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As costs soar, project seeks help

The men behind Main Street Landing appeal to New Port Richey. Here's how it would work.

By BRIDGET HALL GRUMET
Published May 7, 2006

NEW PORT RICHEY - Ken McGurn walked into City Hall in late March and handed a short stack of financial documents to City Manager Scott Miller.

"The apprehension and the losing-the-weight and the stress, I'd already gone through that," recalled McGurn, the developer of Main Street Landing, the jewel of the downtown redevelopment effort. "It was like here it is, I'm not slanting it, what do you think?"

The brutal truth: Rising construction costs were pushing the tab for Main Street Landing from $30-million to $45-million or $50-million.

McGurn asked Miller: What would you do in my shoes?

Miller, who had watched the price tag on the city's own recreation center shoot up from $9-million to nearly $14.2-million a few months earlier, was understanding. He said a developer can't do a project that doesn't make money.

"I said I don't care about making money, I just want to break even," McGurn recalled.

But doing so could require New Port Richey to kick another $3-million into the Mediterranean-themed complex of condos and shops overlooking the Pithlachascotee River.

McGurn and his Main Street Landing partner, former mayor and county commissioner Peter Altman, have asked the city to create a special taxing district, called a community development district, for the project. The entity would use future tax revenue from Main Street Landing - money that would otherwise go into city coffers - to repay some of the construction debt.

"We're looking to borrow every single penny we can find," McGurn said. "These cost overruns have just been horrendous. Everybody's trying to keep this thing together."

But the plan would require the approval of the City Council, the group that already approved $1.25-million two years ago for Main Street Landing, hoping the project would become a catalyst for further development.

While he supports the project, Deputy Mayor Matthew McCaffery worries about setting a bad precedent. The city can't bail out every downtown venture that fails, he said.

"I believe it's going to be a beacon for the city, but at what cost?" McCaffery said.

Here's how the proposal would work:

The city would keep the $1.25-million it originally planned to give Main Street Landing once construction is complete.

Instead, Main Street Landing would borrow about $4-million to build the drainage system, roads, public parking, landscaping and other infrastructure. Once the project is finished, the city would refund part of Main Street Landing's property taxes each year until the debt is repaid.

Unlike most community development districts, this entity would not charge the condo and shop owners an extra assessment to pay off the debt.

The benefit to the developer is obvious, but what's in it for the city?

New Port Richey would get to keep the $1.25-million lump sum it otherwise would have paid Main Street Landing - making more cash available for projects now.

And the city would still reap tax revenue from Main Street Landing. Even after taking out the money to repay the debt, the project would net $6-million in property taxes for New Port Richey over the next 25 years, assuming a 6 percent annual appreciation in values, Altman said.

"If the project doesn't happen, nobody's got (the property tax revenue) to divide up," Altman said.

The city's Development Review Committee discussed the idea last week but needs more financial details from Altman.

How much of the property taxes would Main Street Landing get back each year? For how many years? Altman, a former accountant who now works for District Management Services, a company that sets up community development districts like this one, said he is crunching the numbers.

The city manager said he was "concerned" when McGurn first told him about Main Street Landing's financial predicament. But he said the community development district "is a viable alternative."

"Certainly it will most assuredly assist in keeping this project moving forward," Miller said, "and that's important."

McGurn feels the eyes of city officials, developers and neighboring business owners. They watch the progress of Main Street Landing - now a sandy construction site partitioned by a few concrete block walls - as a barometer of downtown redevelopment.

Across the river, St. Petersburg developer Grady Pridgen plans to build a similar complex with condos, shops and offices. A few blocks north, Quality Holdings of Florida proposes to build more condos, shops and offices on the First Baptist Church property overlooking Orange Lake.

"The next guy in line says, "I'm ready to go, but I'm doing my numbers and until we know what (Main Street Landing is) selling (units) for, we don't know if ours works,' " McGurn said. "That's why it's important this one moves forward."

Still, as McGurn's partner Altman can attest, cultivating new ventures in an old downtown can be a challenge.

Two years ago, Altman opened Spoonbill's restaurant and a bait and boat shop on the Pridgen property across from Main Street Landing. Now the restaurant owes $5,187 in back taxes and penalties to the state Department of Revenue. Altman owes two years' worth of back taxes on two other New Port Richey properties, and financial difficulties forced him to close the bait and boat shop late last year.

"I took on a couple of business issues in the spirit of trying to keep the downtown open and functioning," Altman said. "They have not proved financially rewarding. Honestly, it's a major financial strain."

"I certainly bit off more than I can chew."

But Altman emphasized that his financial woes are separate from Main Street Landing, which is being built with financing obtained by McGurn, a Gainesville developer who earned a sterling reputation for redevelopment efforts in that college town.

McGurn said Main Street Landing ran into the same construction cost overruns faced by every other builder in America. The vast rebuilding efforts in the wake of Hurricane Katrina and other storms, and the voracious demand for raw materials in industrialized China, have sent construction costs soaring in the past few years.

The cost of PVC pipe, for instance, spiked from 52 cents to $1.20 a foot after Katrina, McGurn said. Sheet rock, a construction staple whose manufacture was once dominated by Louisiana factories, has become nearly impossible to get, he said.

"You have to know somebody who knows somebody" to get it, McGurn said.

But McGurn and Altman said they are committed to seeing the project through, with a completion date of fall 2007.

"Our expectation is the best we can do is break even on this property, if we get the maximum assistance from the city," McGurn said. "Realistically, we will probably lose a considerable amount of money."

What happens if they don't get more city assistance?

McGurn paused. "We'll cross that bridge when we get to it," he said.

Altman said he is grateful McGurn has stayed on board "when others long ago may have said the profit has disappeared and lost interest."

"I'm intending to do everything I can to see that project through, and I think the city needs that project to go through," Altman said.

"Nobody is getting rich," he said, "I can tell you that."

Bridget Hall Grumet covers New Port Richey. She can be reached in west Pasco at 869-6244 or toll-free at 1-800-333-7505, ext. 6244. Her e-mail address is bgrumet@sptimes.com

[Last modified May 7, 2006, 01:10:18]