Whew! Cherokee Investment Partners, CATS’ official North line tax increment financing partner, is having it lights punched out by one New Jersey paper.
A Cherokee subsidiary, EnCap Golf Holdings, is trying turn garbage dumps at the Meadowlands into a $500 million golf result. But the financing for the project, heavily dependent on taxpayer loans and backing, keeps falling into question.
This latest story updates the EnCap saga in great detail. Essentially state government watchdogs have had to continually reign-in a project that has powerful political friends in local circles and in some parts of state government:
The Department of Environmental Protection, which contributed $105 million to the EnCap financing package, even exempted the developer from providing more than minimal collateral.
The bottom line: The biggest loan the DEP has ever made to a private developer is backed only with $13 million in borrowed cash and the promise of future tax revenues that may never materialize as the massive landfill-to-links project teeters on the brink of collapse.
The developer is months behind in payments to its subcontractors, and on May 17 the state Attorney General’s Office found EnCap in default of the terms of its deal with the New Jersey Meadowlands Commission. EnCap has until next Friday to submit a revised landfill cleanup budget — or else the project could be canceled.
EnCap’s current troubles were anticipated more than two years ago by DEP staff members who pegged the company as a risky borrower and argued against the financing.
This is against the backdrop of EnCap/Cherokee being forced to abandon its original plan of using a form of tax increment debt — PILOTS — for the project in the face of informed opposition from the governor, Jon Corzine, a former Wall Street heavyweight.
The Record reported in December:
Governor Corzine says the state should protect taxpayers by rethinking a controversial project to turn the Meadowlands’ trash dumps into pricey golf communities with more than 4,000 new apartments and condos.
In an interview Tuesday with The Record, the former Goldman Sachs & Co. chairman raised questions about the complex public-financing plan assembled by the developers and their attorneys. The governor frowned, in particular, on the development company’s desire to borrow against future property-tax revenues generated by the golf community.
The developer, EnCap Golf Holdings of North Carolina, wants to raise as much as $450 million by selling bonds backed by the promise of the future revenue. Three south Bergen County communities in which the golf village would reside — Lyndhurst, Rutherford and North Arlington — have already agreed in principle to the financing plan.
“We’ve got to make sure the public isn’t exposed,” Corzine said, speaking in his State House office. “Using bonds the way being proposed … is not something I would have done.”
The governor said he was concerned that bonds backed by future tax revenues generated in the form of so-called PILOTs — or payments in lieu of taxes, which are a central feature of the EnCap plan — may have no market.
“If you’re depending on a PILOT, you may have trouble actually finding someone who will finance those bonds,” Corzine said. “Who eats it if isn’t financeable? It’s a fair question.”
By January EnCap abandoned its $366 PILOT financing plan. The Local Finance Board also noted that plans to issue debt to build schools were jeopardized by the EnCap project.
What does this have to do with North line thru North Meck?
Everything.
Recall that CATS needs at least $76 million in TIF debt to build the North line. The Metro Transit Commission will be presented a Cherokee-designed financing plan at its June 27th meeting and be asked to approve it in late July.
Right now there is a bill making its way through the General Assembly — SB1196 — that would allow the use of TIFs for school construction. It is sponsored by Sen. Dan Clodfelter (D-Meck) so you know it is on a fast track. It is intended to help speed the construction of the Research Campus in Kannapolis by greatly loosening the kinds of things TIFs can be used to pay for — stuff like parks, schools, and community college classrooms. Whatever. That is a wacky plan the people of Cabarrus will probably come to regret.
However. With the state set to allow TIFs to be used to build schools the taxpayers of Mecklenburg County are presented with a clear choice — do we want to use TIFs to build schools or build trains?
Oh, of course, CATS and Cherokee will say that only a train can bring so much wonderful new development that will throw off so much wonderful new tax revenue with which we can issue wonderful new bonds. Except as we’ve mentioned, the growth scenario for the North line is wildly out of whack. A projection of 83,000 new jobs within a half-mile of the North line — some 30 percent more jobs than Uptown has right now — tells you how out of whack. All to make the train-building numbers work.
Who believes that projection? More precisely, who believes that who does not have a paycheck riding on it being true?
Who believes that in the face of CATS performance to date on the South line? Where every cost projection and time-line was wrong, even with informed warnings all along the way?
And now, with the EnCap experience unfolding in the swamps of Jersey, who would — who could — willingly embrace the numbers put out by Cherokee?
We shall soon find out.
