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Laney-Walker/Bethlehem redevelopment project gets 'bridge' loan from URA

Thursday, June 19, 2014 9:39 PM
Last updated 11:11 PM
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Augusta’s Urban Redevelop­ment Agency on Thursday authorized a $2.5 million loan for the continuation of redevelopment efforts in the city’s Laney-Walker and Bethlehem districts, but members of the panel continue to question the project’s bookkeeping and reliance on outside consultants.

After an extensive tour of the project’s new occupied, speculative and rental homes on Pine, Florence and 11th streets in the Heritage Pine development, members praised the quality of the construction, intended to transform the areas to newfound glory.

Funded in part through a 50-year, $750,000 yearly allocation of excise taxes charged on hotel and motel rooms, project funding is overseen by the URA, which changed from a largely absent, hands-off board to an active one when city commissioners extended the board’s jurisdiction to several downtown sites eyed for development and replaced its resigning members with former Mayor Bob Young, downtown activist Brad Owens, businesswoman Bonnie Ruben, Libertarian party official Amanda Bryant and citizen Isaac McKinney, who did not attend Thursday.

Issuing $8 million in bonds against future tax collections, the project since 2010 has spent $7.3 million in bond proceeds, $2.5 million in federal funds, $1 million in other local public funds and seen $2.5 million in private investment, according to a June monthly status report.

The funds have resulted in the purchase of 274 lots and demolition of 101 blighted properties, and the construction of 24 homes, 22 of which have sold (with 6 more under construction), as well as the construction of 24 new rental units, the report said.

While the project continues to receive $750,000 annually, $550,000 goes toward servicing the bonds and it is effectively out of sufficient cash to continue momentum until its next bonding opportunity next year, prompting city Housing and Community Development Director Chester Wheeler, who serves as project manager, to call for a $2.5 million “bridge loan” to keep it going and repay from the next bond issue next year.

“We didn’t know we would sell houses as fast as we have,” said Wheeler, attributing the cash shortage to the popularity of the new development.

About 30 percent of the funds have gone to consultants APD Planning and Development, which has received about $550,000 a year for its services since January 2010, and Melaver McIntosh, which has garnered approximately $90,000 annually since February 2011. Thirty-eight percent went toward property acquisition, and 32 percent for demolition, construction of the new homes and infrastructure, such as rear access roads behind the Pine Street homes.

Owens, who requested Wheeler provide him a list of 24 “development partners” whom Wheeler said had been procured at the start of the project, and descriptions of what each does, said after extensive discussion Thursday his chief concern about repaying the $2.5 million loan had been addressed and motioned to approve it. After the tour, “we can’t not want to see the project move forward,” he said.

Young, a former U.S. Housing and Urban Development regional director, pressed Wheeler on why he hadn’t begun replacing consultants with city staff, a recommendation made by the American Planning Association in a review, and when private developers would lessen the burden on taxpayers, who presently supply at least $4 to each private $1 spent.

While Wheeler’s budget for spending the loan funds did not mention city staffing, he said he’d written a job description for a project manager.

Young said despite the information provided Thursday, other details including program income and how it was spent, the amount budgeted for homeowner assistance and evidence of significant private investment were absent.

“These are all things we need to talk about moving forward,” he said. “What I’ve seen just hasn’t lived up to all the hype. I’d love to see it live up to the hype.”

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Little Lamb
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Little Lamb 06/19/14 - 08:51 pm
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Sad Day

It’s a sad day.

Riverman1
90278
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Riverman1 06/19/14 - 09:33 pm
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Question About Private Funding

It's said the funding is 4-1 public money to private money. Is the 1 those people who buy the houses?

gargoyle
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gargoyle 06/19/14 - 10:04 pm
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1
“We didn’t know we would sell

“We didn’t know we would sell houses as fast as we have,” said Wheeler, attributing the cash shortage to the popularity of the new development.

???????

dichotomy
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dichotomy 06/19/14 - 10:15 pm
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"“We didn’t know we would

"“We didn’t know we would sell houses as fast as we have,” said Wheeler, attributing the cash shortage to the popularity of the new development."

Does that seem counterintuitive to anyone else? Any REALLY successful project would have cash flow if they were selling houses. Oh wait....I forgot....this is a government SUBSIDIZED housing program and redevelopment project.

