Why does Citibank want to do this 100% affordable tax credit deal?
Easy, they get the best return on their investment. And they also get a “basket of goodies” from the City as well. What is in that “Basket of Goodies”? Let’s take a look
First and foremost, the developer of this property, Citibank/McClutchy, receives a tremendous real estate tax break that was baked into the LDA by Tim Sheehan and company. A market rate development at $80 million (lets use this as the benchmark) would net the City of Norwalk approximately $1,500,000 annually in real estate taxes. But the Citibank/McClutchy deal as proposed would net the City of Norwalk a paltry $175,000 per year.
Citibank/McClutchy would also receive the $4.3 million in infrastructure monies the City of Norwalk is required to put into this deal via the LDA. That’s $4.3 million of our taxpayer dollars.
The final goodie is that the City of Norwalk is changing its parking requirements to accommodate the Citibank/McClutchy deal by allowing the 100 spaces of public parking, lost during construction and required to be replaced, to include on-street parking spaces and other illegal parking formats.
So to summarize the bigger issues. The City of Norwalk is enabling one of the world’s largest banks to dump an unfeasible low-income housing project into the middle of our burgeoning downtown, a downtown which the City swore to revitalize, mind you.
And to aid this “bailout” the City is bending over backward to provide Citibank/McClutchy with the basket of goodies outlined above.
The end result will be a building largely populated by families as 79 of the 101 units are 2-3 bedroom units, which are family units. These families will be hard pressed to make ends meet, thus limited discretionary funds to spend supporting the local retailers, all the while adding to our overburdened schools. And the taxes received from this project will be woefully inadequate to address the myriad of added cost it imposes on the City for decades.
But there is a very easy way out. Norwalk could stop the Citibank/McClutchy deal in it tracks by simply doing any one of the following three things.
Say no to being a municipal sponsor of this deal – that would be very easy.
Tear up the LDA and as a result the massive tax break, and the $4.3 million of infrastructure investment to Citibank/McClutchy goes by the wayside – that would be very easy as well.
Not allowing the special parking allowances that no one else gets – that might be the easiest of all.
If it’s easy then why haven’t we done this yet?
Great question. As they say, follow the money. Who stands to make money on this deal as is – Citibank logically for all the reasons noted above, then there is the entire bloated bureaucracy that feeds off of a system that is largely devoid of checks and balances – that would be the attorneys, advisors like Harriman and RPA, our own RDA, politicians, etc.
But what happens if we do this, won’t we be stuck with the Tyvek Temple for years to come?
No, we won’t. For the same reason Citibank is pursuing this deal, once those doors are shut, they will move to plan B. Plan B is an orderly liquidation of a non-performing real estate loan, which happens all the time
The likely outcome would be the development community vying for the rights to build this property in the heart of an Opportunity Zone. It would most likely be scaled back for parking reasons, be market rate and be the kind of development that works with the surrounding environment, something sorely missing in the current plan.
Consider that the Wall Street area, despite decades of RDA bungling and abuse, has revitalized over the past decade – virtually all of this done by individuals without government help. Virtually every building in this area has been upgraded and renovated over the past decade. The result is a vibrant arts and small business community in the region’s third largest central business district. Plus, this area has the highest potential for growth and value increase along the I-95 corridor in Fairfield County.
You want to see the Tyvek Temple being fought over by market rate developers? Do you want to see Wall Street take off and the Grand List grow? Put a train station in at Wall Street.
Tell your Council representative to not be swayed by the nice pictures, flowery language and slick looking reports. Ask that they dig into the numbers, if they don’t understand the numbers fully, request they bring in advisors other than RDA staff.
Bottom line – Capping the income of the residences in a downtown area only caps the potential of the area and drags down the Grand List.
Michael McGuire, MAI, CCIM
Principal, The Austin McGuire Company