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Carolina Blasts 9th Square Bailout

by | Jun 13, 2013 8:22 am

(9) Comments | Commenting has been closed | E-mail the Author

Posted to: Ninth Square, Campaign 2013

Thomas MacMillan Photo Advising New Haven to “just say no to subsidizing wealthy developers,” mayoral candidate Kermit Carolina has come out against a proposed $10 million-plus bailout of the Ninth Square project.

“In a mind-numbing display of arrogance that only makes sense to those who live in a parallel universe, McCormack Baron Salazar and Related Companies—the big guys who are the developers of the Ninth Square Project—are asking New Haven taxpayers – the little people who struggle day in and day out to just barely make ends meet – to forgive nearly $10 million in unpaid interest,” Carolina is quoted as saying in a statement released by his office late Wednesday.

He advised Mayor John DeStefano to say no to the request.

Carolina—one of seven Democratic running in a Sept. 10 party primary for the nomination to replace retiring two-decade incumbent Mayor DeStefano—was reacting to a deal the developer proposed to its lenders last fall. The developers say they need new tax breaks and tax credits and forgiveness of debts in order to pump needed new money into the Ninth Square development and keep it viable

In the Ninth Square, the city used public money and state-issued tax credits to help McCormack Baron/Related fix up historic but neglected three- and four-story brick buildings and construct some new brick ones throughout the district, which is bordered by Chapel, State, George, and Church streets. The developer created 335 new apartments, with a mix of low-income and middle-class renters, plus 49,000 square feet of stores and restaurants and galleries. That was the start of a broader rebirth of downtown into a place where people live and hang out at night.

Fifteen years later, the developers are asking to city to renew a just-lapsed tax abatement saving it more than $750,000 a year in taxes; and to forgive $9.9 million in interest payments on debt. The developer has asked all the project’s lenders (the city, the Connecticut Housing Finance Administration,  and Yale) to refinance a total of $86 million under a new entity created by floating a new set of state tax credits for the project.  Pending a deal, CHFA agreed to grant the developer a six-month moratorium on payments on a $13.7 million outstanding loan, with all late fees waived, while a restructuring deal is worked out. (Read more about that here.)

But that deal has hit a snag: Yale has stated it’s not interested in investing any further in the project. Read about that here.

Meanwhile, one Democratic mayoral candidate, Toni Harp, has expressed deep reservations about the proposed deal. Two other candidates, Henry Fernandez and Matthew Nemerson, have supported the idea of reaching some form of a deal to continue subsidizing affordable-housing downtown in what has been a successful project to date.

In Wednesday’s release, Carolina did not mince words.

“We cannot – no, we must not – support this deal,” he stated. “If Ninth Square has to be sold to another company, so be it. But make no mistake about it – as mayor, I would use all the municipal resources at my disposal to get the unpaid taxes owed to this city. In fact, I would be present at the sale of Ninth Square to make sure we get that nearly $10 million owed to the city. If we expect the little guy to pay, the same expectation must exist for the big guy!”

“If any New Haven resident is late in paying car taxes – no matter what the amount—we get a letter from the city telling us that our car can be booted.  I wonder if there is any way to place a giant boot around Ninth Square so that the wealthy developers can see how that feels,” Carolina said.

Click here to read the full release.

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posted by: Atticus Shrugged on June 13, 2013  9:08am

There is practicing politics and then there is advocating strong policy.  I’m deeply saddened to see Mr. Carolina employ the former at the expense of the latter.  It is clear that he has no idea of how property development truly works and/or how detrimental some decisions can be on the long-term viability of a New Haven revitalization.

Right now, New Haven is on the verge of what may become a housing bubble.  That is in part due to the success of Ninth Square - people saw that mixed-use properties in New Haven could work as a business model and are choosing to emulate it.  There is much to be thankful for in Ninth Square.

The part of his comments that are offensive to any business person is that he has not expressed an interest in reviewing their books and records.  It is not altogether clear whether their current tax assessment is logical or feasible from a business perspective.  Moreover, I highly doubt he knows the terms of the loan or how much money the city and state might lose if this project is put up for sale.  In short, he’s done no research and is merely trying to be a populist candidate rallying the troops.  This is simply foolish.

Let’s listen to what Senator Harp, Mr. Fernandez and Mr. Nemerson said and actually review their books and records before jumping to conclusions.  Business is tricky, if just anyone could do it - we’d all be successful business people. 

I do hope that Kermit does not employ the same act first think second mindset in his current position.  And more importantly, that if he is elected, he does not continue to do so.

posted by: Dwightstreeter on June 13, 2013  9:35am

Isn’t this just another kind of “too big to fail”?
The City has been touting the success of Ninth Square to justify all kinds of zoning changes and development.
The reality is not as presented.
Where is the bail out for the Dwight coop owners?
The gap between the “haves” and the “have nots” is increasing and special breaks from the city and state should have limits.

posted by: Curious on June 13, 2013  9:39am

My Dream Team.

Elicker: Mayor
Carolina: Superintendent of Schools
Holder-Winfield: Community Services Administration
Keitazulu: Youth Department
Nemerson: Economic Development
Fernandez: Corporation Counsel
Harp: City Plan

posted by: Noteworthy on June 13, 2013  10:22am


One does not need to see the books to know the facts.

