In The News › Plaza Tower tax break has tentative O.K.

Aug 25, 2006

Source: Times-Picayune

Plaza Tower tax break has tentative O.K.

Plaza Tower tax break has tentative OK
City taxes would be diverted to help pay for cleanup costs
Friday, August 25, 2006
By Bruce Eggler
Staff writer

A New Orleans City Council committee gave tentative approval Thursday to developers’ request
for a tax break that would help pay for converting the vacant and environmentally blighted Plaza
Tower high-rise on Howard Avenue into luxury condominiums.

The council’s Budget Committee voted to send to the full council two ordinances that would lay
the groundwork for a tax increment financing district, or TIF, that would use part of expected
increases in the building’s property taxes to help pay for ridding it of asbestos, mold, lead-based
paint and PCBs.

But the committee urged the developers to work closely with Harold Asher, an accountant
Councilwoman Stacy Head asked to advise the council on the TIF proposal. Asher said he still
has many questions about the proposal and needs more information before he can make a
recommendation.

Converting the office building into a top-of-the-line residential building to be called the Crescent
City Towers is expected to cost about $136 million. The developers plan to create about 200
condos that would sell for an average of $415 a square foot, or $299,000 to $2.8 million each,
with most costing about $700,000.

The cost of environmental remediation, which involves stripping off the 45-story, 535,000-
square-foot building’s entire exterior and gutting nearly all of the interior, is put at $27 million. The
TIF would pay for $13 million of that.

The building now pays $67,000 a year in property taxes. After its conversion to condos, the
developers predict, it would pay about $2.9 million a year, of which $1.3 million would go into the
TIF.

Chip D’Angelo of WCD Consultants, a New Jersey firm that would oversee the building’s
cleanup, said it has “a witch’s brew of contaminants” that make it unusable and that in case of
fire could pose a health risk to large parts of the city.

Gary Schnellbacher of PKF Consulting, a real estate consulting firm working with the developers,
said the conversion would pump $169 million of direct spending into the local economy, giving
the city a $13 return for each $1 it would invest through the TIF.

But Asher said he has yet to see convincing evidence that the conversion could be done for
$136 million, that the condos would sell as rapidly and for prices as high as the developers
project or that their financing is all in place.

Janet Howard, president of the Bureau of Governmental Research, said it is a mistake for the
city to authorize a TIF, which diverts money from the city’s general fund, to support high-end
condos. She said it “appears to be a gross misallocation of resources” that is both inequitable
and unnecessary at a time when the market for condos is booming.

Moreover, she said, paying off the $13 million in bonds the TIF proceeds would support could
cost the city $30 million over the life of the bonds.

Cheryl Kornick, an attorney for the developers, said they are not asking the city to guarantee the
bonds. “All the city is risking is tax money it does not now have” and won’t ever get unless the
building is redeveloped, she said.

“The city would not be on the hook for $13 million?” Head asked. Kornick said no.
Without the TIF, Kornick said, the Plaza Tower will remain vacant and blighted. If the city
ultimately seizes it as blighted, she said, it would cost the city $25 million simply to remove the
asbestos and demolish it.

Head, whose district includes the site, said she wants to hear Asher’s recommendations after he
gets the further information he is seeking. But she said that as long as the city would not be put
at risk if the project fails, she is inclined to support it.

Councilman Arnie Fielkow said that despite “many unanswered questions, I do not believe the
word TIF has a negative connotation.” He said such arrangements have worked well in Chicago
and Pittsburgh.

The full council is expected to consider the issue Sept. 7. If it votes in favor, the plan would go
before the voters Nov. 7.
. . . . . . .
Bruce Eggler can be reached at beggler@timespicayune.com or (504) 826-3320.

Aug 25, 2006

Source: Times-Picayune

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