'These are all things we need to talk about moving forward,” he said. “What I’ve seen just hasn’t lived up to all the hype. I’d love to see it live up to the hype.”

I think these are all things YOU NEEDED TO TALK ABOUT BEFORE YOU APPROVED BORROWING ANY MORE MONEY FOR WHICH THERE IS NO REVENUE STREAM TO REPAY.

I guess the URA is just another rubber stamp for B.S. and hype. I had hopes they were actually going to hold people accountable, demand answers, and quit giving these 'lick and a promise" approvals. "Yeh, we know it is all bullcrap and hype but we approved the loan."

Brad Owens
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Brad Owens 06/19/14 - 10:51 pm
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dichotomy

I am afraid you are incorrect about there not being a revenue stream for this bridge loan. There is the $1 per night bed fee charged by hotels and motels and this loan will be paid back out of proceeds from the next bond issue done by the URA to fund the project.

Also, the reason selling the houses quicker than anticipated in the original business plan has caused a shortage in funds is because the gaps created between selling price and approved loan amounts is covered as part of the project for those buying the homes and is a second mortgage owed back to the organization.

Because the homes sold faster than anticipated there was a larger demand for funds quicker as well, which means that all the loan is being used for is to complete this phase of the project 18 months before another bond issue was planned. The money was ALREADY dedicated to it and the interests being paid (from the URA to the city) is negligible.

The only impact to the program this loan will have is that there will be less discretionary funding inside the program coming from the $1 fee for the next five years.

There will be four more, five total, bond issues related to this project over the course of the entire plan.

The URA will be much more active in oversight moving forward, I can assure you of that but this was necessary to make sure that the project didn't stall at a time when it is critical to finish phase one.

Hope that helps clear up some misconceptions.

Brad

gargoyle
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gargoyle 06/19/14 - 11:44 pm
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Who is paying the gaps

Who is paying the gaps created between selling price and approved loan amounts and how much is the gap per unit ? Second question: Is a 30% bill for consultants normal and proper for a publicly funded project ?

GnipGnop
12692
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GnipGnop 06/20/14 - 01:40 am
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37 million dollars put into a area

that probably only makes up 10% of ARC population...this is so Augusta. I don't care if the money is coming from a hotel tax. Why can't South Augusta get this kind of money? All these boards representing downtown and the rest of Augusta sucks hind teat.

Riverman1
90278
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Riverman1 06/20/14 - 03:51 am
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Question for Brad

"Owens, who requested Wheeler provide him a list of 24 “development partners” whom Wheeler..."

Brad, did you ever get an answer to that?

Brad Owens
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Brad Owens 06/20/14 - 06:51 am
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gargoyle,

I am not sure if you caught that when I posted it, but if there is a gap it is a second mortgage owed back by the home owners.

Brad

Brad Owens
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Brad Owens 06/20/14 - 06:58 am
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RM1

I need to give him a chance to compile the list, I asked him yesterday and I am sure he will get it to me.

We have just been seated as a board but already they can see that we are going to be very active.

This project has many more years of funding allocated and there will be increased oversight on the phases and spending as we move forward.

I know folks are just dying for some blood but right now the moves being made are finishing out the left over business from the last board and completing this phase of the project.

Brad

Riverman1
90278
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Riverman1 06/20/14 - 07:01 am
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Brad, I appreciate your reports

Brad, I appreciate your reports.

Brad Owens
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Brad Owens 06/20/14 - 07:12 am
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"Consultants"

I would like to add that there seems to be an idea that the "consultants" are a waste but please look at it this way; They are outside project managers and have had seven folks working on the project full time.

Mr. Wheeler doesn't have the full time staff to support this project, Also, they would only be employed for the duration of the project, hired guns so to speak, to get seven full time county employees hired would take forever and there would be little accountability.

We can fire a consultant at will according to the contract we have with them, have you ever tried to get a county employee fired?

Also, they are cheaper than having full time county employees working inside Mr. Wheeler's office, contractors are cheaper in the long run for the tax payer. I compare it to my world, private security contractors make more money than soldiers, but soldiers cost more money to field.

There sure seems to be a lot of misconceptions about this project out there.

