In The News › IDB leader ends 25-year era atop key funding stop

Mar 24, 2008

Source: New Orleans CityBusiness

IDB leader ends 25-year era atop key funding stop

IDB leader ends 25-year era atop key funding stop
by Ariella Cohen

Jimmie Thorns Jr. resigned last Tuesday as president of the city Industrial Development Board, an agency that has issued more than $3 billion in federal bonds and tax abatements since Katrina for real estate developments.

The departure marks the end of an era for the IDB, which Thorns, 61, joined in 1983, taking breaks from its meetings only when the all-volunteer board ceased operations briefly in the late 1980s and early 1990s.

Since Katrina, the IDB has become a necessary stop for developers seeking to build using Gulf Opportunity Zone bonds. Thorns ran the IDB out of the North Claiborne Avenue office of his estate appraisal company, Thorns Consulting,

A recent IDB analysis of Orleans Parish developments financed with board-approved bonds showed 57 projects in the pipeline with a total investment of $2.9 billion, including $1.8 billion in GO Zone dollars.

“The IDB is the premier tool for redevelopment in the city,” said Thorns.

Thorns resigned to pursue other passions, including photography and documentary filmmaking.

“Photography is where my heart is,” said Thorns, a New Orleans African-American Museum board member who has produced two film documentaries and is working on a third, “A Celebration of Faith.”

The departure leaves two vacancies on the 15-member board. Both are expected to be filled within weeks. City Councilwoman Jacquelyn Brechtel Clarkson will make one appointment and Councilwoman Cynthia Hedge-Morrell will name a successor to Thorns.

“He has been a good president and now he is ready to move on,” said Hedge-Morrell. “I am looking for someone who will fit in with the board and can bring a similar wealth of community experience and knowledge to the table.”

Whoever takes the reins at the IDB will be coming into a big job. Two and a half years after Katrina, most large-scale developments depend on IDB-issued government bonds and tax abatements.

“Without the IDB, our projects would never have moved forward,” said Matt Schwartz, a principal of The Domain Cos., which broke ground last year on three mixed-income Mid-City apartment buildings: the 183-unit Preserve; the 222-unit Crescent Club; and 72-unit Meridian apartment at 750 Jefferson Davis Parkway.

The three developments, worth $125 million total, are being financed with $56.1 million from New York-based Centerline Capital Group and a mix of subsidies, including a $35.5 million community development block grant and $36.7 million in GO Zone housing tax credits.

IDB-approved payment-in-lieu-of-tax agreements, which freeze property taxes at predevelopment levels for 10 to 15 years, also help finance the projects by lowering developer costs. The three Domain PILOT agreements are worth $2.5 million, according to board records.

PILOT agreements for three other residential projects and four retail projects, including a Walgreens and a Home Depot, have been approved by the IDB since Katrina, according to the Bureau of Governmental Research.

The IDB could not confirm the amount or value of approved PILOT agreements because the information is not “compiled,” said Sharon Martin, IDB administrative consultant.

The complex arrangement of public and private financing used by developers in the wake of Katrina made the IDB’s job tougher than in the past, said Schwartz.

“One of the challenges that (Thorns) dealt with is that everything getting built (following Katrina) requires cocktails of subsidies that have never before been used,” said Schwartz, who credits Thorns with moving quickly and effectively to get shovels in the ground when rising construction costs and bureaucratic delays were stymieing projects across the city.

Thorns’ resignation comes at a watershed moment in the 36-year history of the IDB. As demand for its services has increased, so has debate about the bond issuance agency’s role in city economic development.

Just last year, BGR studied the public cost of development subsidies to spotlight a subsidy approval process BGR President Janet Howard said is “without standards” and potentially a drain on the city’s already-strained tax base.

“Long before Hurricane Katrina, New Orleans suffered from having too much property off the tax rolls. … The result was crumbling infrastructure, reduced services and higher tax rates for (property owners paying taxes),” BGR reported in the 2007 study “Seeking Subsidies on Top of Subsidies.”

BGR reported government subsidies financed up to 90 percent of the cost of some of the city’s low- and mixed-income housing developments. And while the IDB requires developers to pay for a cost-benefit analysis before considering a request for financing, the fact no projects post-Katrina were denied by IDB raised eyebrows and questions, said Howard.

The unpaid IDB board, composed of real estate, law, community service and finance professionals — 14 appointed by the City Council and one by the mayor — is the only body required to approve requests from developers.

There is no standard analysis for judging requests beyond a developer’s impact study, said Howard. Unlike other cities where a single, city-controlled agency typically provides and oversees comprehensive subsidy programs, developers assemble public and private financing here in a piecemeal fashion, going to different agencies for different approvals without a single, unifying accountable body.

“We noticed that there is more or less an ad hoc process without standards, policies and procedures, which creates the risk that an entity is approving unnecessary tax breaks and thereby wasting taxpayer money,” said Howard.

Thorns and other real estate professionals disagreed with BGR analysis of IDB, which was created in 1973 to spur growth and job creation at a time when businesses and residents were leaving the city in droves.

“They say we will approve everything and anything. That is not true, but the end game is that we got $1.8 billion in federal bonds for the city and have gotten the ball rolling on the city’s redevelopment while (others) were doing expensive studies,” said Thorns. “What we do is more than giving up tax breaks or bonds, it’s building a labor base, new jobs and in other sources of revenue. We are stimulating activity and creating ripples of growth.”

Incentives are necessary for cities competing against one another for investments that will bring jobs and other resources, said Ivan Miestchovich Jr., director of the University of New Orleans Center for Economic Development and an associate professor of finance.

“If there are other communities that are competing with us who are willing to give these tax breaks and we are not, then we are at a disadvantage,” Miestchovich said. “It’s a competitive world and to attract development, you have to use whatever tools are in your tool box … as long as the benefits outweigh the costs.”

Miestchovich and others, including Thorns, say a more standardized, comprehensive economic development approach would improve efficiency.

“The IDB is a board of volunteers making decisions about fairly significant amounts of money with limited expertise and resources,” said Miestchovich.

Developers say New Orleans lacks a comprehensive development approach, which slows projects and inflates project costs on all sides.

“Most municipalities have several standardized (subsidy) programs and New Orleans doesn’t have those programs in places so each (developer) has to start from scratch,” said Schwartz.•

Mar 24, 2008

Source: New Orleans CityBusiness

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