers’ money?” she asked before the vote.
She said a deal this large should require the disclosure of that information. In committee meetings last week, Brosche also questioned the need for the REV grant and the continued need for the Southside Community Redevelopment Area, considering the Southbank is performing better than the Northbank.
“They’re taking all the risk,” said Downtown Investment Authority CEO Aundra Wallace on Tuesday. “The money doesn’t go back to the developer, it goes back to those investors who lent them the money to pay that debt service.”
Wallace also said if Elements fails to build everything it promised per the agreement, “there’s no REV grant for them.”
Munz said he found Brosche’s questions “surprising.”
“What I find very curious about the question is that we’ve gone through two workshops, which we requested, a number of council committees and we’ve brought everything to the table,” said Munz.
“We’ve shared all the information we’re required to share,” he said.
The other side of the deal is the development of public property.
After Elements closes on the real estate, it must convey about 4.5 acres of riverfront and other park space to the city at no cost.
According to the economic development agreement, the city will invest roughly $19 million into an adjacent project that includes a riverfront park, another pocket park, walking trails, an extension of the Southbank Riverwalk, bulkhead construction, a 100-space parking lot and the expansion of public roads and sidewalks on the Southbank.
Wallace said the agency has nearly $9 million earmarked over the next three fiscal years and would borrow the rest from the city at 2.66 percent interest over 15 years.
The loan will be paid back through tax revenue generated from the Southside Tax Increment Financing District, which is part of the Downtown Southbank.
Wallace said he anticipates being able to repay the general fund loan before the 15-year deadline.
Wallace said the agreement sends a clear message to outside capital that Jacksonville is willing to make deals.
“Also, professionally what it does is it now allows me to focus a little bit more on some other projects,” said Wallace.
“I do have a convention center coming down the line, as well as the Shipyards project, so we’ve got to turn our attention to other things.”
Elements previously announced it had come to terms with a hotel operator to build a 147-room AC Hotel by Marriott to anchor the development, along with a grocer to anchor the retail portion.
“I’m not going to make any announcements about the vertical just yet, but we will soon,” Munz said of potential tenants.
He said the retail portion of the project will be appropriate for the area.
“We’re targeting the types of shops you would see in San Marco or Avondale, and not necessarily ones in the Town Center,” he said.
Munz said they’re also coming to terms with a large office user to occupy most, if not all, of the 200,000-square-foot office tower planned for the site.
Palm Beach Gardens-based Kitson & Partners will oversee all aspects of the development, including coordinating with contractors.
When completed, the estimated $600 million project could include up to 1,170 residential units for sale and lease; 200,000 square feet of office space; more than 200,000 square feet of retail; riverfront restaurants and bars; a 4-acre riverfront park and an extension of the Southbank Riverwalk; a 125-slip marina; and the hotel.
“It’s in everybody’s best interest for us to be able to move forward as quickly as possible,” Munz said.