The following is an excerpt from an article about the Downtown East project by Sarah McKenzie in the January 1, 2014 edition of the Southwest Journal. This excerpt focuses on the financing of the project, which provides clarification for taxpayers.
Co-founder of Park Watch
DOWNTOWN EAST PROJECT FINANCING
The latest version of Ryan Cos.’ proposal for a new five-block development in Downtown East has the developer and the Vikings kicking in more money for the project.
Details of an updated financing plan for the $400 million project were revealed to the City Council’s Committee of the Whole on Dec. 5. Ryan has pledged $350 million to finance the office towers, housing and retail portion of the development — $3.7 million more than they originally committed to the project.
The Vikings have also agreed to donate $1 million for the two-block park.
Rybak said the additional financial contributions from Ryan and the Vikings were key elements in making the latest proposal viable in a briefing with reporters before the Committee of the Whole meeting.
Here are highlights of the proposed financing plan:
— Ryan will privately finance $350 million for the office towers, housing and retail;
— The Minnesota Sports Facilities Authority (MSFA) will pay $28.9 million to build the skyways and a portion of the Block 1 parking ramp (see map); and
— The city will finance about $57 million of the project by issuing bonds — $19 million for the park; $33 million to pay for a portion of the Block 1 parking ramp; and about $5 million in other site costs. The debt service on the bonds will be paid by revenue generated from the parking ramps. Ryan Cos. will make payments to the city for the first 10 years and after that revenue from the parking ramps will go directly to paying off the debt service.
The city is basing projected parking revenue on the amount generated at the nearby Jerry Haaf Memorial Parking Ramp.
The MSFA also plans to transfer development rights for an area above and next to the Block 1 parking ramp to the city (see map). City staff will issue an RFP for the site now that the Council has approved the deal.
Rybak said the site is prime real estate and he has already been in talks with interested developers. Rick Collins, vice president of development for Ryan Cos., said the developer is potentially interested in the site, but is staying focused on its already very “full plate.”
Wells Fargo and the Vikings have also come to an agreement allowing Wells Fargo to have a large sign with their logo on top of the office towers. The signs are also subject to the city approval process.
According to a report prepared by CPED, the Ryan project is expected to generate $3.9 million in property taxes in its first year — of that, $1.1 million would go to the city. Over time, the development is expected to generate $40 to $45 million in property taxes for the city.