The price tag for the Proscenium mixed-use development is coming in higher than originally projected, and the Carmel City Council is considering increasing the principal amount of an economic development revenue bond by $4.5 million to help fund some of the increase.
The council did not vote on the proposal at its Oct. 18 meeting but instead decided to send the matter to its Land Use & Special Studies committee for further review. A meeting date was not announced as of press time, but it is expected to occur before the council’s next regularly scheduled meeting on Nov. 1.
If approved, the ordinance would allow the principal amount of the bond to increase from $12.5 million to $17 million. The bond, to be repaid through tax increment financing, funds the development’s parking garage and other infrastructure improvements.
Tony Birkla, owner of Proscenium developer Birkla Investment Group, told the council the change is needed primarily because of the increase in construction costs since the project was approved in 2015. The project experienced a significant delay as developers worked with Duke Energy to relocate a transmission line that ran through the site.
“It took us a while to get things moving, but we’ve upgraded many of the items across the entirety of the site,” Birkla said.
In 2015 the council approved $8 million in bonds for the project with developers receiving 75 percent of TIF funds, but in 2017 the council voted to give developers 100 percent of TIF funds and increase the bond to $12 million.
The $85 million project on the northwest corner of Range Line Road and Carmel Drive officially broke ground in August 2017, but construction didn’t begin until approximately a year later. Originally estimated as a $60 million project, the Proscenium includes retail and office space and residential units. Construction was initially projected to last 18 to 24 months, but that timeline also has been slowed, thanks in part to the COVID-19 pandemic.
Other factors increasing the cost of the project are modifications to the parking garage, such as adding cameras, and planting more expensive trees to give the Proscenium a “more mature look from day one,” Birkla said.
The 25-year bond is expected to be issued in the next few months. TIF captures tax revenues generated as a result of improvements in a particular area to pay down debt acquired for those improvements. The Proscenium bond is backed by the developer, which means if tax revenues fall short of the amount needed to make debt payments, the developer is required to cover the difference.
Raising the bond principal amount would not impact taxpayers or tax rates, according to Carmel Redevelopment Commission Director Henry Mestetsky. However, City Councilor Tim Hannon said he’d like to ensure the council fully reviews the matter before approving it because of the high dollar amount involved.
Councilor Kevin “Woody” Rider said it makes sense to raise the principal amount because the increase in tax revenue — which also is expected to be higher than originally projected — wouldn’t exist without the developer taking the initiative and risk to improve the site in the first place.
“If the developer has built something that will produce more, and he can help to use that to recover the additional cost he went through and the unbelievable challenges of developing that piece of property, I don’t see the issue,” Rider said.
Mestetsky said the Proscenium has been developed as a public/private partnership from the start and that the city should do its part to continue supporting the project.
“If we enter into an agreement in 2015 for 100 percent TIF (for the developer) and the development gets delayed for years thanks to the Duke transmission line and deals with all sorts of cost increases and delivers a project this entire city can be proud of, I think it’s important for the city to back their word and deliver on the 100 percent TIF project, even when the developer is asking for a bump in that ultimate amount,” he said.
Mestetsky said a financial firm is working on updated tax revenue projections for the project. He said he does not know if the financial model will show TIF revenues in excess of $17 million, but he’s comfortable with raising the bond principal amount because taxpayers will not be responsible for covering a shortfall if it occurs.