One of the issues the new Wheaton City Council will confront early in its tenure is whether to approve an amendment to the original planned development for the Courthouse Square project. The proposed amendment would permit the construction of a senior care facility in place of two planned condominium buildings.
The recession has taken a huge toll on real estate development. The Courthouse Square developers have been unable to obtain financing to construct the condominium buildings due to their inability to pre-sell a sufficient percentage of units. With time running out on their development agreement with the City, the developers are seeking to change course in order to get something built. If the project is not completed in accordance with the terms of the agreement by March 31, 2015, they are required to repay the $7,700,000 in assistance provided by the City. It is not known whether they have the financial resources to do so, and they may request the City to extend the completion date. It is important to note the private investment component of the project is approximately $40,000,000.
The immediate consequence of the inability to complete the project on the original timetable is that less real estate tax increment than expected has been collected, resulting in a shortfall in amounts available to pay debt service on the bonds issued by the City to finance a portion of the costs of the project. The developers have guaranteed $2,700,000 of the debt service due in 2009, 2010, 2011 and 2012 (the bonds do not mature until 2018), and have made all required payments thus far. The City’s taxpayers are responsible for any further shortfalls exceeding the guarantee. In addition, the lack of tax increment means no funds will be available for other uses within the tax increment district.
The construction of the senior care facility is no panacea for City taxpayers. Real estate tax revenues will increase, but it is unclear whether the increase would close the gap in debt service. The City has retained a consultant to project the impact on tax revenue. Additional considerations for the City Council are: whether a senior care facility is appropriate for this location; will the owners will remain in place for the long-term or will they build and sell; the diminished economic impact on downtown business (less than that of owner occupied residences) and further development; and the potential negative economic impact on the value of the existing condominiums and townhomes both in terms of the resale value and increased owner assessments (this is due to a smaller number of residents contributing to the costs and expenses of the maintenance of the common areas).
Council members will have to decide between waiting for housing demand to rise to a level sufficient for financing of the construction of the remaining units and approval of a project which may have a very positive economic benefit to the developers and a likely lesser positive impact for the City’s taxpayers, but which does not fulfill the original vision for Courthouse Square and has an immediate and long lasting negative impact on its current residents.
I don't support such an amendment. The current residents purchased their properties in reliance upon the representations of the developers and the City that the completed Courthouse Square would consist of high quality, owner-occupied town-homes and condominium buildings. The development should be completed in conformity with those expectations notwithstanding the fact that it may take some time. In the long run, the City will be better off. If a loss is to be suffered, the City as a whole must bear the cost; it is not appropriate to cause further losses to the residents of Courthouse Square who, in good faith, bought into this City-sponsored project.
The original vision for the development of the courthouse, which intended to spur development and use of the downtown area south of the tracks, remains a good one. It will certainly take longer to bring this to fruition, but it is crucial to future development south of the tracks to adhere to this plan.