Jacksonville wants to give Khan $ 65 million interest-free loan
Jacksonville taxpayers will give Jaguar owner Shad Khan $ 65.5 million through an unusually structured loan that charges no interest, takes up to 50 years to pay off and significantly reduces Khan’s tax burden, according to the proposed agreement he made with the town hall to build a mixed-use development on lot J next to TIAA Bank Field which was announced on Monday.
As part of the new arrangement, the city will make an upfront payment of $ 65.5 million to the billionaire’s development team. Instead of repaying the loan on a set schedule, the developers would make an initial deposit of $ 13.1 million into a trust account, where the city expects its value to increase over the decades. The city would collect the money when the value of the account reaches $ 65.5 million or 50 years, whichever comes first.
Including the loan, Curry offered to commit up to $ 233.3 million in government grants to the project, including up to $ 205 million in hard cash. By comparison, the city plans to spend around $ 240 million this year across the city on expensive capital projects and infrastructure improvements.
Khan’s development team, which is a partnership between him and the Cordish Companies, plans to invest $ 229 million in the project, although the amount is actually $ 174.4 million when proceeds from the loan of the city is counted.
The loan included in the deal is known in the real estate industry as the “bread loan,” a new financial program designed to allow developers to receive money from municipal governments, much like a grant. , while avoiding the significant federal tax impact of receiving one, according to documents created by UTW Capital LLC, a company that manages these types of loans.
While governments can expect to be repaid under “reasonable circumstances”, these loans can be structured to release a developer from any future obligation to make a lender whole in the event that the initial deposit does not increase sufficiently over the course of time. the 50-year period to repay the loan, according to UTW Capital documents.
The city has not released any documents providing specific details on the structure of the loan. Mayor Lenny Curry told a press conference on Monday that the city would loan Khan’s development team $ 65.5 million, but he did not say the loan would be interest-free or take until at age 50 to the city to be reimbursed.
“Loan from the bread box” without interest
A summary of the deal provided to the media by Curry’s office described the deal as a “breadbox loan,” but also failed to mention that the loan was interest-free. Instead, Curry’s office provided this information in response to questions from The Times-Union.
Khan’s proposed Lot J development would be anchored around an outdoor entertainment district that includes ground-floor retail, bars and restaurants, and 75,000 square feet of office space. The concept is similar to the entertainment districts built by the Cordish Companies in St. Louis, Philadelphia and Arlington, Texas.
The developers also plan to build hundreds of condos or apartments and a hotel with 150 to 200 beds.
The proposed development agreement must be voted on by the Downtown Investment Authority and the city council.
Both Curry and Khan said the project would give the local economy a much-needed boost and spark a development rush in the city’s stagnant inner city that city rulers have been chasing for decades.
Curry said the project will create 2,300 construction jobs and 1,000 permanent jobs once the project is completed, although he declined to discuss wages or the nature of permanent jobs at a press conference on Monday.
A Jaguar official said construction could start early next year and is expected to take three years, although the proposed deal includes a completion guarantee clause that gives developers four years after permits are issued for complete the project.
The city had originally offered to give Khan’s development team a $ 65 million grant, but the development deal was announced on Monday, which was the first of any kind that city hall had entered into. with Khan in connection with his big plans to build an urban village near the stadium, called for the money to be provided in a long-term zero-interest loan.
Curry’s office did not respond to questions about why the deal was changed.
The proposed agreement calls for the city to spend up to $ 92.8 million on public infrastructure development, although the agreement says the planned amount is $ 77.7 million. The city would spend up to $ 50 million to build the estimated $ 100 million entertainment district, pay $ 12.5 million for the hotel, and provide $ 12.5 million in property tax refunds over 20 years for both residential buildings.
Curry said on Monday that the city will take out bonds to pay for its investment in the project.