by Bradley Parsons
Staff Writer
In 2006, developers with a market-rate mentality will have the best chance to pry incentives away from the JEDC.
Ron Barton, the executive director of the Jacksonville Economic Development Commission, said the commission’s priority next year will be to encourage the development of low-cost housing in a downtown market suddenly crowded at the high end.
“Bringing market-rate housing downtown will be our number one push in the new year,” said Barton.
The City used incentives early on to awaken downtown’s slumbering housing market in the late 1990s. City money and tax breaks helped convince developers to take a chance on entering a dormant market with high-end projects like Berkman Plaza, 11 E. Forsyth and The Carling.
Now, with a pair of residential towers rising on the Southbank and several other high-end projects in the works on both sides of the river, Barton believes the luxury market can run on its own momentum. But incentives might be necessary, he said, to prime the pump at the market’s low end.
“We have to prove there’s a market here (for low-end housing),” said Barton. “There’s no reason for us to continue to give incentives for higher-end residential, the developer’s pro forma can stand on its own.”
A pro forma is a financial statement that reports expected earnings from a development project. City incentives make a pro forma look healthier because they lessen the amount the developer has to invest in a project.
High-end residential projects, if they sell, usually give developers the best return for their investment. Low-end projects aren’t as attractive to developers because the profit margins are thinner, said Barton.
“My experience... tells me there’s a demand for it (market-rate housing), but the profit margins are much thinner so there’s only a few developers who take those kind of projects on,” said Barton. “In that context, it might make some sense for the City to put some skin in the game; encourage the kind of development that will show there’s a market.”
The JEDC started veering toward market-rate development in early 2004. Then, it offered Riverplace Properties an incentive package based on a sliding scale. The cheaper the developers kept the units inside their San Marco Place development, the more City money they could pocket up to $3.6 million.
Later that year, the Downtown Development Authority endorsed a report calling for more rental units and more affordable housing. That report said cheaper housing was necessary to round out the housing market and create a diverse population downtown.
Barton said affordable housing downtown would also help spur retail and commercial development.
“There’s a strategic reason for the City to invest in a project like that,” said Barton. “It balances the market and strengthens the office and retail component downtown.”