by Bradley Parsons
Staff Writer
With interest rates likely to climb later this year, City planners are examining the rates they charge on development loans.
Lending to local developers is a balancing act. The Jacksonville Economic Development Commission wants to lend at rates low enough to encourage desirable development, but high enough to keep red ink out of the City’s ledger.
Further clouding the situation, the City has loaned cheaper in areas where development lags. At Thursday’s JEDC general meeting, the commissioners approved a West 45th Street loan at 3 percent and later approved a 4 percent loan to a Bay Street developer. Some of the commissioners think the money’s too cheap. Some in the community think it’s not cheap enough. As the JEDC continues a six-month reorganization, Managing Director Kirk Wendland said he hopes a consistent policy emerges.
“We’ve got to have some fairly clear guidelines,” said Wendland. “We don’t want our staff to have to negotiate a different rate for every project.”
Most of the development money loaned by the City since 2001 has come from the Northwest Jacksonville Economic Development Fund, $25 million in Better Jacksonville bond money intended to stimulate economic activity north and west of the river. The fund’s enabling legislation requires 3 percent interest on loans from the fund. The low rate is designed to spur interest in the area and would require action from the City Council to change.
JEDC commissioner Charles Appleby, who is leading a subcommittee charged with reviewing the commission’s finance, said that rate is too low.
“I know what it would cost to borrow money in the private sector, and it’s not 3 percent,” said Appleby at the meeting. “It would cost at least 7 percent at a commercial bank.”
Low national rates since 2001 have allowed the City to borrow money cheaply. But if rates climb as projected, Appleby worried the City would still be required to loan at 3 percent while paying more to borrow.
Appleby noted that many of the loans target areas that pose a high risk to investors. Higher interest rates would help make up City money lost on failed loans, he said.
“We are not going to be repaid by every loan we make,” said Appleby. “Some of them are going to go bad. Three percent is an unreasonable rate, it’s unreasonably low and we are going to get hurt by these fixed-interest loans.”
Appleby suggested a standard 7 percent rate. However, that suggestion drew opposition from Northwest Jacksonville advocates.
If the City charged market-rate interest, Council member Mia Jones said there would be little incentive for developers to risk investing in poor areas.
Even at the current rates, investment in the Northwest lagged behind the rest of Jacksonville, said Jacquelyne Brown, an area contractor who spoke at the meeting on behalf of the Jacksonville Coalition of African American Contractors.
“You’re looking at things like a bank, you need to be a little more lenient to encourage development in these areas,” said Brown. “The money is trickling to us, we need a shower.”
During it’s general meeting the JEDC also:
• Approved $2.1 million in tax credits to offset costs from Washington Mutual, Inc.’s expansion of its 7301 Baymeadows Way offices. Washington Mutual will receive a $3,000 credit for every full–time job created up to 700. The jobs range from $24,000 processing positions to $85,000 management jobs.
• Approved $124,000 in development loans, forgivable loans and a facade grant to renovate the second floor of the Dyal-Upchurch Building for Bay Street Fine Arts Marketing. Commissioners debated whether the art gallery fit the Bay Street Town Center model, but decided the cultural venture would add to the entertainment corridor.