In The News › Tax break sought on tower

Aug 24, 2006

Source: Times-Picayune

Tax break sought on tower

Tax break sought on tower
Condo conversion proposed by developers
Thursday, August 24, 2006
By Bruce Eggler
Staff writer

The latest chapter in the long and often troubled history of the Plaza Tower plays out today at
City Hall as two New Orleans City Council committees consider a request for a tax break to
facilitate the high-rise office building’s conversion to luxury condominiums.

If the council refuses, developers warn, the building is likely to remain vacant and blighted for
years.

The developers are seeking a tax-increment financing district, or TIF, that would divert about half
of the building’s post-conversion property tax revenue to cover the cost of ridding the 1960s
structure of asbestos, lead-based paint, PCBs and mold.

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 and to take more than two years.

The cost of 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.

A TIF diverts specified tax revenue away from the city’s general fund to pay for specific projects.
The goal is to allow a financially strapped government to help underwrite infrastructure or other
improvements that it can’t pay for directly, thereby stimulating economic development that will
pay for itself and benefit the city’s treasury in the long run, all without raising taxes.

Without the TIF, Cheryl Kornick, an attorney for the developers, said Wednesday, the condo
conversion is not economically feasible and won’t go forward, meaning the building would remain
an empty eyesore and an environmental hazard that the city might end up having to pay to
remediate if its owners abandon it. Even to demolish it, she said, the asbestos would have to be
removed first, which alone would cost millions.

With the TIF, she said, the city will get a cleaned-up, revenue-producing building that would pay
about $2.9 million a year in property tax, compared with the $67,000 it pays now.

The current condo project, the latest of several attempts to revive the building, is led by
developers Glenn Rushton, Robert Katz and Michael McCreary, all of whom are from other
states.

Critics cite tax loss

Critics of the TIF are likely to point out that the financially strapped city would be giving up about
$1.5 million a year in property tax revenue to help create about 200 condos that would sell for
$299,000 to $2.8 million.

But Kornick said the TIF would include only taxes that go to City Hall, not those due to the
Orleans Parish School Board, Orleans Levee Board and Sewerage & Water Board. In addition,
she said, the city would get $200,000 a year in increased taxes as the building’s value rises,
before any money goes into the TIF.

The council’s Budget Committee and Special Projects Committee will consider two ordinances
today.

One would create the New Orleans Plaza Tower Economic Development District, comprising
only the building at 1001 Howard Ave. The district would be authorized to issue bonds secured
by the increased property taxes the building would pay. That ordinance would have to be
approved by Orleans Parish voters at the Nov. 7 election.

The second ordinance would establish the “baseline collection rate” of $67,000 and provide that
increased tax receipts would go to the district to pay for the building’s environmental cleanup.

November vote sought

To get the first measure on the November ballot, the developers want the council to act on it at
the council’s Sept. 7 meeting.

In introducing the two measures three weeks ago, Councilwoman Stacy Head, whose district
includes the site, said she was prepared to push for a quick vote on them, as the developers
asked, but was not committing herself to support them. She said she was not opposed to TIFs in
principle but would support this one only if, after analyzing it, she decided it would benefit the
city.

Kornick said that even if the council passes the two ordinances and the voters give their
approval, a cooperative endeavor agreement still would have to be worked out and approved by
the council, meaning that whatever action the committees take today and the council might take
Sept. 7 would not be final.

The Bureau of Governmental Research has long been critical of TIFs, though less critical of
those involving property taxes than those that divert sales tax revenue from the city’s treasury.
The BGR has not commented on the proposed Plaza Tower TIF. The developers’ attorneys said
they planned to brief the bureau’s staff on the proposal today.

The Plaza Tower, at the time the city’s tallest building, was developed in the 1960s by Sam
Recile, who lost control of it before it was completed. Construction was halted for 16 months as
creditors waged a courtroom battle for possession of the half-finished structure.

Long financially troubled, especially after newer office towers began sprouting along Poydras
Street, the building has had a string of owners and became virtually unusable after 2001, when
workers in some offices began reporting health problems they attributed to toxic mold and other
environmental factors.
. . . . . . .
Bruce Eggler can be reached at beggler@timespicayune.com or (504) 826-3320.

Aug 24, 2006

Source: Times-Picayune

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