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Company’s financing plan under the microscope
By Molly Parker
Staff Writer
While The Noisette Co. is garnering national attention for its plans to turn the defunct Charleston Naval Base into an urban mecca, the company is battling strict scrutiny in its home city where support matters most.
The North Charleston City Council is expected to soon debate a proposal that would combine two common municipal financing tools to ensure that the company can finance about $60 million worth of public infrastructure improvements.
Under the plan, a municipal improvement district, which is basically an overlay tax on the developer, would be created atop the existing tax-increment financing district covering the historical Navy yard.
The municipal improvement district tax could be passed onto homeowners and businesses moving onto the land, though it would be used only if a gap exists between the funds created through the tax-increment financing district and the amount required to pay down the bond the city is expected to float when the infrastructure is completed, Noisette CEO John Knott said.
A special finance committee meeting was called for Sept. 18 by Mayor Keith Summey to consider the plan, but was abruptly canceled only a few days after it was put on the calendar.
“It’s not going to kill us to wait a week,” Summey said then, though Councilman Kurt Taylor, chairman of the finance committee, said he canceled the meeting.
The mayor said he wanted to await the final study from MuniCap, the consultant the city recently hired for $10,000 to study the city’s options for the base, though others familiar with the deal speculated privately that meeting was canceled amidst public pressure and uncertainty as to whether enough votes could be secured to pass it.
Taylor denied those claims.
“If that were the reason for canceling a meeting, then it would not be rescheduled,” Taylor said in late September, noting he planed to have a meeting sometime soon.
Councilman Bobby Jameson said the deal will be a tough sale as he understands it, though he complained that he lacks all the details because council members are “always left in the dark.”
Jameson said he would vote against any deal that gives Noisette $60 million in bonds before the money is created through increased property assessments; that’s not the way a tax-increment financing district is supposed to work, he said. And any council member voting in favor of such an agreement would likely get the boot in the next election cycle, he said.
“Everybody wants to throw up when they hear the word Noisette,” Jameson said.
Knott, however, said the recent hubbub seems to be a result of misinformation. The company, he said, is not asking for the city to float bonds before the money is created through increased property tax assessments. That’s why he agreed to include the land in a municipal improvement district, which is basically a tax on his company for future buyers.
“The only reason there would be a gap is because of a timing difference,” he said.
Otherwise, the company has not changed its development plans since the council approved in 2004 the tax-increment financing redevelopment plan for the Navy Yard, which generally outlined what Noisette planned to do, and how the city would pay them back for the public infrastructure, Knott said.
Still, a council vote is required to technically float bonds, and Noisette must complete the infrastructure and prove its actual costs before the city would repay the company for its expenditures.
Despite the recent dustup, the company has already begun tearing out old infrastructure on the base in preparation of building new in what it has designated its Phase 1 development, said Art Titus, Noisette’s director of operations.
The first phase will consist of infrastructure improvements on about 120 acres of the nearly 300 acres Noisette owns on the base, where the company plans an urban city that when completed would include 5,000 to 7,000 housing units and up to 6 million square feet of mixed-use commercial space in what the company calls The Navy Yard at Noisette. The first round of infrastructure development would support roughly 2,100 residential units and about 2 million square feet of commercial space.
Noisette expects infrastructure for this phase to cost roughly $70 million; the developer will seek reimbursement for $60 million. But under the proposal, that bill would not come due in a lump sum, Titus said.
Noisette plans to first construct a massive stormwater drainage system that would cost between $18 million and $20 million, necessary because a good rain can leave portions of the base under three to four feet of water, he said. To handle the water flow, a 1,200-foot-long basin, roughly the size of four football fields laid end-to-end, will be created south of McMillan Avenue that also will stand as “a significant visual addition to the development,” he said.
The second piece of Phase 1 would consist of redeveloping the infrastructure around McMillan Avenue and the area between Spruill and Hobson avenues; the third section would be the replacement of McMillan Avenue, located on the northern edge of the project, including Noisette Boulevard and the area between Hobson and Turnbull avenues. The last segment would be redevelopment of the infrastructure from Turnbull Avenue to Noisette Creek, along Noisette Boulevard.
The whole thing is expected to take roughly three to four years, Titus said.
Taylor, who supports the concept, said he thinks much of the debate will subside when the proposal is fully vetted, though he realizes some may never come around.
“There are some people on council whose hearts and minds are hardened to the Noisette Co.,” he said, “and they don’t care to hear anything about what’s going on.”
If the company does intend to ask for the money piecemeal, and not ask for tax dollars outside the tax-increment financing district, Jameson said he could consider supporting such a deal. Still, he said, he wants to make sure Noisette keeps prudent records, a sore spot with him over repayment of the The Riverfront Park, for which the city recently reimbursed Noisette about $6 million.
“I’m just saying follow the yellow brick road,” he said. “Let’s do it upfront and proper and clear to everybody, because the stuff done in the past was not done very well documentation-wise.”
Molly Parker is a staff writer for the Business Journal. E-mail her directly at mparker@setcommedia.com.
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