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Tuesday, November 20, 2007
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UPDATED: 9:55 PM
Museum Plaza seeks $45 million bond issue
By Dan Klepal and Marcus Green
The Courier-Journal
Louisville Metro Government will be asked to issue $45 million in bonds to jumpstart construction of the Museum Plaza project, a proposal that surprised some Metro Council members today.
The money would be used to help pay for about $139 million in public improvements related to the $490 million project, including new floodwalls, lighting and a public plaza.
A 62-story skyscraper — the heart of the project — is being privately financed.
Some council members said they were told only recently that metro government would have to carry debt on the public improvements.
"This merits serious discussion," said Hal Heiner, R-19th District, who spoke with Museum Plaza developers about the financing plan several weeks ago.
But a spokesman for Mayor Jerry Abramson said the city has always expected to cover some of the costs, even if the idea of financing them through city-backed bonds wasn't discussed publicly.
"We've known from the beginning of the project that the city would have a role to play in financing the public infrastructure, but it hadn't been quantified. It was just talked about in the abstract," said Chad Carlton, an Abramson spokesman. "We are making a business decision that this is an economic project important enough to put dollars behind."
Developers say the city bond money, negotiated with Abramson's administration, is a relatively small part of paying for the complex. They say the bonds are necessary for the project to proceed and will be paid off over three decades through future tax revenue generated by the project.
Council member David Tandy, whose downtown district includes the Museum Plaza site, is sponsoring an ordinance that would authorize a $130 million bond issue for the project. The measure was introduced at today's council meeting.
Tandy, D-4th, said he was briefed on the additional need for city funding last week.
"I'm not overly concerned. Relatively speaking, the number doesn't scare me," he said, referring to the proposed bond issue. "I'm confident that money will come back to us."
Last month officials broke ground on the project, at Seventh Street and River Road. Plans call for the skyscraper to include lofts, condos, a contemporary art center, office and retail space and a Westin hotel.
Museum Plaza will be financed in several ways, including private sources to cover the buildings and bonds to pay for the public improvements. The debt on the public portions will be paid through new taxes generated at the site as part of a tax increment financing, or TIF, district.
The district would allow developers to recapture some of the taxes generated at Museum Plaza, including room taxes from the hotel, and use them to pay off debt for the public infrastructure improvements.
The bulk of the improvements would be covered by the $130 million in bonds issued by the council and guaranteed by revenues from the tax district. The city's credit rating would not be affected, and it would not be liable for the debt.
But developers will be able to use only about $75 million in proceeds from that bond issue because they'll need to set aside money for expenses, such as paying debt until the district starts to generate revenue after Museum Plaza opens in 2010.
To make up the difference, the city would cover $45 million and the developers would pitch in $25 million.
Council member Kelly Downard said he had thought that the city's only financial stake in the project would be the revenue from the tax district and that local government wouldn't be asked to guarantee bonds, which is money that couldn't be borrowed for other purposes.
"I am not aware of that," said Downard, R-16th. "If that's the case, I wonder where the discussion has been."
Craig Greenberg, a Louisville attorney and one of four Museum Plaza investors, said developers have been crafting financing details with Abramson's administration for about a year, but they were only finalized last week.
"It has always been contemplated in those discussions that a portion of the TIF bonds are enhanced with the city's credit," he said.
Greenberg and Bruce Traughber, Louisville's economic development director, said the city's role in issuing bonds for Museum Plaza is similar to how it helped finance the downtown Marriott hotel.
The city issued $46.5 million in bonds for that project, and a tax-increment financing district at the site is paying annual debt on the bonds.
If the Museum Plaza district meets projections, Traughber said, the city would pay off its $45 million investment and receive an estimated $15 million in interest over the 30-year life of the taxing district.
"So our contribution toward one of the outstanding architectural feats in the world would be $1 million a year or less," he said.
Reporter Dan Klepal can be reached at (502) 582-4475.
Reporter Marcus Green can be reached at (502) 582-4675.
Hopefully this doesn't get delayed by metro council.
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Louisville has my deepest sympathies. 
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