The $15 million in funding Memphis Mayor A C Wharton Jr.’s administration put together as the last piece of financing for the Sears Crosstown building redevelopment is not just a combination of state and federal grant money.
It is a mixture that includes bond debt as well as tapping city stormwater fee funding and a relatively new stream of city revenue: the money Memphis Light, Gas and Water Division will accrue as the city hands over control of streetlights to the utility.
(Daily News File/Lance Murphey)
“This is the first I’ve heard of this $500,000,” utility president Jerry Collins said Tuesday, Dec. 3, when council member Harold Collins asked about that part of the funding.
Memphis Housing and Community Development director Robert Lipscomb insisted that none of the money is general fund city property tax revenue.
But it also wasn’t the exclusively federal and state grant money that early reports suggested or that some council members had been led to believe.
Lipscomb explained there were some last-minute substitutions as bond counsel weighed in with legal opinions about what was possible and what wasn’t.
The largest block of funding in the package is $6 million in qualified federal energy conservation bonds. The bonds would be paid back with 1 percent interest using money the city would shift from anti-blight initiatives. Lipscomb also said the administration might swap out that source for the debt if it is able to secure state money in the next two months.
Another $4 million is federal Section 108 funding that is an economic development, housing rehab loan the city would pay back with other federal funding it gets through Community Development Block Grants.
Federal grants under the Environmental Protection Agency’s “Brownfields” program would account for another $2 million.
Another $1.5 million would come from the city Public Works Division’s street work budget and $950,000 from the city stormwater fee fund.
With the package of city funding secured, private investors are expected to make their final commitments to tentative financing totaling $180 million that will allow a two-year construction period to begin on the 1.5 million-square-foot building early next year.
The building has eight tenants, or partners, for most of the space.
Several council members questioned the ownership of the building, an issue Crosstown development leaders hadn’t disclosed until they were pressed on the point Tuesday.
“As long as the owner is a good citizen, irrespective of who they are, they are contributing to the city of Memphis,” Lipscomb said. “We ought to celebrate that.”
Council members pressed the point and Lipscomb replied, “It is anonymous, and we should respect that.”
That’s when Crosstown developers acknowledged that Elizabeth and Staley Cates, president and chief investment officer of Southeastern Asset Management Inc., bought the building in 2007 and will donate it to Crosstown LLC with any profits going back into the development.