The planned North Salt Lake Development, which has suffered severe delays due to the current economic climate, recently asked city officials for a deal that would replace a $400,000 cash reserve with money that the city would owe the developers if they get vertical by a certain date. Though the need to rework the wording of the agreement delayed any official decision, the council seemed willing to approve the idea.
“Right now, it’s ‘I owe you, you owe me,’” said North Salt Lake financial director Brian Passey. “This simplifies things.”
As part of the original development agreement, North Salt Lake agreed to pay Compass Development a $715,000 bonus if the development had 50,000 square feet of retail or office space sold and in use within the next 10 years, and required Compass to have a $400,000 cash reserve in order to help the city pay for the second year of the debt service payment on the development’s bond. The city would need to use that money only if Compass is no longer able to make their payments.
“Compass came to us and said that, under the circumstances, they didn’t have the money for the second year reserve,” said North Salt Lake City Manager Collin Wood.
The agreement replaces the cash reserve with city money, and says that the bonus payment goes down to $315,000 if the city needs to use part of the money for a payment.
“If they get vertical, the property will have enough value that we won’t need the second year reserve,” said Jason Burningham, the city’s financial advisor on the project.
Getting vertical, however, is still some time in the future. Though initial projections had the upper portion of the development going vertical as early as spring 2008, liquidity and impending weather issues mean that there won’t be any vertical development on the property until spring 2009 at the earliest.
“It’s getting close, but not yet,” said North Salt Lake Community Development Director Blaine Gehring. “I’m not worried.”
Representatives from Compass Development, the group behind Eaglewood Village, also recently spoke to the Davis School District in taking part in a CDA that would help reduce the development’s taxes over the next several years.
The district has requested more time to make a decision about the CDA, which North Salt Lake and the County Commission have already agreed to participate in. The CDA, which the city has been working to put together since this summer, is an agreement in which the participating groups agree to forgo part of the property taxes that they would normally receive from a new development.
Despite the financial setbacks, Compass Development remains optimistic.
“We still want to start building,” said Compass Development principal Ben Lowe. “We want to make sure people buy homes again.”