McCormack Baron Salazar borrowed money from Yale, the city and CHFA. It also received certain tax advantages including massive tax credits which they sold or used to avoid paying Connecticut and federal taxes together with extremely favorable property tax treatment - all of which ran for 15 years. They reaped the benefits and have failed to pay what’s due to anybody they owed.

McCormack Baron Salazar has great accountants. They have access to unlimited funds. They should refinance and pay. Look at the books? Why? This project has enjoyed enormous, generous subsidies all these years at the expense of the taxpayers in Connecticut and in New Haven. When a development like this doesn’t pay its fair share, the rest of us pay more. We are maxed out. The property taxes in this city have doubled across the last 10 years.

As for the very weak position Toni Harp has staked out, perhaps that’s because she has her own problems with debt and taxes. Like McCormack Baron Salazar, she and her family have reaped the benefits of the CHFA financing, tax credits and just like them, have refused to pay what’s due. Add in the sales taxes - you have a perfect storm.

posted by: Mike Slattery on June 13, 2013  10:55am

Atticus - you have one of the most clever nicknames in the NHI commentariat, I love it.

I agree there is more to this than simply “subsidizing wealthy developers.”  We are sharing a cost of subsidizing downtown housing.  That topic is not mentioned in the release.

But we may be past the point where ‘looking at the books’ and dealing with this developer is desirable either, so I’m not sure what the other candidates are hoping for.    I’m of the opinion that ‘looking at the books’ is forensics for the next group, and for the city as we sue for back taxes and interest.  We are on the hook either way, and I’m not liking what I read here.

But I’m not an expert.  What I don’t know is, when it comes to the books, which books and in what context.  In a project like this, is all the money managed separately from the parent group?  How insulated was this project from losses elsewhere? 

Answering this might tell us to what degree New Haven taxpayers are subsidizing housing for our own people, and to what degree have we been subsidizing housing in LA or the other cities in which this company has grown while our project has suffered.  Either way, if this city agrees that subsidizing housing downtown is good for us, let’s make sure that the cost bears fruit here through good management and a focus on what New Haven needs.

posted by: Brutus2011 on June 13, 2013  10:58am

What struck me about this article is the image of KC recorded by the author.


The selection of an image of a political candidate can really alter his/her perception in the mind of the public.

I know some think I am being simplistic but I have been thinking lately about why is it that our politicians are so dismissive of us once they get into office—think Dan Malloy here.

Are “we” voters really that stupid?

posted by: Threefifths on June 13, 2013  12:01pm

posted by: Atticus Shrugged on June 13, 2013 9:08am
There is practicing politics and then there is advocating strong policy.  I’m deeply saddened to see Mr. Carolina employ the former at the expense of the latter.  It is clear that he has no idea of how property development truly works and/or how detrimental some decisions can be on the long-term viability of a New Haven revitalization.

Property Development are also Scams. When it comes to politics this is when the pay envelopes start getting passed around.

Right now, New Haven is on the verge of what may become a housing bubble.  That is in part due to the success of Ninth Square - people saw that mixed-use properties in New Haven could work as a business model and are choosing to emulate it. There is much to be thankful for in Ninth Square.

Not just New Haven,But this hold state is in a housing bubble.In fact did not Ninth Square get a big tax break.Mr.Carolina is right.

posted by: Mark Chesler on June 13, 2013  12:29pm

City Pages

On May 23, during Shaw’s second interview with officials from McCormack Baron and Legacy Management, the contracting firm was confronted with a problem they’d seldom encountered: They were informed that their bid was too low.

“They were pretty concerned and basically seemed to want us to increase our price in a couple of areas,” says Paul Nelson, who, as the Shaw staffer who’d put the bid together, was present at the
interview. “They weren’t going to let it go. They just kept insisting that they had the experience to know our numbers were too low. We told them that we figured these numbers and we thought they were right, but we finally did send a letter saying that we would raise costs in some areas, at their urging. We ended up raising our proposal by $1.7 million—but we still felt like it could be done for $30 million.”

Richard Baron refuses to discuss Shaw’s allegation that Weis was allowed to re-bid…

After he submitted his initial bid, Shaw says, some of the subcontractors he had listed called to report that they’d received phone calls from people who claimed to be working for Weis. Shaw says the callers said they were helping the company to refigure a bid and wanted to know specifics about how the subcontractors had
arrived at their proposed prices for doing particular jobs.

It looked to Shaw as though Weis was re-bidding the project well after the deadline and, to add insult to injury, as if his competitor was somehow using presumably confidential subcontractor lists and price breakdowns to do so. “Our loyal subcontractors called to warn us that this was going on,” Shaw alleges. “They told us that they did not tell Weis what price they had given us for our bid. But how would Weis have known to call them if they did not already see part of our proposal?...That is supposed to be private.”...

“I’ve been in business more than a half-century and this is the first time I’ve really felt like something was really wrong with the hiring.”

posted by: Bill Saunders on June 15, 2013  2:10am


Pretty good ‘fantasy ’ political team, but I would change Harp to Collector of Taxes and O’Henry to handicapped services.

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