The City Council Auditor projects a lower return on investment for the $450 million project than the mayor’s office.
The Jacksonville City Council heard divergent views Nov. 5 on the economic impact of Jacksonville Jaguars owner Shad Khan’s proposed $450 million Lot J development.
In a five-hour meeting at City Hall, officials from Mayor Lenny Curry’s administration and Jaguars representatives made their pitch for a proposed $233 million public investment in the mixed-use project Downtown near TIAA Bank Field. It is planned by Khan development company Gecko Investments LLC and Baltimore-based The Cordish Companies.
Council Auditor Kim Taylor projected that the city would receive a return of 44 cents for every $1 invested in the project. The mayor’s office, through the Office of Economic Development, calculated a return of $1.69 for every $1 invested.
Taylor said a financial analysis provided by Chicago-based C.H. Johnson Consulting Inc. was used as a basis for both ROIs. She said competing calculations came down to “a difference in philosophies.”
A comparison of the two ROI calculations in Taylor’s report shows that the mayor’s office did not include the city’s $50 million contribution for the city-owned $100 million Live! District or its $92.8 million infrastructure expense when it calculated the more favorable return.
Taylor’s report didn’t include the developer’s $50 million contribution for the Live! District.
“Yes, we are getting an asset, but the calculation for return on investment is designed to look at what revenues come from that. And the revenues that come from that building have really already been taken into account in your local sales tax, your bed tax, your employment-related taxes,” Taylor said. “So we’ve taken that projected revenue into account and do not feel that it would be appropriate to include the $50 million.”
Taylor said that the city’s public investment policy allows “megaprojects” to have an ROI that does not break even.
Chief Administrative Officer Brian Hughes, who said Nov. 5 he was the city’s lead negotiator on the Lot J deal, defended the Curry administration’s ROI calculations.
He pointed to the Council Auditor’s and administration’s conflicting revenue projections in the 2020-21 fiscal year budget, where the mayor’s office numbers were more accurate.
“That’s (an ROI) we believe in and one we’re very comfortable accepting. Any difference or disparity in the calculation of ROI can be discussed when we talk methodology,” Hughes said. “It’s certainly not uncommon, as we did in the budget, to arrive at some different projections or calculations.”
The auditor’s report shows the city’s total investment in the project would increase because of interest on the $208.3 million it would borrow to pay for its share of the development.
“The Treasury Division estimates that the City’s additional debt service as a result of the borrowing will total $12.2 million per year. In total, it is estimated that interest costs on the $208.3 million will be approximately $157.5 million, for a total debt service cost over 30 years of an estimated $365.8 million,” the report states.
Taylor’s report also showed concern for the unknown construction costs and revenue projections to the city for the parking agreement, which the administration officials said Nov. 5 they are renegotiating.
Mayor and Council
During prepared remarks, Curry praised the Jaguars, Cordish and the proposed public-private partnership. “There is no line of people waiting and willing” to invest more than $200 million in private capital Downtown, Curry told the Council.
“But let’s be clear, we are absolutely at a crossroads for Downtown. Local, national and global development interests are watching the decisions we’re about to make. They want to know, are we ready to be bold. Are we going to be bold?” Curry said. “When it’s time to push the button — the green or the red — again, vote your conscience but understand we’re sending a very clear message to the economic community at large.”
To get an outside opinion, Finance Committee Vice Chair Randy DeFoor said she has talked to development experts who have worked deals with the New Orleans Saints, the Dallas Cowboys and the Philadelphia Eagles.
“Based on their review, I will tell you this is a very sweetheart deal. It’s a fat deal,” DeFoor said. “Sweetheart deals are great, but we want a married deal.”
DeFoor wants to tie the Lot J deal to an extension of the Jaguars’ stadium lease, which runs through 2030.
“The only way this project makes any sense at all is if the Jaguars’ stadium lease is extended at least 25 years and then they commit to a certain number of home games. All the rest can be on mutually agreeable terms,” she said.
Hughes and Jaguars President Mark Lamping said in their Council comments that the Lot J deal should be separate from a stadium lease renewal. Lamping said entities like the TaxSlayer Gator Bowl Association and the Universities of Florida and Georgia also have a stake in stadium improvements but not directly in Lot J.
“We have 10 seasons left on our lease, including this year. Sitting here today, it would be really difficult for us to accurately predict what the stadium may need, not only 10 years from now, but the expectation is a lease extension,” Lamping said.
Council Finance Committee Chair Matt Carlucci went further than DeFoor. He filed emergency legislation Nov. 4 that would contract Orlando-based Robert Charles Lesser & Co. LLC for an independent analysis and an economic market assessment of Lot J and the development agreement.
If approved at the Council meeting Nov. 10, the city would pay the firm $26,500 to determine Lot J’s market viability in Jacksonville as part of the city’s due diligence.
RCLCO Managing Director Gregg Logan said at the meeting the he performed market assessments for Jacksonville developer Peter Rummell as co-lead of the proposed $600 million Downtown Southbank project The District.
The report would be fast-tracked to be completed by Nov. 19, the final public hearing for the Lot J bill, according to a draft bill provided by Carlucci.
Carlucci said after the meeting his goal isn’t to upend or kill the Lot J deal. He said it was intentional to pick a firm based outside Jacksonville but with knowledge of the local market to offer an independent view.
“This is not to be against or for Lot J, it’s can we sustain it. Can our market sustain it? Is it viable? I think those are good questions to ask before we spend $200 million of our taxpayer dollars,” he said.
Council will hold a second public hearing on the Lot J legislation Nov. 10 be heard by the Committee of the Whole at 5 p.m. Nov. 19.
In an Oct. 26 memo, Council President Tommy Hazouri said if Council members have all their questions answered and are prepared to vote on the bill Nov. 19, the Committee of the Whole will file its report.
A special City Council meeting will be noticed immediately following the committee meeting to take final action.