Fourteen months ago, when city officials were scrutinizing developer Dudley Webb’s financing to decide whether to let him begin excavation and construction of his problem-plagued CentrePointe project, I wrote that there are far worse things to have in the center of your city than a grassy field.
Now we know one of those things: a huge crater, nearly 40 feet deep and an entire city block square. A hole in the heart of Lexington.
Webb’s contractors spent three months last spring blasting, digging and hauling away more than 60,000 cubic yards of rock and dirt to build an underground garage. The three-level, 700-space garage is supposed to be the base of his proposed CentrePointe development of offices, apartments, shops, restaurants and hotels.
Webb said in May that the garage would be finished by late summer. But all he has done is dig a big hole, pour a few footers and make a lot of excuses.
CentrePointe has fallen months behind schedule, causing its major office tenant, the engineering firm Stantec, to cancel its lease agreement.
Instead of building the garage, as promised, Webb has sought more public subsidies. It is the latest episode in a tragedy that has been playing out since early 2008, when city officials let Webb demolish an entire block of historic buildings and popular businesses on nothing more than promises.
In August, Webb asked the Kentucky Economic Development Finance Authority to issue $30 million in bonds for the garage’s construction to lower his borrowing costs. The state refused, so he asked the city.
Mayor Jim Gray and the Urban County Council also wisely declined, even though Webb’s attorneys assured them that taxpayers would not be on the hook for repayment in case of default.
Even if that is true, city officials are keenly aware that a default on city-issued bonds would tarnish Lexington’s reputation even more than the CentrePointe fiasco already has.
Webb next turned to the Kentucky League of Cities, which agreed to create a non-profit corporation to issue the bonds. That was supposed to happen last week, but Temple Juett, the league’s general counsel, said the issue has been delayed. He did not have a new date.
If and when the bonds are sold, the big question will be whether anyone will buy them. The bonds are to be repaid by a portion of future tax revenues generated by the project. “The only people left holding the bag if there is a default are the bondholders,” Juett said.
Maybe the bond issue will be successful. Maybe Webb has the rest of his financing in place, as he claims. Maybe there will be no further delays, and CentrePointe will be built as promised.
Maybe pigs will fly.
If the bonds don’t sell, I predict Webb will come back to the city with his hand out. He will seek a bond guarantee or some other assistance in addition to the tax-increment financing package he last negotiated with the city and state in 2013.
There is only one appropriate response to any request for more public subsidies for CentrePointe: No. Period.
When Webb assured city officials a year ago that his financing was solid, they forced him to put up $4.4 million as a “conditional restoration agreement” that could be triggered if work at the site stops for 60 days.
That $4.4 million is supposed to be enough to pay for refilling the hole, compacting the soil and restoring the block to its pre-excavation appearance — a grassy field.
If the developer can’t pay, the city can go to court and seek foreclosure on the property, which is owned by corporations set up by Webb and jeweler Joe Rosenberg, whose family has owned much of the land for decades.
Of course, it would make no sense to fill the hole. The city needs the parking garage, just as it needs a vibrant, tax-generating, job-creating commercial development to be built on top of it. The question is whether Webb is capable of ever building either.
Here is what should happen: If Webb can’t finish the garage in a timely manner, city officials should use their leverage to force him and Rosenberg to turn the project over to another developer who can.
For nearly seven years, city officials have bent over backward to try to make CentrePointe a well-designed, successful project. Webb has squandered opportunities and made a lot of promises he hasn’t kept. Enough is enough.