By Gagandeep Ghuman
Published: Feb 16, 2015
Some local developers are concerned the district is transferring the risk to the community with an agreement it’s proposing with the Oceanfront developer on Development Cost Charges (DCCs).
The Oceanfront developer, however, says he’s taking a substantial risk with his company putting up $38 million upfront with no guarantee of reimbursement.
Development Cost Charges (DCC) are funds that municipalities collect from developers to offset costs associated with new development. There isn’t enough money in the existing district reserves to service a project as big as the Oceanfront.
The district is proposing a front-ender agreement which will have the Oceanfront developer, Matthew Southwest, put $38 million up front to fund infrastructure the district says will benefit the entire community.
The district will then reimburse that $38 million to the developer over a period of 20 years using part of the Development Cost Charges (DCC) from other projects in the municipalities.
The arrangement being proposed isn’t in the best interest of the community, some developers say. The community loses out because the arrangement could mean less money for other services like parks or a gym, said Grant Gilles of Team Target.
“It will be punitive to put this SODC cost to the rest of the community,” said Gillies.
Oceanfront developer Michael Hutchison said Matthews Southwest is taking a considerable risk in putting up money upfront which will be used to upgrade off site infrastructure and help spur development downtown and on the Oceanfront.
“We are taking all the risks here and the assumption is that the rising tide will float the boat,” he said.
What increase the risk, Hutchison said, is that there is no legal provision through which the company can force the district in case of non-payment of the upfront money.
Dave Ransier of Team Target said if there isn’t money in the long run to pay to the developer, the district may have to pay the money from its profits. The arrangement doesn’t bode well for other developments.
“If we don’t collect enough DCCs, it will come out of our pockets,” he said.
Developer Doug Day said he was opposed to the front-end agreement the district is proposing.
“Most of this money will be going into the bottomless pit of this development,” he said.
Prashant Pundit, a district consultant, said the district doesn’t have the borrowing capacity to fund the off-site projects needed to develop the Oceanfront.
The developer will only be reimbursed for funds spent on constructing or upgrading offsite infrastructure. Those off-site improvements will benefit the entire district, Coun. Doug Race told the Reporter last year.
The developer will pay the usual DCCs on the Oceanfront, for which he won’t be reimbursed, he said.
Hutchison, meanwhile, said the community, the council, and the developers have made downtown and Oceanfront its priority but major infrastructure upgrades are required for this project.
“We are putting $38 million up front because no one really wants to wait another eight year to move this project forward,” Hutchsion said.