Brad

dichotomy
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dichotomy 06/20/14 - 08:16 am
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Brad......"There is the $1

Brad......"There is the $1 per night bed fee charged by hotels and motels and this loan will be paid back out of proceeds from the next bond issue done by the URA to fund the project."

I knew about the hotel/motel tax but assumed that would be used to pay for the "normal" bonds like the ones they have already overspent and wasted on "consultants" and marketing. I thought this bridge loan was "immediate" money for which there was no "immediate" funding stream because the current bond money had already been spent/wasted on consultants. You know, like there is no funding stream for the 20 million in bonds to finish the totally screwed up Marble Palace project.

AFjoe
4681
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AFjoe 06/20/14 - 08:25 am
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3
50 years?

Some folks got a meal ticket for the next half century. Thirty percent to tear down a run down shacks? How much does Mr Wheeler make?
Too much money...too little accountability.

Brad Owens
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Brad Owens 06/20/14 - 10:39 am
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dichotomy..

I explained why they ran out of money, whether the money was "wasted" on the contract project mangers or not is what we are looking at now.

Unfortunately for the bomb throwers it doesn't look like it's going to be a source of as much scandal as desired.

From what I see there has been significant movement in a positive direction for what has been spent.

I will withhold labeling this until I get more information and crunch all the numbers.

Brad

gargoyle
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gargoyle 06/20/14 - 12:06 pm
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50 years of Richmond County

50 years of Richmond County tax collections are ear marked for this project. Promises were made how this seed money would grow, asking hard to answer questions isn't bomb throwing. If I remember correctly this deal was sold as investment with a possible 10 to 1 growth so the hard question must be what has the seed money returned and is this a good use of a limited resource. Accountability should be established before the money tap is opened .

countyman
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countyman 06/20/14 - 12:16 pm
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Many neighborhoods across the

Many neighborhoods across the US were less desirable in the past and they've become hip and trendy in 2014.. The naysayers didn't like the project from the beginning and don't want to hear any positive facts surrounding the development.. The concerns from Bob Young regarding the lack of private investment are valid, but let's remember neighborhoods don't change overnight.. The overall project should be congratulated for being able to sell homes in neighborhoods(Laney Walker/Bethlehem) suffering from image problems...

The $37.5 million is over fifty years and the city has spent more than $40 million already on Diamond Lakes probably..

The city should help revitalize the older parts of South Augusta, but let's focus on smart growth.. The Regency Mall area is very important, but the Peach Orchard corridor provides the best opportunity to attract the private sector..

The neighborhood Sand Hills and the waterfront property in East Augusta(Marion Homes) offer tremendous redevelopment opportunities..

Sweet son
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Sweet son 06/20/14 - 12:54 pm
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I had a lot to say and even composed my comment but my inference

as to what the problem is would not be well received. We all know what the problem is!

gargoyle
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gargoyle 06/20/14 - 03:19 pm
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So ask oversight and

So ask oversight and accountability and the name calling starts. Guess you got to know your role, just push a wheelbarrow full of money to the cool people and shut up .

corgimom
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corgimom 06/20/14 - 03:51 pm
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It is a proven fact that if a

It is a proven fact that if a homeowner has to take out a 2nd mortgage at the time of purchase, their risk of foreclosure is much higher than normal.

And when a house is foreclosed, it is sold far below market value and blights neighborhoods.

So....the foundation is laid. *sigh*

corgimom
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corgimom 06/20/14 - 03:55 pm
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But L/W is NOT hip and

But L/W is NOT hip and trendy. There are still way too many blighted properties.

But the people that are buying in there are the ones who can't afford a house with conventional financing. Did people not learn anything from the mortgage collapse?

If they can't afford the loan for the full amount, they WILL NOT have the money to make the needed repairs and upkeep. And as all of us homeowners know, that's constant, it's every time you turn around, there's something else that needs doing.

These houses WILL be rundown, and in 10 years, they will be blighted.
Putting people in houses they can't afford is a sure way to cause blight.

Brad Owens
4859
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Brad Owens 06/20/14 - 04:09 pm
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1
corgimom...

You could not be more wrong about this or the type of person this development is attracting. I must admit I was surprised and i am still skeptical on the returns, but you're just not in possession of the facts concerning this project.

Brad

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