Loan guarantee in Laura Street Trio deal draws rebuke. Sponsor calls attacks unfair.

The incentive deal for restoring the Laura Street Trio in downtown Jacksonville has drawn fire from the Downtown Investment Authority board's chairman as "reckless and financially irresponsible" while the sponsor of the legislation says its terms are still undergoing changes and deserve a fair hearing.

Downtown Investment Authority board Chairman Jim Citrano's criticism came during a DIA meeting Thursday when the board unanimously approved a resolution that asked City Council to send the deal to the the board for its recommendation before City Council votes on it in January.

The stakes are high for taxpayers and for downtown's future development in its historic core. The $175 million project would rejuvenate the Laura Street Trio, which dates back to the city's rebirth after the Great Fire of 1901, and add two new 11-story buildings for a boutique hotel, apartments, stores and restaurants.

Other development: Mega-development in downtown historic district rolls out design of 22-floor building

Backstop: Jacksonville might guarantee repayment of bank loan to bring hotel and apartments to Trio

Citrano said he opposed an earlier proposal by the developer in the summer because he thought it asked too much of taxpayers. He said the latest version would expose the city to even more financial risk by effectively guaranteeing it would make good on construction loans for the project if the developer cannot repay them.

City Council member Matt Carlucci, who introduced the legislation, said it left him "hurt and disappointed" that DIA board members criticized the legislation without him being able to respond during the meeting.

"It's not a fair representation, particularly of a project that is still under review, still in collaboration and not in its final form yet," Carlucci said.

The resolution approved by the DIA board wasn't listed an as action item on the meeting agenda but instead came up as "new business." Carlucci said if he had known about it, he would have gone to the board meeting to speak up for the legislation, especially since he was mentioned by name during the board's discussion.

"That's not fair play," Carlucci said. "That's not giving me a fair shake."

The Laura Street Trio has stood vacant for more than two decades, despite a series of city-approved redevelopment deals to get them back into action.

Carlucci said the DIA board already played its role when it voted in June to let City Council make the call on whether the Trio development merited a $63 million package of taxpayer incentives. The board took no position on the incentive package because it was far more than what the DIA's own guidelines would allow, but it opened the door for council to vote on the proposal.

DIA CEO Lori Boyer said in June the board's action was like a bunt in baseball that advanced the project to City Council for its consideration.

"I think the DIA had their chance and when they passed it over to City Council, they washed their hands of it," Carlucci said.

A representative of SouthEast Group, the developer working on the Trio restoration, said there's no need to bring DIA back into the review process.

"While undermining downtown development by the DIA CEO after the board gave express direction to 'bunt' the project to council is concerning, it is not relevant," Jordan Elsbury, a lobbyist working for SouthEast, said in a statement.

He said City Council President Ron Salem "has outlined a transparent legislative process to allow for elected officials to analyze and negotiate a development that will serve as a catalyst for downtown. We remain committed to that process."

Loan guarantee is crux of debate over Trio incentives

Mayor Donna Deegan has not yet taken a position on the development deal. She is awaiting the developer's answers to a list of questions posed by the City Council Auditor's office.

"I think every one of us wants to redevelop the Laura Street Trio," she told reporters earlier this month. "It's a historic and important part of our downtown. The question is going to become what does that deal look like."

The legislation pending before City Council contains many of the same kinds of taxpayer incentives as the proposal in June with one big change. It eliminates the $25 million cash completion grant that would have been paid after the work was done and adds an unusual provision making the city the financial backstop guaranteeing repayment of construction loans for the project.

The city would start by putting up $22 million in a fund that the bank, Capital One, could draw from in the event SouthEast Group was not making its loan repayments.

If the development is successful, the city would eventually be able to get back the $22 million. But if the bank must draw from the fund to cover loan repayments, the city would be responsible for replenishing the fund. The proposed development deal says the city's obligations under that replenishment guarantee "are uncapped."

After hitting the $22 million mark, the city would have the option of taking ownership of the development along with the obligation for the loans.

Citrano said that he opposed the proposed deal put forward in June because he thought it put too much financial burden on the city, but he said it did have defined limits on the city's maximum costs. He said the current proposal doesn't and the city could end up paying millions of dollars a year over the course of a 25-year construction loan.

"I think that's reckless and financially irresponsible," he said.

He said the city should hire an independent consultant to analyze the long-term revenue and expenses of the project to determine how realistic it is for SouthEast to repay the loan the city would be guaranteeing.

Board member Braxton Gillam said he supported sending the deal to City Council back in the summer for its consideration even though he personally opposed its terms.

"I didn't want to stand in the way of that, but I did not support the project then," Gillam said. "I'm certainly don't support the current legislation it looks nothing like what we were asked to look at (in June.) It actually asks for more public support."

Board member Craig Gibbs said SouthEast Group's managing partner Steve Atkins "might be the wrong person for this project." Akins and his Laura Trio LLC have owned the building since 2013 and previous development deals with him for those buildings failed to pan out.

"We did allow City Council as the policymaker to look at this once again," Gibbs said. "But maybe it's time to pull the plug and get somebody else into this project because the well will continue to pour water into a project that maybe this developer should not be doing."

City Council will devote Jan. 4 meeting to Trio deal

Carlucci said Atkins has shown he can successfully convert a vacant historic building by doing that to 18-story Barnett building across from the Laura Street Trio. He said that while critics of the deal "parade the horribles" about the potential risks, the upside of the deal is high and officials shouldn't be frozen in "paralysis by analysis."

"The more we let this sit and sit and sit, the less any other businesses are going to want to locate in downtown because it looks like blight now," he said. "Whereas when it's developed, it will be attractive to other businesses wanting to come downtown."

While DIA board members voiced their own concerns, the resolution approved by board does not take any position on the current deal, other than emphasizing the DIA's evaluation in June should not be applied in any way to what's before City Council now.

The loan guarantee "makes this a wholly different transaction," Boyer said.

Boyer said that current proposal would assign DIA the responsibility for overseeing implementation and enforcement "so it's not like we are disengaged or not involved."

The board's resolution also authorized Boyer to analyze the legislation and give "analysis and advice" to City Council, including at an upcoming Jan. 4 City Council meeting that will be devoted solely to the Laura Street Trio.

Salem, who is using his position as council president to set the meeting's agenda, said it will set aside a half hour for Boyer and city Chief Financial Officer Anna Brosche to present their understanding of the deal and any concerns they have, a half hour for the development team to make its presentation, and a half hour for the City Council Auditor's to go over it.

"I'm optimistic in that environment the council will really understand the deal and the differences of opinion and it will clarify those issues," he said. "I think it's the best environment to get to the truth."

The council will decide at that meeting whether it wants to put the legislation on a fast track for a vote at its Jan. 9 meeting. Salem said the DIA board is free to meet before Jan. 4 to puts the board's position on record if it want to do that.

This article originally appeared on Florida Times-Union: Laura Street Trio deal heads to Jacksonville City Council vote