Purple Vetch Properties representatives spoke at the Shelbyville City Council meeting about the Methodist Building on Public Square on Monday, offering a question and answer session after asking the council for a $3.5 million “hybrid bond."
“We want to form a partnership, where the city actually will be intermediary and pay our mortgage for us, which we will, of course, give you the cash for. The development budget, as you will see in your package, already reserves for three to five years. We have two years of reserves set in place. It’s a loan that is three years interest only,” said Sean Carpenter, the development specialist for Purple Vetch.
“It’s like a bond, but it’s a hybrid…the city would partner with Purple Vetch as a guarantor to make this deal happen. Of that infusion of capital that we would get from those funds, we would get an additional $1.5 million in new market tax credits equity; we would get an additional $800,000 roughly, between $600,000 to $800,000 in historic (tax credits). So you would get roughly $2.3 million in additional infused capital into the downtown redevelopment district by providing this financing mechanism.”
Part of the issue with funding the project had to do with the scope, which was not large enough to receive market tax credits. In order to increase the size, and thus, the money needed, Purple Vetch wants to annex the Bradley Hall Furniture Building, which sits beside the Methodist Building on the Circle.
“It became clear that the Methodist Building all by its lonesome, even at a $3.5 million development budget, was way too small with the work that needed to get done with this new market tax credit,” Mitch Genser, the principal of Purple Vetch, said.
“The coincidence of Bradley Hall opening up shifted all that. All of the sudden, we’re now in the $6.5 million development budget, and then, all the sudden, we get attention. So, one of the things that happened was getting that attention from entities that have been infused with money from the federal government, who have charged to distribute the funds for projects throughout the country. Now, we’re working with these entities, which are called CD…we have two or three of them who are extremely interested in this project.”
Jason Brown, the president of the council, wasn’t sold on the idea, saying that such a decision would require a lot of trust.
“You want the city of Shelbyville to essentially make the payments on a $3.5 million loan. Basically guarantee a $3.5 million loan, and we’re going to get the payments from you, that is if you can come up with the money or you can get the funding or if you can sell the project. If not, we’re on the hook for the $3.5 million, correct?” Brown asked.
“That is correct,” Carpenter said.
“What that would entail would be a trustworthy relationship, where we trust each other. In the beginning, with the Methodist project, as I read the proposal, it talked about the new market tax credits and the historical tax credits and what it would entail to get those and how we’re going to move forward. Purple Vetch, I believe the quote was ‘knew full well’ that the project was not big enough to get those. That was not told to us in the beginning, so if you ‘knew full well’ in the beginning, you didn’t tell us that,” Brown said.
Councilman David Phares found it difficult to okay the leveraged financing, as he felt not much physical progress had been made to the building.
“Two years later, we have $285,000 spent, and the building hasn’t changed at all if you’re driving around as a taxpayer. I just have a tough time lending $3.5 million of additional taxpayer dollars when project A is still the same after two years. ... I am so thankful that you’re thinking about Shelbyville and trying to make it. No one’s doubting that it’s a shining star or could be a shining star, but the Methodist Building is still the same as it was two years ago,” Phares said.
Genser said that he “would love to sit down, roll up my sleeves and go through some of the product,” and said that a lot of the money was spent on projects that took place behind the scenes.
“One of the things that have really happened over the last couple years is that there’s always a sort of changing environment. We have to contend with historic tax credits, we have to contend with new market tax credits. The shifting economies of when things are available, when things are not available. There’s no one in this room who prefers having the Methodist Building already in motion as myself…
“The vision has never changed. What we wanted to do and what we still want to do is be a major player in the revitalization of downtown and I’m proud of the relationship we developed with Mayor Tom (DeBaun) and his departments.”