nothin Woodward’s New Haven Rx: Take A Cut | New Haven Independent

Woodward’s New Haven Rx: Take A Cut

Christopher Bockstael/ Svigals + Partners

34 West: Should city have a 5% cut?

The next time New Haven helps a developer build a new project in town, it should take an equity stake, in the view of a prominent journalist who recently spent some time here.

That journalist is Bob Woodward (pictured at left), the Washington Post reporter better known for bringing down a U.S. president and sneaking into a hospital room for a death-bed interview with a CIA chief.

Woodward taught a journalism seminar at Yale this spring. As part of his preparation, in a wide-ranging informal discussion at JoJo’s Coffee Roasters & Tea Merchants at Park and Chapel streets, he asked probing questions about the city his students would write about — and offered a solution of his own.

Cities like New Haven have to start sharing in the wealth they are helping developers accumulate, beyond just collecting taxes, he argued.

Woodward elaborated on his idea in a subsequent email message. He stated the he knows of no other city doing this. [T]he idea came from talking with you about New Haven, which is a city coming back.”

It just seems logical that public … development or sale of public land or facilities should have long-term benefit to the city,” he argued. Why not give the city an equity stake in such projects? It could provide a revenue source beyond property and other taxes. Cities are providing value to private owners.”

Woodward added that the increased value of property (think Manhattan for example) is so off the charts that the public should benefit, just not the real estate barons. Probably would be only a few percentage points of equity with a maximum of 5 points. Also it could be sold because it would reduce property taxes. Why should these barons get rich beyond imagination and the cities get poorer? This is not socialism but pure capitalism — make the cities investors.”

Landino: I Would Go For That”

That idea sounded good to one capitalist busy building projects in New Haven, Robert Landino (pictured).

Landino’s company, Centerplan, is currently building a $50 million assortment of 200 luxury apartments and 20,000 square feet of retail space at the corner of Crown and College streets. It recently won approvals to build another $50 million mixed-use project on 5.39 acres of land it bought from the city on Legion Avenue across from Career High School.

Yeah, I think I would go for that,” Landino said when told of Woodward’s idea. He said he had never heard of the idea before. We certainly would think about it.”

Landino said a limited partnership would need to be structured in a way that restricts the city’s role in decision-making. Otherwise, the company’s decisions — every time you hire a vendor or negotiate a lease” — would become available to the public through the Freedom of Information Act, which could hurt its competitive position, he said.

Such restrictions are already common, he said. His company will sometimes take on an equity partner who has a minority stake along with a limit [on] their ability to make uninformed decisions that would adversely impact” a project, he said.

The advantage to the developer in taking on a city partner, he said, would come in cost savings. If we buy a piece of land and it’s $5 million, and they want a 10 percent equity position, we take 10 percent off the purchase price,” he said. Also, it aligns their interests with ours.”

Perez: It’s Complicated”

Thomas MacMillan Photo

A key New Haven lawmaker who’d have to sign off on such deals, Board of Alders President Jorge Perez, said he, too, had not heard the idea before. He said he’s not sure how he feels about it.

It’s an idea. Maybe it has merit to look into. I don’t get excited over it,” Perez said. On the face of it seems like a simple question. It’s actually more complicated.”

If the city owns a portion of a development project, what happens if someone slips and falls on the property and wins a half-million-dollar judgment in court? Perez asked. Do we pay 10 percent of it? What happens if one of the contractors [illegally] dumps asbestos? Are we legally liable?” Back in the 1990s the city arranged the sale of a Temple Street building to a developer who was indeed later convicted of having workers (hired illegally) dump asbestos in the West River.

In regulating a development, the city would also potentially face the question of how aggressively to enforce, say, building codes on a project in which it has a financial stake.

Ultimately the question of whether to pursue such deals comes down to the question of government’s proper role, Perez said: Is it to facilitate development? Generate and collect more taxes?

Nemerson: Wait 6 Months, Then We Can Talk

Thomas MacMillan Photo

To the city’s economic development chief, Matthew Nemerson, the general concept behind Woodward’s idea hearkens back to the early 1800s.

In the 1830s and 40s, when states were going bankrupt, why did they go bankrupt? Because they invested in bonds in canal lines,” Nemerson said. They were like, We’re going to invest in America.’ They invested in canal systems in the 1820s and 30s. They thought, We want to get a piece of this.’ Well, the railroad got investments, and the canals went out of business. …

Now we get to the modern era. Sometimes cities are throwing incentives to developers to come [like with the federal Urban Development Action Grants New Haven obtained in the 1980s to help build projects like Whitney-Grove, the Ninth Square, and the Long Wharf Maritime Center]. Right now developers are buying parcels. They’re not asking for subsidies.”

For Woodward’s idea to be relevant, developers would need to be competing to buy city land, Nemerson said. Then the city would have the leverage to levy an additional tax” on a project by demanding a small equity stake if it chose. New Haven’s not at that stage now, he said; given the increased interest in development in New Haven, we might be there in six months.”

Like Perez, Nemerson sounded some cautionary notes. Just as the city would share as a partner in a project’s financial successes, it would also share in its losses. He cited government-backed projects from the past generation — the Chase office tower, the Konover project at Grove and Church, 55 Whitney Ave. — that added to the tax rolls but went bankrupt. 

Also, having an equity stake could change the way the city defines the public good in negotiating a project, Nemerson noted. Whereas affordable housing might have once seemed like an important goal, officials might start seeing luxury apartments as a better alternative because they can produce higher returns. Do we want only Tiffany? Or a grocery store?”

On the other hand, cities across the country are concerned about gentrification pricing people out of their neighborhoods. Does the city deserve a piece of this changing value that it can redistribute to people who are losing out?” Nemerson asked.

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