Museum Plaza seeks hand, State to ask feds for $100 million loan
By Marcus Green • The Courier-Journal • June 26, 2010
Nearly 2 1/2 years after abruptly stopping work on Museum Plaza, the project’s developers are turning to the federal government in hopes of raising money to start building the skyscraper.
The state plans to apply for a $100million federal loan from a U.S. Department of Housing and Urban Development program typically associated with creating jobs for low-income residents.
Even if HUD approves the loan, the project would still need a $140.5million construction loan — about one-third of the overall $465million cost.
Kentucky Gov. Steve Beshear made the announcement Friday morning at the Museum Plaza site near Seventh and Main streets. He called the loan effort a “first step” to advance the project but cautioned that there’s no certainty that HUD will approve it.
But Steve Wilson, a developer in the 62-story building, said later Friday that he’s confident HUD will grant the request. “We wouldn’t have made this public announcement if we didn’t think we were going to get it,” he said.
Before the state formally applies for the loan, the Kentucky Department for Local Government will hold a public hearing on the request July 7 in its Frankfort offices.
The project calls for two hotels, condominiums, office space, a museum, space for the University of Louisville’s fine arts and business school programs and infrastructure improvements like sidewalks and a parking garage. HUD’s Section 108 loan guarantee program can be applied toward a broad range of projects. The HUD website describes its uses as “economic development, housing rehabilitation, public facilities rehab, construction or installation for the benefit of low- to moderate-income persons, or to aid in the prevention of slums.”
Creating jobs: Museum Plaza officials estimate that 4,500 jobs will be created during construction, followed by 2,300 positions once the skyscraper opens. As part of the HUD program, the developers will commit that more than half of the permanent jobs are at least made available to two groups of people — low- and moderate-income residents, and residents of Bullitt, Hardin, Oldham, Shelby and Spencer counties, said attorney and co-developer Craig Greenberg.
The government wouldn’t provide the money but rather would raise the funds from private investors. The state would pass the money along to the developers, who would be responsible for repaying the loan over 20 years.
The development team– Wilson and his wife, Brown-Forman heiress and arts patron Laura Lee Brown; developer Steve Poe; and Greenberg — hope the HUD approval makes the project more attractive to lenders who will be needed to provide the $140.5million construction loan. The main collateral for the loans is Kentucky’s current and future Community Development Block Grant funds, which are often used for economically distressed areas. Those funds could continue to be spent, Beshear said.
The governor said the developers have guaranteed the loan with their personal wealth, meaning the state would not be liable for a default. “Let me assure Kentucky taxpayers of one thing: This federal money, through this program, is guaranteed risk-free for the state under the proposed setup for this project,” Beshear said.
Officials back plan: The strategy has the support of local and state leaders. Among those attending the announcement were Louisville Mayor Jerry Abramson; state Senate President David Williams, R-Burkesville; and state House Speaker Pro Tem Larry Clark, D-Louisville.
U.S. Senate Minority Leader Mitch McConnell, R-Ky., and Rep. John Yarmuth, D-3rd District, also support the plan, according to their offices. But the state’s approach has raised some objections. “I do question whether this is where we want our extremely limited and shrinking HUD dollars to go,” said Jane Walsh, a housing activist and former executive director of the Metropolitan Housing Coalition. Walsh said she applauds any jobs created at Museum Plaza, but she cited Louisville’s need for additional affordable housing and said, “I’m not sure this project addresses that.” Abramson, however, insisted that the Museum Plaza loan would not take money from other sources, such as affordable housing. “It’s not an either/or, as I see it,” Abramson said.
More than 1,200 projects across the country have been funded through the HUD program since it was created in 1978. The $100million Kentucky loan request, if approved, would be the third-largest in the program’s history, behind projects in Los Angeles and Houston. The loans have been used for diverse projects across the country, including hotels, redeveloping former industrial sites and building offices.
Project faced hurdles: Unveiled in 2005, Museum Plaza’s progress has been hobbled. In early 2008, just months after ground was broken, work was halted after workers installing the foundation created strong vibrations among Main Street’s historic buildings.
Soon after that, the developers indefinitely postponed efforts to borrow money because of concerns about higher interest rates. And last September, the University of Louisville confirmed that its business school’s graduate programs and Master of Fine Arts program were pursuing other locations because of the project’s delays.
UofL President Jim Ramsey said in a statement that the university was looking forward to “becoming reengaged in this exciting project as it moves forward.”
Much of the preliminary work at the construction site is complete. Once financing is obtained, work could resume in 30 to 90 days, said Bill Hedge, construction executive with general contractor M.A. Mortenson.
Museum Plaza officials announced Thursday that the project was replacing 90 condominiums from the building’s plans with a 190-room limited-service hotel. A 265-room Westin hotel remains part of the plan.
Reporter Marcus Green can be reached at (502) 582-4675.